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Sector-Level Bargaining and Possibilities for Deviations at Company Level – Ireland

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Sector-Level Bargaining and Possibilities for Deviations at Company Level – Ireland Sector-level bargaining and possibilities for deviations at company level – Ireland Click for contents Wyattville Road, Loughlinstown, Dublin 18, Ireland. - Tel: (+353 1) 204 31 00 - Fax: 282 42 09 / 282 64 56 email: [email protected] - website: www.eurofound.europa.eu Author: Maarten van Klaveren, Amsterdam Institute for Advanced Labour Studies (AIAS), University of Amsterdam Research project: The functioning of sector-level wage bargaining systems and wage-setting mechanisms in adverse labour market conditions Contents Collective bargaining and labour market conditions in Ireland 1 Relevant derogation clauses 4 Employment Regulation Orders and Registered Employment Agreements 6 Opinions and actions of social partners 8 References 12 Annex 16 Collective bargaining and labour market conditions in Ireland Collective bargaining In Ireland, collective bargaining is organised as a three-tier system, with a dominance of bargaining and complementary bargaining at sectoral and company level. For over two decades collective bargaining, covering the unionised private and public sectors, has been regulated by national tripartite ‘social partnership’ agreements, drawing up guidelines on minimum and maximum wage increases. There have been seven successive triennial Social Partnership Agreements, or national wage agreements, since 1987. The national agreements include provisions allowing deviation from the national agreed wages via agreements at company (or sector) level (Baccaro and Simoni, 2007; Arrowsmith and Marginson, 2008; EIRO, 2009b). From the early 1990s Ireland’s economic transformation took place, set in motion by high levels of inward investment by multinational companies. Its English-speaking population and membership of the EU, availability of low-cost skilled labour as a result of high levels of investment in education, and an active industrial policy contributed to an expansion of the Irish real gross domestic product (GDP) by an average 7.5% and real earnings by an average 3.1% between 1995 and 2007 (Marginson and Sisson, 2004; European Commission, 2009) – an economic success story which led to the economy being called the ‘Celtic Tiger’. Today, however, Ireland is in deep recession, with its real GDP falling 7.5% in 2009, and without a national pay framework. In December 2009, the Irish Business and Employers’ Confederation (IBEC) formally withdrew from the terms of the national private sector pay agreement. The wider context for the breakdown was the collapse of talks between the government and the public sector trade unions over how to reduce the public service pay bill. Talks with the Irish Congress of Trade Unions (ICTU) failed on an arrangement that, according to IBEC, ‘was appropriate for the economic and commercial environment of 2010’. On 23 December, IBEC withdrew ‘from participation in the pay terms of the Transitional Agreement, which are wholly unsuited to our economic circumstances’. Director General of IBEC, Danny McCoy, explained that, because of this, ‘we are entering a period of enterprise-level bargaining in unionised employments’. Mr McCoy wrote to his members, saying IBEC invited ICTU ‘to meet as soon as possible in January to agree measures for the orderly conduct of industrial relations in the private sector’, suggesting that his organisation would prefer the protection of some form of national framework (EIRO, 2010c; EER, 2009-431; EER, January 2010). Until the withdrawal of IBEC, about 125 companies had paid some element of the pay increases agreed under the Transitional Agreement. In January 2010, IBEC produced detailed guidelines for its members on the conduct of enterprise-level bargaining in the private sector. 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’, although it added that employers should refuse pay increase claims in 2010 (EIRO, 2010d). In March 2010, IBEC and ICTU agreed a protocol providing negotiators with broad pay guidelines. The first article of this protocol reads: ‘Both IBEC and ICTU are agreed that the maximisation of sustainable employment is the most important objective to be secured during the economic downturn’. Parties also stated that they will ‘utilise the machinery of the State, the Labour Court and Labour Relations Commission (or other agreed machinery) to resolve disputes’ (article 3c) (EIRO, 2010e; IBEC/ICTU, 2010). Organised employers in Ireland have presented an exception to the general trend in Europe; due to economic circumstances, they preferred to restrict possibilities for company negotiations in the national agreements. Scope was provided for productivity