Breakthrough on new national agreement

In mid-January 2003, the Irish social partners and government are close to finalising the terms of a new national agreement to replace the Programme for Prosperity and Fairness, which expired in December 2002. The draft deal provides for a 7% pay increase over 18 months, as well as concessions on trade union recognition and increases in statutory redundancy pay entitlement.

Talks on a new national agreement to replace the three-year tripartite Programme for Prosperity and Fairness (IE0003149F), which expired in December 2002, started in late 2002. Employer and trade union representatives spent a number of weeks attempting to reach an acceptable compromise on pay terms and the thorny issue of trade union recognition (IE9903135F), but the talks broke down over the Christmas period. However, a breakthrough on the new national agreement came in mid-January 2003 following an expected and successful 11th hour intervention by the Prime Minister (Taoiseach), Bertie Ahern, and senior Ministers.

The intervention by Mr Ahern, the Minister for Finance, Charlie McCreevy and the Deputy Prime Minister (Tanaiste), Mary Harney, saw the employers and unions presented with a formal seven-point proposal, which was to act as the core element in a new agreement. Mr Ahern’s move was always on the cards, as long as sufficient progress had already been made behind the scenes. Such preparatory work was undertaken by seasoned negotiators during the breakdown of talks.

The main contents of the draft agreement are outlined below.

Worker representation

The government is prepared to propose amending legislation and changes to statutory codes, in order to enhance the procedures by which trade unions can represent their members’ interests, on the lines agreed in outline between the two sides.

A significant change has been agreed in the current 'right to bargain' provisions of the Industrial Relations (Amendment) Act 2001 (IE0211201N and IE0209203F), which do not allow for trade union recognition, but provide for a series of procedures that may result in a binding Labour Court determination on specific workplace issues. The 'good faith' protocol in the current legislation is to be done away with, while the overall timeframe, from the formal beginning to the end of the process, is to be shortened from 18 months (or more) to between six to eight months. This will involve four key stages: referral to the Labour Relations Commission; a full Labour Court recommendation; a binding Labour Court determination; and a Circuit Court hearing (if necessary).

On the issue of union demands for formal statutory trade union recognition, the negotiators came to no agreement on what remains a highly sensitive issue for government and employers. However, in noting an 'ongoing debate within the EU' on the issue, the agreement appears to reflect a view that, ultimately, the EU may force change on this matter, despite the opposition of government, employers and state agencies.


On the social side, the agreement contains a commitment to engage in a novel programme of social housing, with a target of up to 10,000 affordable houses annually. This is to be achieved using the National Development Finance Agency, which is set to avail of the national pension reserve fund to get the new initiative moving. This is expected to involve the use of 'land banks' held by local authorities, with a key role for the National Building Agency. The latter would oversee the building of new houses at cost (paying private builders), but cutting out developers. These houses would then be sold to lower- to middle-income earners, and the profit from these sales would then be ploughed back into the funding of social housing, for which rent would be payable.


The government is prepared to develop, with the social partners, a new anti-inflationary initiative targeting key sources of inflationary pressure. If the proposed deal is approved, the parties will hope that the initiative will not damage competitiveness and will ensure that living standards, over the full 18 initial months of the proposed agreement, can be maintained. A key element in this will be the inflation outcome, and the rate – now close to 6%, which is over twice the EU average - is expected to improve towards the latter half of 2003. Whether the government’s agreement to participate in a joint anti-inflation strategy will assist in this regard remains to be seen.

Statutory redundancy terms

The government is prepared to enhance statutory redundancy pay terms to provide for two weeks' pay per year of service, with the abolition of differentiation by age, and to retain the existing 'bonus week' in the calculation of payments. Currently, statutory redundancy pay entitlement amounts to half a week's pay per year of service up to age 41, and one week's pay per year of service from age 41 onwards. The redundancy issue has provoked major campaigns by unions over the past year, and the government has agreed a major concession in an area that the employer side agreed was ripe for improvement. The two weeks' pay per year of service, along with the ending of differentiation between service before and after the age of 41, will be a major improvement in the basic severance deal. That said, it is not expected to have a major impact on the above-average settlements that are commonplace in voluntary severance programmes (IE0005211N).

Statutory minimum wage

The government is prepared to increase the statutory national minimum wage (IE0107170F) from its current level of EUR 6.35 per hour to EUR 7 per hour, with effect from 1 February 2004. The increase may serve to cushion the fact that the proposed new national agreement - unlike its predecessor - does not provide for a minimum cash pay increase for the lower paid.

Pay terms

The recommendation to the parties is that the pay agreement should provide for an increase of 7% over 18 months, implemented in the private sector as follows:

  • 3% for the first nine months;
  • 2% for the next six months; and
  • 2% for the final three months.

