Social partners agree three-year national programme
A new three-year national programme - Partnership 2000 for Inclusion, Employment and Competitiveness- has been concluded between the Irish Government and social partners. The agreement, which allows for pay increases totalling 9.25% over 39 months and includes tax relief measures worth IEP 1 billion, also promises to promote enterprise-level partnership and employee share-ownership, and to tackle social exclusion. It is the fourth such deal since centralised national bargaining recommenced in Ireland in 1987.
The primary objectives of Partnership 2000 (P2000) are: " the continued development of an efficient modern economy capable of high and sustainable economic and employment growth and operating within the constraints of international competitiveness, ensuring that Irish society becomes more inclusive, that long-term unemployment is substantially reduced, and that the benefits of growth are more equally distributed. The strategy provides a framework within which specific issues or programmes will be developed, in the normal way."
In framing that policy, the maintenance of low inflation, reduction of public sector deficits and debt and transition to EU Economic and Monetary Union (EMU) provide clear guidelines, the agreement says. The participants to P2000 accept that this requires:
- agreement on public finances, including a reducing rate of increase in current public spending;
- agreement on the maintenance of a firm exchange rate policy;
- coordinated wage setting, with a strong focus on competitiveness; and
- a commitment to economic and social solidarity
The pay provisions
The overall pay provisions cover 39 months and provide roughly the same increase (9.25%) for private and public service employees, payable over four stages. The main difference relates to the phasing of the increases and the "local bargaining" element. The pay increases for the private sector, which will start to come into effect at local level over the coming year as previous agreements expire, are as follows:
- 2.5% for the first 12 months;
- 2.25% for the next 12 months;
- 1.5% for the next nine months;
- 1.0% for the next six months;and
- there is also provision in the agreement for the negotiation, at local level, of an additional 2.0% in the second half of the second year of the agreement.
The pay increases for the public service are as follows:
- 2.5% of the first IEP 200 of basic weekly pay (IEP 10,436 in annual terms) for first 9 months of the agreement, at the end of which the increase of 2.5% shall apply to the balance of full basic pay for the next 3 months;
- 2.25% for the next 12 months;
- 1.5% for the next nine months;
- 1.0% for the next six months; and
- 2% "local bargaining" in the public service will not apply until the beginning of the third year of the agreement (or third phase), with payment being "conditional" on unions agreeing to a "modernisation' programme".
In both sectors there is agreement in respect of the lower-paid, which states that if the above agreed formulae result in weekly pay rises of less than IEP 3.50 in phase two, IEP 2.40 in phase 3 and IEP 1.60 in the final phase, then the percentage increases will be adjusted after local negotiations to meet these minimum monetary increases.
In respect of the local bargaining clause as it applies in the private sector, the Irish Business and Employers Confederation (IBEC)and the Irish Congress of Trade Unions (ICTU) also agreed a "minute of understanding". On the last occasion such a "local" element was included in a national programme (the 1991-3 Programme for Economic and Social Progress, or PESP), ICTU and IBEC differed substantially on how extensively it should be applied. However, the "minute of understanding" in regard of P2000 acknowledges that although "cost offsetting measures" can be negotiated, the clause will "not operate on an exceptional basis, as was the case with Clause 3 of the PESP." As reported in the weekly Industrial Relations News, IBEC director-general John Dunne said that the "minute" meant that the 2% increase would be widely applied.
The private sector agreement also stipulates that in paying any wage increases, due regard must be had to the economic and commercial circumstances of the particular firm, employment or industry. This means that employers which face genuine difficulty in meeting the agreed pay increases can plead "inability to pay". If agreement cannot be concluded in direct negotiations, disputes regarding the pay elements will be dealt with by Ireland's formal dispute-settling agencies, the Labour Relations Commission (LRC) and the Labour Court. The agreement also "precludes strikes or other forms of industrial action" in respect of any matter covered by the agreement. It should be noted, however, that this agreement is not legally binding, but binding in honour only. This is in accordance with the tradition of voluntarism in Ireland's industrial relations system.
The agreement states that no new cost-increasing claims are permitted other than those which relate to pensions and sick pay schemes. In regard of pensions and sick pay schemes, claims for the introduction of, or improvements in these elements, are allowable in certain circumstances.
There is provision for an overall review of the pay agreement in the third year of its operation, but only if such a review should be requested by one of the social partners. Such a review may also arise in the event of "unforeseen changes in economic circumstances arising from EMU."
Pay and tax changes
According to documents prepared by the Department of Finance, it is estimated that the average industrial worker can expect to be around 14% better off in net income terms over the three years of P2000, due to the combined effect of the agreed pay increases and the tax commitments. The actual outcome will depend on the Government meeting all of the tax commitments in P2000, and the maintenance of moderate inflation levels. The 1997 Budget, introduced on 22 January, confirmed the current Government's adherence to the tax promises, with the inclusion of a tax reduction package worth over IEP 400 million. Given that many trade union members voted on P2000 after the Budget was announced (see below), this was considered by union leaders to have been an important factor in persuading trade union members to back P2000.