or flexibility-enhancing wage agreements at company level, but ‘cost increasing’ settlements were prohibited. In contrast, trade unions unsuccessfully pressed for the inclusion of a local bargaining or ‘ability to pay’ clause. The incidence of ‘above the norm’ company agreements in recent years has been skewed, reflecting both tight labour market conditions as well as productivity considerations (Arrowsmith and Marginson, 2008). © European Foundation for the Improvement of Living and Working Conditions, 2011 1 Sector-level bargaining and possibilities for deviations at company level – Ireland Although tripartite bargaining at the macro level remained the dominant form of collective bargaining, this has coincided with an increasing trend towards the decentralisation of collective bargaining to the micro level of the enterprise (company/workplace), beginning in the 1980s and 1990s. This paradoxical development of centralised bargaining and a trend towards single-employer bargaining was influenced by factors such as: the increasing numbers of multinational companies moving to Ireland; the growth of international competition in domestic and foreign product markets; the increasing emphasis that employers placed on company-level competitive strategy. As a consequence, the importance of sectoral bargaining has declined significantly, although it is still present in sectors with many small to medium-sized businesses, such as printing, hotels and the construction industry. As this report will show, labour intensive and low-pay industries are regulated at industrial (sectoral) level by Joint Labour Committees (JLCs). In the public sector, as well as being regulated by centralised pay bargaining, social partners may also negotiate over various issues at local level (EIRO, 2009b, 2009c). The Irish industrial relations system is basically a voluntarist one. Legal mechanisms to govern wage determination are considerably weaker in Ireland than in countries such as the Netherlands, Belgium, Denmark or Finland (Hardiman, 2006). As shown in section three of this report, wage formation is not regulated by law other than through Registered Employment Agreements (REAs), when negotiated sectoral agreements are given legal force, and Employment Regulations Orders (EROs) protecting workers in vulnerable low-income employment. Where collective bargaining fails, the system is heavily reliant on state dispute resolution institutions, the most prominent of institutions introduced to this effect being the Labour Court (Duffy, 2006). However, the Labour Court’s role in dispute settlement on pay issues remains voluntarist as well: in such disputes the court issues only recommendations. Changing conditions If economic and labour market conditions in any EU Member State can be called ‘adverse’ compared with just a few years ago, it is in Ireland. The country entered a deep recession in 2008 as a result of economic shocks to foreign trade, in the financial sector, and in the housing market. The shocks to foreign trade and finance were largely outcomes of the global crisis, but the housing market bust was primarily homegrown. As a result, in 2008 GDP contracted 3% (OECD 2009; Kanda, 2010). In late September 2008, a transitional agreement as the second stage of the ‘Towards 2016’ national agreement was negotiated by the government, ICTU and the employer associations, providing for a 6% pay rise over 21 months (or 3.4% a year). The deal was in two phases; including a three-month pay pause in the private sector and an 11- month pause in the public sector. The review of the agreement had started in February 2008. Already during that period dramatic changes in the economic context took place. The parties involved considered the report prepared by the National Economic and Social Council (NESC), The Irish Economy in the Early 21st Century, and endorsed its broad conclusion that ‘a combination of factors in 2008 has created an exceptionally difficult policy context in which to manage the economy’s transition to the next phase of development’ (Transitional Agreement 2008, p. 7). Two months after the accord was ratified, IBEC was already arguing that its terms were inappropriate in an economy entering such a severe downturn. In November 2008, the Construction Industry Federation (CIF)1 announced that it would not sign up to the agreement. A week later, the construction employers announced they were going to cut the 1 Besides IBEC, the employer association involved in national agreements. 2 © European Foundation for the Improvement of Living and Working Conditions, 2011 Sector-level bargaining and possibilities for deviations at company level – Ireland wages of 200,000 workers by 10% (Cremers, 2009). By contrast, the trade unions sought to defend the pay agreement, arguing that companies
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