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Seanad Éireann Speech by Minister for Business and Employment, Ged Nash T.D.

Second Stage debate on the National Minimum Wage (Low Pay Commission) Bill 2015

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I am pleased to introduce the National Minimum Wage (Low Pay Commission) Bill 2015.

Before I give the details of the Bill I think it is also worth taking stock of the progress we are making more generally in terms of our economic recovery. 
Over 100,000 extra jobs have been created since the start of 2012 when the Government’s Action Plan for Jobs was launched.

The latest figures released last week from the CSO show that, in the first Quarter of 2015:

  • The unemployment rate has dropped below 10% for the first time since 2008.
  • In the 12 month period to Quarter 1 of 2015:
  1. Uemployment decreased by 45,000, and there was an annual net increase in employment of over 40,000 bringing the total number in employment to 1,930,000.
  2. Most of the increase in employment was in full-time employment; it increased by 52,000 and part-time employment fell by 2.4 per cent, and 
    The long-term unemployment rate fell from 7.3% to 5.9%.
  3. Tax revenue has increased, primarily as a result of the improving economy, while the Social Welfare bill has fallen in line with falling levels of unemployment.
    What these figures illustrate is the success of the Government’s twin track of 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, there are too many people still jobless and we are working to build on the success to date and to create full employment within the next three years. 
    It is of course 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. 
    But, now that the recovery is beginning to be felt, workers quite naturally feel that it should be reflected in their wage packets. And a return to wage bargaining is visible in many sectors of the economy. In this regard, IBEC’s recent pay survey found that 57% of companies plan to increase basic pay this year. According to that survey the median pay increase is set to be 2%. Other surveys suggest that this figure may well be higher.
    So long as pay increases are commensurate with both the performance of the enterprise and the economy, do not hamper the emergence of job opportunities, or impact on competitiveness either locally or internationally, then such increases can only benefit the economy and strengthen domestic demand.
    National Minimum Wage
    The National Minimum Wage in Ireland is relatively high by international standards. Bearing in mind that social transfers differ from country to country and also taking the cost of living into account, Ireland’s rate is the sixth highest among the 22 EU Member States that have a National Minimum Wage
    The most recent figures from the Central Statistics show that just over 4% of all employees were being paid the adult experienced national minimum wage of €8.65 per hour, or the sub-minima, in mid-2014.
    As it stands, under the provisions of the National Minimum Wage Act 2000, the national minimum wage can be adjusted by Ministerial Order:-
  • following a recommendation in a national agreement,
  • in the absence of such a recommendation, following an examination and recommendation by the Labour Court on foot of a request by a substantially representative organisation of employees or employers, or
  • unilaterally by the Minister, whether or not a recommendation under section 12 or 13 has been made. 
    The legislation specifies a number of criteria that must be taken into account.

The ESRI, in its 2006 analysis of the last Labour Court recommendation, concluded that adjusting the minimum wage by a substantial amount on an irregular basis, with lengthy gaps between increases, is more likely to have a detrimental impact on employment and to contribute to uncertainty for employers and (actual and potential) employees than more regular and therefore smaller and fairly predictable up-ratings.

From an employer and worker perspective, a significant benefit of the new approach is that minimum wage rates will be assessed annually and, therefore, adjustments in future will be incremental and less disruptive for business than the step changes we had in the past.

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

The Commission was launched last February, chaired by Dr Donal de Buitléir. It is currently operating on an interim, non-statutory basis. It has sought and received submissions, which are currently being considered, and I expect its first report by the middle of July.

The Commission is a nine member body comprising an independent chair, three members with an understanding of the interests of low-paid workers, three members with an understanding of the interests of employers, in particular those operating in traditionally low-pay sectors, and two members with relevant academic backgrounds.

The principal function of the Low Pay Commission will be, on an annual basis, to examine and make recommendations to the Minister of the day 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, overall competitiveness and the likely impact any adjustment will have on employment and unemployment levels.

Alongside examining the National Minimum Wage, the Low Pay 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.

In addition, in the discharging of its function, the Commission will be required to make recommendations that are evidence-based using a suite of agreed data sets or, where required, based on bespoke research undertaken at its own behest.

This approach draws on that adopted in the UK where, since 1997, the recommendations of the UK Low Pay Commission have brought about a progressive increase of the minimum wage that has had little detrimental effect on the functioning of the economy or labour market.

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

Work should always pay. But I am also conscious of the need to balance a basic 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 any advice or set of recommendations it makes to Government is evidence-based, utilising 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 – workers and employers – who are directly affected by the National Minimum Wage. This real-lived experience will be vital for the Commissioners when deciding on what the minimum wage rate should be.

The changes proposed in establishing the Low Pay Commission on a statutory basis are essentially taking the politics out of setting the National Minimum Wage. It is very much in keeping with the dignity of work agenda I am pursuing, and complements work such as the Study on Zero Hours and Low Hours Contracts by the University of Limerick which has just commenced.