These pay terms ultimately came as no real surprise. This is because, late in the talks, the trade unions were set on 7.5%, while the employers, although ostensibly adamant about insisting on a six-month 'pay pause' and a subsequent wage increase in low single figures, had indirectly signalled that a 6.5% deal was possible. The compromise, when it came, worked out at 7% over 18 months. Crucially for the employers, this is payable in three phases of 3%, 2% and 2%, and is in the middle of the effective final positions put forward by the two sides in the process. It means that in the first year of the deal, the cost to employers will be just over 3.5%, while unions will hope that inflation will fall over the 18-month period, thus enhancing the agreement.

The text also includes a section on how to 'police' or ensure compliance with the pay terms. On compliance, it is proposed that the Labour Court is to play a major role. Disputes related to the new agreement are to be referred for binding determination. Issues such as union pay claims that are above the basic terms of the deal, employer demands for change that are seen as more than 'normal' or 'ongoing', and cases involving employers' ability to pay, are to be referred to the Court. This is allowed for under section 20 (2) of the Industrial Relations Act 1969, which covers binding determinations.

In addition, a greater role for the National Implementation Body (NIB) is also envisaged. The NIB is a special disputes body, which was established in late 2000 to monitor the pay terms of the PPF (IE0103233N). An informal body, the NIB is made up of key negotiators from the main social partners: David Begg, the general secretary of the Irish Congress of Trade Unions (ICTU); Turlough O’Sullivan, director-general of the Irish Business and Employers Confederation (IBEC); and Dermot McCarthy, the secretary of the Department of the Taoiseach.

For employers, these provisions should provide the sort of certainty they have been seeking in a new deal (IE0210202N), while unions know that the final text excludes 'draconian' measures included in earlier drafts. Unions will not be able to make 'spurious' pay claims, and employers will have to prove they cannot pay if they plead inability to pay. Where employers want 'normal' change at the workplace, they will have to convince the Labour Court that such change is not deserving of reward. In many ways, the new provisions introduce an element of what has become known as 'pendulum' arbitration.

Public service pay

The same pay terms would apply in the public service, but with an initial six-month pay pause, as follows:

  • 3% from 1 January 2004;
  • 2% from 1 July 2004; and
  • 2% from 1 December 2004.

In addition to this increase, and subject to final agreement on a modernisation programme for the public service, the 'benchmarking' report - which compared public service pay with private sector comparators, and was published in July 2002 (IE0207203N) - has awarded average pay increase of 8.9% across the public service, which should be implemented as follows:

  • 25% of the total increase backdated to 1 December 2001;
  • 50% of the increase from 1 January 2004; and
  • 25% of the increase from 1 June 2005

The proposed six-month public service pay pause was signalled well in advance. No public service trade union actively opposed it, a clear signal that it was likely to be accepted. The fact that the basic rise of 7% will be paid in the 12 months that follow the six-month pause, as well as the phased implementation of the benchmarking awards (up to July 2005), should 'sweeten' the deal for public sector workers.

Some dissent will be inevitable, particularly among unions already under pressure on the benchmarking front, such as the Irish Nurses Organisation (INO) and the Civil and Public Service Union (CPSU). Meanwhile, the teachers' unions may have a tough time persuading their members to back the deal.


Despite serious reservations about the possibility and feasibility of a new national agreement in a less benign economic climate, it looks like the parties have reached an acceptable consensus on the key issues of the day, and that the new deal stands a good chance of being approved. Aside from pay, the key industrial relations elements in the proposed new national agreement are: the related issues of worker representation and trade union recognition; the whole issue of how to police or ensure compliance with the pay terms; and the increase in basic statutory redundancy pay terms.

The provisions outlined above will be implemented subject to agreement on an appropriate text governing these and related areas which have been under discussion between the parties, and on the basis that the parties have also agreed to enhanced arrangements to ensure adherence to the agreement by all sides and the maintenance of stable industrial relations.

Attention has now turned to ICTU and IBEC, as they attempt to 'sell' the agreement to their respective members. The decision on whether or not the social partners accept the terms of the new deal will not be known until the end of February or early March 2003, when ICTU-affiliated trade unions meet at a special delegate conference to vote on the deal. Affiliates of IBEC are also due to meet to decide whether or not to accept the deal. If this new national pact is given the all clear, the two sides are aware that they will probably be meeting again with the government after 18 months, to negotiate the second half of what is set to be a two-part national agreement within the umbrella of the usual three-year partnership framework. Both sides can argue, therefore, that while they have conceded some of their aspirations, any of the ground they may have lost can be potentially made up 18 months from now.

Although it is by now almost certain that the new agreement will be validated, this does not mean that there will not be any problems in the coming months. Inflation is still running at over 5%, unemployment has started to creep up, and various commentators, including the European Commission, have expressed reservations about the rigidity of the current model of centralised wage bargaining, and its perceived inability to adapt to changing economic circumstances (IE0202201F). (Tony Dobbins, IRN)

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