Speech by Minister Ged Nash to IRN Conference 'Managing expectations beyond the crisis'

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Introduction

I want first to thank Brian and his team for the kind invitation to speak to you today.

I think it’s fair to say that we have seen a paradigm shift in the economy over the past few months. An economy that is well-managed through and out of a crisis creates a virtuous circle and the momentum of recovery can then speed up. I believe that is what is happening now.

• Unemployment has dropped by a third since 2012, is at its lowest level in six years and may dip below 9% before year-end – indeed more than 14,600 left the Live Register in January to take up work
• The number of people in jobs has increased by nearly 100,000 since the low-point of the crisis – 36,000 net new jobs were created last year alone – and mostly full-time
• The Exchequer deficit at end-February stood at €205 million compared with €1.7 billion at the same time last year
• Tax revenue has increased by €925 million, primarily as a result of the improving economy, while the Social Protection bill has fallen by €240 million in line with falling unemployment levels, and
• Our debt servicing costs have fallen by 17.8% over the year.

What these figures illustrate is the success of the Government’s twin track approach in creating the conditions for job growth and helping people back to work. The Action Plan for Jobs is accelerating Ireland’s transition to a sustainable jobs-rich economy, while the Pathways to Work programme is ensuring that as many people as possible taking up work are from the Live Register.

However, as I and my colleagues have said repeatedly, there are too many people still jobless. Our aim now is to create full employment within the next three years.

It is important for the thousands of people still looking for work that their aspirations are not endangered by policies that will undermine or even row back on the progress made to date. My aim today is to bring you up to date on to progress on the Government’s industrial relations and employments rights reform agenda.

Low Pay Commission

As the economy recovers equilibrium, it is only natural that workers are seeking to increase their take home pay. It is well-documented that pay increases have been negotiated in many parts of the economy over the past 18 months. This trend is expected to continue as employers share productivity and market gains with their employees. And pay increases that are commensurate with both the performance of the enterprise and the economy can only strengthen domestic demand and further benefit the economy.

Throughout the crisis the Government has been committed to maintaining employment rights and protecting the most vulnerable workers. Where changes have been made or new legislation introduced, it has been to improve employment rights. On low pay alone, one of the first actions of this Government was to restore the minimum wage to the level it was at before the last Government cut it before it left office.

Making work pay continues to be a cornerstone of this Government’s agenda and the setting up of a Low Pay Commission is one of the key commitments in the Statement of Government Priorities agreed in July last.

The Commission was launched on the 26^th February by the Taoiseach, the Tánaiste, Minister Bruton and myself. It is operating on an interim non-statutory basis and it held its first formal meeting that day. Notices inviting submissions on the rate of the minimum wage appeared in the newspapers last Monday.

Legislation to provide for the Commission’s establishment on a statutory basis will be published shortly, with a view to its enactment in the first half of this year.

The principal function of the Low Pay Commission will be to examine and make recommendations annually on the national minimum wage, with a view to securing that the minimum wage, where adjusted, is adjusted incrementally over time having regard to changes in earnings, productivity and overall competitiveness and the likely impact on employment and unemployment levels.

Specifically, it will be asked to make recommendations to the Minister that are designed to set a minimum wage that is fair and sustainable, that, when appropriate, is adjusted incrementally, and that, over time, is progressively increased so as to assist as many low-paid workers as is reasonably practicable without creating significant adverse consequences for employment or competitiveness.

Alongside examining the Minimum Wage, the Commission will also be tasked with examining matters related generally to its functions under the Act. This work programme will be agreed by Government and presented to the Commission in February of each year.

I have said elsewhere that the approach draws on that adopted in the UK. Since 1997 the recommendations of the UK Low Pay Commission have brought about a progressive increase in the minimum wage without party political controversy and with no detrimental effect on the functioning of the economy or the labour market.

The Minister of the day will have power to accept, reject or vary the recommendations of the Commission, for reasons that must be stated to the Houses of the Oireachtas.

The Commission will of course be independent in the performance of its functions. While not provided for statutorily, it is intended that the LPC will adopt a consensus-based approach to its reports and recommendations.

As I have said, work should always pay. But I am conscious of the need to balance a statutory minimum pay rate that is fair with one that is sustainable and which allows employers to continue to create quality jobs.

In this context, a particular function of the Commission will be to ensure that the recommendations it makes to Government are evidence-based: using agreed data, carrying out research and consultations with employers, workers and their representatives and taking written and oral evidence from a wide range of organisations.

Alongside this ‘hard data’, the Commission will consult with people who are directly affected – workers who are on the minimum wage and employers who pay the minimum wage. This real-lived experience will be vital for the Commissioners when deciding on what the minimum wage should be.

