Employer body issues bargaining guidelines after pulling out of national pay talks

The Irish Business and Employers’ Confederation (IBEC) formally withdrew from the terms of the social partnership national pay agreement for the private sector in December 2009. The agreement had been negotiated as part of the Transitional Agreement in 2008 and provided for a 6% pay increase over 21 months in all economic sectors. IBEC has issued guidelines for its members as the country now faces a period of ‘enterprise-level bargaining’ for the first time in 23 years.

On 23 December 2009, the Irish Business and Employers’ Confederation (IBEC) decided to formally withdraw from the terms of the national social partnership agreement on pay for the private sector (IE1001029I). The decision followed the collapse of efforts between the Irish Congress of Trade Unions (ICTU) private sector unions and IBEC before Christmas to reach a compromise, based on a proposed set of amendments to the Transitional Agreement (2.8Mb PDF) put forward by the government to the social partners on 24 June 2008. The proposed government amendments to the private sector pay arrangement would have suspended the pay deal ratified in the Transitional Agreement, except in certain defined circumstances.

In November 2009, IBEC notified the social partners and member companies that it would withdraw from the private sector pay agreement if a compromise could not be found with the trade unions on an alternative arrangement by the middle of December.

Pay terms unsuited to economic circumstances

Commenting on IBEC’s decision to formally withdraw from the agreement, the confederation’s Director General, Danny McCoy, insisted that the pay terms ‘are wholly unsuited to our economic circumstances’.

To date, about 125 companies have paid some element of the pay increases agreed under the Transitional Agreement, according to the specialist weekly journal, Industrial Relations News (IRN). In addition, a number of pay claims (up to 60 as of last September, according to IRN) under the Transitional Agreement had been referred to the Labour Relations Commission (An Coimisiún um Chaidreamh Oibreachais, LRC) before IBEC’s withdrawal. It is possible that, following IBEC’s withdrawal, many employers may now decline to discuss these existing claims.

In a letter to members on 23 December, Mr McCoy explained that IBEC had ‘been engaged in informal discussions with ICTU to seek to agree a suspension of the pay terms of the Transitional Agreement and an alternative that is appropriate to the prevailing economic and commercial environment in 2010’.

However, ‘not having agreed such a suspension with Congress, IBEC is … giving effect to its decision to withdraw from participation in the pay terms of the Transitional Agreement, which are wholly unsuited to our economic circumstances’.

According to Mr McCoy: ‘The consequence of this decision is that we are entering a period of enterprise-level bargaining in unionised employments.’

Ongoing commitment to social dialogue

Nevertheless, Mr McCoy assured IBEC’s members that the employer body remains ‘strongly committed to social dialogue at national level and a stable industrial relations environment in the private sector’. He added that IBEC was inviting ICTU to a meeting ‘as soon as possible in January to agree:

  • measures for the orderly conduct of industrial relations in the private sector;
  • a bilateral response to the economic crisis;
  • and measures to preserve and create employment’.

In his letter, Mr McCoy advised members ‘to ensure that they continue to comply with any in-house collective agreements and locally agreed dispute resolution procedures’.

Detailed guidelines for members

In January 2010, IBEC produced detailed guidelines for its members on the conduct of enterprise-level bargaining in the private sector. The guide, entitled ‘Negotiating pay and related matters at enterprise level’, states that IBEC’s decision to withdraw from the pay terms agreed under the Transitional Agreement was taken ‘following the ICTU failure to acknowledge that it was no longer appropriate given the difficult commercial circumstances facing most employers’.

The guide covers areas such as:

  • how employers should handle outstanding claims under the Transitional Agreement;
  • how to respond to new pay claims outside the national agreement;
  • how to prepare for and conduct negotiations;
  • how to approach the issue of pay reductions.

The guidelines state that, where agreements to pay the first or second phase of the accord have been reached, ‘these should be honoured, if practicable, or any variation carefully mediated’. Employers should refuse pay increase claims in 2010

In general, according to IBEC, ‘employers should not entertain claims for pay increases in 2010’. In addition, companies should be aware of the effect on their overall sector of any pay concessions they may make. Crucially, there needs to be a ‘disposal of certain headline cases’, which may set parameters for other similar claims.

Where claims are considered, these should be ‘in exceptional cases’. In such instances, the guide suggests that trade unions will most likely seek to have any increases backdated to the date when the Transitional Agreement pay terms expired. However, IBEC advises its members that ‘in the current environment, there should be no question of retrospective application and employers are reminded that there is no automatic entitlement to a new agreement which runs from the date of expiry of the old agreement’.

Coordinated employer response to pay claims

The IBEC document asserts that ‘a robust response and a degree of cooperation (via IBEC) between member companies’ is required, in order to prevent companies being ‘picked off piecemeal’ by trade unions lodging local-level pay claims.

IBEC suggests that the ‘[trade] unions will prefer to secure some high-profile wins before advancing claims in other employments where their strength is less evident’. In the 1980s, according to IBEC:

[trade] union strategy was to make a headline settlement in one enterprise and then to use these terms as the going rate with other employers in the sector or in the locality/region. This ‘leap-frogging’ strategy works to establish putative norms that can be leveraged with other employers or in discussions chaired by the LRC or in hearings of the Labour Court.

IBEC also warns members that pay reductions ‘should not be considered lightly and the cost, legal and industrial relations challenges associated with an across the board pay cut need to be calculated’.

Protocol under discussion

IBEC and ICTU are currently discussing the possibility of a protocol in order to address the issue of procedures for handling company-level collective bargaining on pay. It is believed that the protocol would address the issue of procedures for handling local pay claims. At the same time, it would set out broad principles for considering such claims, such as levels of employment and regard for economic circumstances.Commentary

Since IBEC’s formal withdrawal from the Transitional Agreement in December 2009, no national wage agreement is in place for the first time since 1987. This is a significant change in the structure of private sector pay bargaining in Ireland, signifying the end of a 23-year era that was Ireland’s most successful attempt at national-level pay bargaining.

The Irish national wage agreements were relatively unusual in the context of pay coordination arrangements in other European countries, in that they prescribed one schedule of pay increases that applied across the public and private sectors, with one schedule for payment dates applying across the entire private sector. In the face of the steepest economic recession since World War II, it may be inevitable that this ‘one size fits all’ pay bargaining system was going to come under pressure.

Many temporary breakdowns have occurred in national pay talks over the years since 1987, where trade unions made preparations to return to local pay bargaining as the default option in the absence of national pay bargaining. Given that inflation is still negative and many companies are facing cost pressures, it remains to be seen how many private sector employers will face local pay claims – although such claims cannot be ruled out in certain profitable industries, such as pharmaceuticals and medical devices.

The wider social partnership system still exists in theory, in terms of social dialogue on non-pay issues. Moreover, other non-pay commitments in the Transitional Agreement are still on the agenda. However, the pay agreements were always the ‘glue’ that held the wider social partnership process together, and it remains to be seen how the process will fare without them.

Brian Sheehan, IRN Publishing

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