Provisions of the Bill 
If I may, I would like to briefly outline the purpose of each Section of the Bill.
Section 1 defines the “Principal Act” as meaning the National Minimum Wage Act 2000.
Section 2 amends the Principal Act to provide for insertion of a number of relevant efinitions in that Act. 
Section 3 provides for the establishment of the Low Pay Commission and that the body will be independent in the performance of its functions.
Section 4 outlines the duty of the Commission and, in this regard, provides that that the Commission will be required to make such recommendations regarding the national minimum hourly rate of pay that are designed to set a minimum wage that is –

  • designed to assist as many low-paid workers as is reasonably practicable,
  • is both fair and sustainable,
  • where adjustment is appropriate, is adjusted incrementally, and
  • over time, is progressively increased,

all without creating significant adverse consequences for employment or competitiveness.
Section 5 provides for the functions of the Commission. In this context, the Commission will be required to examine the national minimum hourly rate of pay and make a recommendation and a report on the issue by 15 July each year.
This section also sets out the range of economic factors that the Commission is required to take into account when making a recommendation, including:

  • changes in earnings, currency exchange rates and income distribution in the period since the previous minimum wage order,
  • whether during that period unemployment, employment and productivity have been increasing or decreasing, both generally and in the sectors most affected by the making of an order,
  • international comparisons, particularly with Great Britain and Northern Ireland,
  • the need for job creation, and
  • the likely effect that any proposed order will have on levels of employment and unemployment, the cost of living, and national competitiveness.
    Section 5 also provides that the Commission may be requested by the Minister to examine and report on such matters related generally to the functions of the Commission under the Act. In addition, the Commission will be required to report every three years on the general operation of the Act. 
    The Commission will be required to consult with employers and employees when preparing reports under Section 5.
    Section 6 provides that the Minister will, within three months of receiving a recommendation from the Commission, make an order in the terms recommended, make an order in other terms, or decline to make an order. The Minister will be required to lay a statement before both Houses of the Oireachtas setting out the basis for any rejection or variation of a recommendation. 
    If the Commission fails to make a recommendation on the national minimum hourly rate, the Minister may, having had regard to the economic factors specified in the legislation, make an order in relation to the matter.
    Section 7 provides that the Minister shall advance to the Commission out of monies provided by the Oireachtas such amount or amounts as the Minister may, with the consent of the Minister for Public Expenditure and Reform, determine for the purposes of expenditure by the Commission in the performance of its functions.
    Section 7 also provides that the Minister shall make available to the Commission such officers of the Minister and reasonable facilities and services as the Minister, after consultation with the Commission, may determine.
    Section 8 provides for a number of technical amendments to the Principal Act.
    Section 9 provides for the repeal of sections 11, 12 and 13 of the Principal Act.
    Section 10 provides for the short title, collective citation and construction provisions of the Bill.

The new Schedule provides that the Commission will be a nine member body comprising an independent chairman, three members who will have an understanding of the interests of low-paid workers, three members who will have an understanding of the interests of employers, particularly small to medium-sized employers and those operating in traditionally low-pay sectors, and two members who will have relevant knowledge or expertise in relation to economics, labour market economics, statistics, or employment law.

The Schedule also provides that the Minister shall, in so far as is practicable, endeavour to ensure that among the members there is an equitable balance between men and women.

The term of office of its members will be three years. Members may serve two consecutive terms of office and will be eligible for reappointment after a break.
The Schedule also includes standard provisions dealing with resignation and termination, disqualification, remuneration and other terms and conditions of office, appearance by the Chairman before a Committee of either House of the Oireachtas, and the regulation of its own procedures by the Commission. 
As I’ve said, 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 just before leaving office.

I think there is now general agreement that this year will be a good year for the economy, for employment, for those in low-paid jobs and for industrial relations reform. Tomorrow I am introducing into the Dáil a companion piece of legislation that makes significant reforms to industrial relations machinery in the fields of registered employment agreements and collective bargaining.

We are determined to ensure that the economic recovery continues to strengthen, that employers hire more and more full-time workers and that the low paid in particular will share in the economic recovery.

That is what this Bill is about – about fixing a minimum wage that assists as many low-paid workers as possible without threatening jobs or the economy.
I believe setting up the Low Pay Commission is one of the most important policy initiatives taken by any Government in recent years. It is evidence of this Government’s commitment to making dignity at work a reality.

In conclusion, during the crisis we remained committed to maintaining employment rights and protecting the most vulnerable. Our aim in Government now is to continue towards a balanced economic recovery. That means jobs growth in the regions as well as Dublin. It means spreading the recovery to all socio-economic groups.

Because there is no future for this economy and for our society unless we remain committed to these twin objectives: to sustain the recovery and to share the benefits.

I commend the Bill to the House.