From an employer perspective, a significant benefit of the LPC concept is that Minimum Wage rates will be assessed annually and, therefore, where they occur, any adjustments will be incremental and less disruptive for business rather than the step changes we have had in the past.

As I’ve said, the Commission has already started its work: submissions were sought earlier this week and we expect the first report by the middle of July.

Zero Hours Contracts

Setting up the Low Pay Commission on a statutory basis is about taking the politics out of setting the Minimum Wage. It is very much in keeping with the ‘Dignity of Work’ agenda I am pursuing and it complements other aspects of that agenda such as the Study on Zero Hours Contracts. I was very pleased to announce last month, following a competitive tendering process, the appointment of University of Limerick to carry out this study into the prevalence of zero-hour and low-hour contracts and their impact on employees.

Over the past year, there has been increasing debate, nationally and internationally, about zero-hours contracts. For employers they can provide flexibility, efficiency in human resource management, more resilience in downturns and greater competitiveness. Disadvantages for employers include a limited integration of workers in the business, lower motivation and poorer work quality.

For workers, the flexibility offered can help in reconciling work and family life or studies and can serve as a stepping-stone to enter the labour market. However, negatives can include lower levels of job/income security, potential lack of benefits, lower job satisfaction and the risk of becoming trapped in a succession of short-term, low quality jobs with inadequate social protection.

Clearly, the labour market has evolved since the current legislative regime was put in place and there is now an imperative to map out and better understand the prevalence and impact of zero hours contracts in the workplace, to better understand their impact on employees and to establish if any new policy responses are required.

The key objectives of the study therefore are:

• To fill the gap in our knowledge in terms of hard data about the prevalence of zero hour and low hour contracts in the economy and the manner of their use
• To assess the impact of zero hour and low hour contracts on employees, and
• To enable me, as Minister, to make any evidence-based policy recommendations to Government considered necessary on foot of the study.

The study will have a broad scope, covering both the public and private sectors, with a particular focus on the retail, hospitality, education and health sectors. The study will examine how zero and low hour contracts operate in practice and how they impact on employees. It will assess the advantages and disadvantages from the perspective of employer and employee and will assess current employment rights legislation as it applies to employees on these contracts.

The study will also consider recent developments in other jurisdictions, including in particular the UK.

I expect the study, which is just starting, to be completed within six months and I look forward to considering its findings later this year.

Workplace Relations

Most of you here, as workplace relations and IR practitioners, will be well aware of the continued progress being made on the reform of the State’s workplace relations structures and procedures. The objectives remain clear:

• to deliver a world-class workplace relations service which is simple to use, independent, effective, impartial and cost-effective,
• to provide for workable means of redress and enforcement within a reasonable period, and
• to reduce costs.

The reforms will be underpinned by a core two-tier structure, comprising a new single body of first instance, the Workplace Relations Commission, and a separate appeals body, which will effectively be an expanded Labour Court.

The Workplace Relations Bill, which is currently progressing through the Oireachtas, makes statutory provision for these new structures, while also providing for a number of innovative measures including:

• the use of Compliance Notices and Fixed Charge Notices to enhance the compliance functions of the WRC
• the sharing of employment related and other specified information between the WRC, the Labour Court and other official agencies, in the context of promoting compliance with employment legislation
• the appointment of additional members to the Labour Court to facilitate the increased workload of the Court in the new system
• a new more transparent system of appointment of adjudicators of the WRC and the Chair, Deputy-Chairs and ordinary members of the Labour Court, and
• better enforcement of employment rights awards and better compliance and enforcement measures for employment rights.

The Bill will be enacted soon and I expect to see the new workplace relations structures in place very shortly thereafter.

Significant progress has been achieved, in advance of the enabling legislation, to put in place the necessary technological, structural, administrative and staffing changes. For example, shared services units are already in place and they have assumed responsibility, on behalf of the existing bodies, for all aspects of complaint receipt, registration, scheduling and case management support generally.

I am pleased to say that some 19 Adjudication Officers, selected for appointment following an open competition in December last year, are currently undergoing intensive training. These Adjudicators, together with the current cohort of Equality Officers and Rights Commissioners who will be appointed as WRC adjudicators, will be available for deployment on the establishment of the Commission. The adjudication resources at the disposal of the Commission will, therefore, comprise a diverse group of experienced industrial relations and HR practitioners, employment lawyers and civil servants with appropriate skills and experience.

Adjudicators will be required to issue reasoned decisions in all decided employment rights and equality cases. Service level targets for the two new bodies will be put in place, to measure and demonstrate quality, consistency and timeliness of determinations. These targets will be subject to annual audit, review and publication. The Adjudicator’s written reasoned decision is to be communicated to both parties not later than 28 days from the date of the hearing, in at least 90% of cases.

