New figures confirm pay trends in private sector

Latest figures on earnings and labour costs from the Central Statistics Office show that average earnings in the private sector are not falling as fast as some media reports have suggested. However, a major survey of wage settlements by the Irish Business and Employers’ Confederation demonstrates that pay freezes predominate across economic sectors as competitiveness gradually improves.

A new survey of unionised and non-unionised private sector companies, conducted by the Irish Business and Employers’ Confederation (IBEC), shows that most companies are now freezing pay – a trend that is broadly backed by the latest figures from Ireland’s Central Statistics Office (CSO). While the surveys suggest that competitiveness is improving, they do not back up claims – based largely on anecdotal evidence in the national broadcasting and print media – that pay cuts are widespread in the private sector.

CSO findings

Average earnings

The CSO figures were released without attracting much publicity during the summer holiday period on 7 August 2009. The figures indicate that average earnings are not falling as fast as general media reports have suggested. In the industry sector, the CSO found that hourly earnings, including irregular bonuses, rose by 5.9% from €20.82 to €22.05 an hour in the first quarter of 2009, while the quarterly change was 2.8%. ‘Irregular earnings’ fell slightly from €1.55 to €1.51 an hour. Meanwhile, earnings excluding irregular bonuses rose by 6.5%, from €19.28 to €20.54 an hour in the first quarter of 2009.

Decline in hours worked

The CSO reports that the average paid weekly working hours in industry decreased by 0.9 hours a week – that is, from 37.5 hours in the first quarter of 2008 to 36.6 hours in the first quarter of 2009, constituting a drop of 2.4%. The number of weekly working hours also declined in the financial services sector – decreasing from 33.8 hours over the same period by a total of 1.8%. The number of weekly hours not worked (paid leave) totalled 3.8 hours in the industry sector and 3.9 hours in the financial services sector. Weekly overtime hours amounted to 1.3 hours in the industry sector compared with only 0.3 hours in the financial services sector.

Labour costs

The CSO figures show that, between the first quarter of 2008 and the first quarter of 2009, hourly labour costs rose by 9% in the industry sector – that is, from €24.99 to €27.24 an hour. However, within the financial services sector, labour costs fell from €42.39 to €38.57 an hour , or by 9% over the same period. In the industry sector, ‘other labour costs’ increased from €4.16 to €5.19 an hour, while in the financial services sector there was a slight decrease in other labour costs – more specifically, from €8.23 to €8.20 an hour over the year.

The CSO estimates that some 2,800 employees in the industry sector – representing 1.3% of the total working population – were receiving the national minimum wage of €8.65 an hour in the first quarter of 2009. In comparison, some 4,400 employees (1.9%) were reportedly receiving the minimum rate in the first quarter of 2008.

IBEC survey findings

The latest IBEC private sector pay survey, published in September 2009 and carried out in August, covers 508 companies employing over 86,000 employees altogether. The survey shows that pay freezes have continued to predominate throughout the economy in August, as already identified in IBEC’s May 2009 survey, with 59% of companies introducing pay freezes. However, a slightly larger proportion of companies are now introducing wage cuts, compared with the findings for the May survey, while fewer enterprises are paying wage rises.

The latest IBEC survey also found that:

  • more than half of companies (56%) have reduced their pay bill over the past 12 months, by an average of 21%;
  • over half of companies have implemented pay freezes (59%) and staff reductions (55%) in 2009;
  • recruitment freezes (59%) and retraining of existing staff (45%) are among the most likely actions by employers in the next three months;
  • a reduction in the number of permanent staff is expected in 28% of companies and is under consideration in a further 42% of companies;
  • for 2010, almost half of companies (48%) expect their pay bill to remain the same, while one third of companies (33%) expect it to decrease – the average decrease expected is 14%;
  • a reduction in the number of temporary staff is expected in 32% of companies, with 29% of enterprises considering this option;
  • short-time working is expected in 22% of companies, with a further 45% considering its implementation;
  • some 31% of businesses intend to eliminate bonus payments, while a further 29% intend to reduce such payments.

Of those companies introducing cuts in basic pay, some 30% are intending to implement cuts in management grades; a further 22% of companies are planning to apply such cuts to salaried staff, while 14% of enterprises are directing the cuts at production workers. Looking ahead to the next three month period – that is, from October to December 2009 – the survey forecasts that for all staff categories, some 76% of companies anticipate that they will be maintaining pay freezes, while 9% may consider increasing pay and a further 8% may choose to cut pay ‘at the next pay review date’. An additional 1% of companies confirmed that they intend to reverse a previous pay cut.

Brian Sheehan, IRN Publishing

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