Partnership at enterprise level
P2000 contains a separate chapter entitled "Partnership for competitive enterprises" in which ICTU and IBEC state their commitment to the development of appropriate partnership initiatives at enterprise level and say they will encourage and support this process in every practical way. It is not intended that any single model of partnership should be applied, the agreement noting that there is a need to tailor the approach to fit different employment settings. Topics appropriate for discussion at enterprise level may include the following:
- employee involvement for competitiveness;
- training, personal development and support;
- equality of opportunities;
- representational arrangements;
- forms of financial involvement;
- composition of the workforce;
- cooperation with change, including new forms of work organisation;
- problem-solving and conflict avoidance; and
- adaptability and innovation.
A National Centre for Partnership is also to be established. This will help to promote and monitor partnership, provide technical assistance, disseminate best practice and provide training for management, union and workplace representatives. The Centre's role will be to "facilitate agreed local arrangements rather than to prescribe particular partnership mechanisms".
The Government and social partners say they support more favourable tax treatment of employee share schemes and profit-sharing as a means of deepening partnership and securing commitment to competitiveness at the level of the enterprise. The agreement also states that the parties to P2000 see these concepts as being underpinned by appropriate tax adjustments which will follow consultation with the social partners.
A separate chapter deals with the issue of "social inclusion", reflecting the fact that for the first time, groups outside the main social partner organisations were included in the preliminary talks on P2000. This included bodies such as the Irish National Organisation of the Unemployed (INOU), Combat Poverty and the Conference of Religious- all of which already partake in the National Economic and Social Forum (NESF). The NESF was established during the 1994-6 Programme for Competitiveness and Work (PCW), and it played a purely advisory role until its members were invited to preliminary discussions on P2000. Public expenditure of IEP 525 million on a full-year basis on various social inclusion measures is aimed at protecting the real value of social welfare payments and providing funding for specific projects.The groups which make up the NESF do not have an input into central issues such as pay and tax. The involvement of non-social partner organisations in the development of P2000 is interesting, at a time when the European Commission has been examining the inclusion of such groups in a form of EU-level "civil dialogue", alongside the established social dialogue.
The agreement also promises to develop a strategy which enhances equality and counters discrimination in both employment and non-employment areas.
Partnership 2000 was formally ratified by a special delegate conference of ICTU on 30 January, just eight days after the 1997 Budget introduced tax reduction measures of over IEP 400 million. While the majority of ICTU delegates who voted in favour was 217 to 134, there had been fears that the agreement would be rejected. The outcome was effectively decided by the block of 70 delegates from the country's largest trade union, Services Industrial Professional and Technical Union (SIPTU) which in a workplace ballot had voted by 65,000 to 49,000 in favour of P2000, ensuring its safe passage.
IBEC's national executive council also formally ratified the new agreement after a series of regional consultative meetings with its membership.
The P2000 agreement has been backed, not just by the Government, but also by the main opposition parties, which have given commitments that they will honour the agreement if there should be a change of government following the general election which must be held in 1997. This indicates a high level of political consensus about the desirability of such centralised agreements in Ireland, at a time when tripartite deals elsewhere in Europe have become less popular than they once were. The relatively successful experience which Ireland has experienced in relation to social partnership has attracted interest in other EU member states.
P2000 is the fourth such three-year agreement since the Programme for National Recovery (PNR) was agreed in the context of an economic and fiscal crisis in Ireland in 1987. That agreement (PNR) and subsequent agreements (PESP and PCW) have, according to most economic commentators, contributed to Ireland's improved economic performance: low inflation; low interest rates; increases in net take-home pay; increased profitability; and, particularly in more recent years, a marked improvement in job creation. Levels of strike activity have, since the mid-1980s, also fallen off substantially - particularly in the private sector.
As the new agreement, P 2000, was negotiated in a period of growth in living standards and increasing employment opportunity, the social partners have been aware of the importance of maintaining a policy of modest pay increases, combined with specific tax reductions. However, the Government has been facing increasing demands from public sector workers such as nurses, teachers, police and lower paid civil servants. The pay section of P2000 may, therefore, come under more pressure than its predecessors. The danger signals are already there, with a recent pay offer to the nurses effectively breaching the terms of the previous agreement, the PCW. With other public service employees waiting in line, there is a danger that a series of "leapfrogging" claims could ensue.
The pay provisions of P2000 have attracted little express criticism from private sector employers. Most economic commentators are agreed that the pay increases for private sector employees are modest and will not hinder Ireland's competitive position. In addition, the aspiration toward a greater level of partnership at the level of the enterprise is generally being viewed positively by trade unions and employers in the private sector. Many observers feel that this "deepening" of the consensus process, from a national to a local level, is essential if social partnership is to continue into the next millennium. (Brian Sheehan, IRN, and John Geary, UCD)