The Commission will also deliver a mediation service for first instance complaints. Work is progressing at present on the amalgamation of the Equality Tribunal’s Mediation Services and the Early Resolution Service introduced in May 2012 as part of the Reform Programme. The objective will be to ensure that complaints and disputes are dealt with as close to the workplace as possible and prior to costly intervention.

In addition to these initiatives, work will be proceeding at an accelerated pace over the coming weeks to ensure that our workplace relations services are business ready for Establishment Day. This critical work includes rationalising the accommodation and hearings venues, finalising arrangements for the new compliance and fixed charge notices in support of inspection activities and the transitioning of e-business to the new body.

As this project nears the end – stroke – beginning, I wish to thank those who have contributed so far, particularly all stakeholders who contributed ideas and suggestions to the various consultation documents and who have entered into constructive dialogue on the programme of change, and also to the Department’s Programme Office and the chief officers and staff members of the five workplace relations bodies who have worked positively and consistently throughout the process to achieve the objectives.

Registered Employment Agreements

The Government has moved on a number of fronts in relation to wage setting, including reforms to the Joint Labour Committee system through the Industrial Relations (Amendment) Act 2012.

More recently, the Government approved the drafting of legislation to provide a revised legislative framework to replace REAs. This follows the 2013 judgement by the Supreme Court in the McGowan case.

The purpose of the legislation is twofold. Firstly, it will provide for the reintroduction of a mechanism for the registration of employment agreements between an employer or employers and trade unions governing terms and conditions in individual enterprises. Such agreements will not be legally binding beyond the subscribing parties.

The Bill will, separately, provide for a new statutory framework for establishing minimum rates of remuneration and other terms and conditions of employment for a specified type, class or group of employee – in effect a framework to replace the former sectoral REA system.

The new framework proposes a mechanism whereby in future, at the request, separately or jointly, of organisations substantially representative of employers and/or of workers, the Labour Court can initiate a review of the pay and pension and sick pay entitlements of workers in a particular sector and can make a recommendation to the Minister on the matter.

If the Minister is satisfied that the process provided for in the new legislation has been complied with by the Labour Court, he shall make an order. Where such an order is made, it will be binding across the sector to which it relates, and will be enforceable by the National Employment Rights Authority.

I know that employers and workers in some sectors are anxious that this legislation progresses quickly. I expect to see it enacted by mid-year.

Collective Bargaining

At the end of 2014, Cabinet approval was obtained to legislate for an improved framework for workers who seek to improve terms and conditions where there are no arrangements for collective bargaining.

Worker and employer stakeholders have played a critical role in assisting Government to develop a framework in this area, in the spirit of social dialogue and partnership. This legislation will mark the fulfilment of one of the most significant commitments in the Programme for Government.

In developing these proposals Minister Bruton and I have been keen to respect the positions articulated by stakeholders. I believe we have developed proposals that sustain our voluntary system. And workers can have confidence that, where there is no collective bargaining, there will be an effective system that ensures they can air grievances about remuneration and terms and conditions and have their cases determined based on comparisons with relevant similar companies – and not be victimised for doing so.

I expect this legislation to be enacted by mid-2015.

Wage Bargaining

As I said earlier, a return to wage bargaining is already visible in certain sectors of the economy. IBEC’s recent survey found that 57% of companies plan to increase basic pay in 2015. According to that survey, the median pay increase is set to be 2%. I know that other surveys suggest that this figure might be higher.

Appropriate and affordable wage increases will undoubtedly have a positive potential impact on domestic demand.

I have noted Danny McCoy’s recent statement, in this context, that enterprise level bargaining will remain the norm over the coming years.

I have noted too that employers in some sectors are reluctant to engage with employee representatives within our carefully constructed, voluntarist, Joint Labour Committee industrial relations machinery.

However, as wage increases and demands for wage increases move through and across sectors that are performing well, a view may well emerge, as has happened in some sectors already, that a broad-based sectoral approach will better suit employers and employees.

Danny has also said that he sees merit in establishing open channels of dialogue between government, IBEC and the trade union movement. I concur. I don’t think anybody is advocating a return to the old style social partnership, but I do believe there is an a clear role for social dialogue between Government, employers and trade unions to discuss how we can continue to get people back to work, to grow the economy and to share the benefits. My colleague Minister Brendan Howlin has said that he is planning to hold a forum later this year on issues like pay, taxation and the services that can be afforded – a forum where ideas on such matters can be “stress tested”. I believe it makes sense to get the views of the key actors in this space when developing policy and so naturally I welcome his initiative.

In conclusion, I’ve touched briefly on just some of the current and pending political, legislative and economic issues that are relevant to your agenda as practitioners. While it might be a stretch to describe what is happening in industrial relations and employment rights as a paradigm shift, I think that, in time, 2015 will be seen as one of the most significant years in this regard.

I wish you all well for the day ahead and would like again to thank the IRN for asking me here today.