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In Search Of The Living Wage

Published on Jun 24 2016 1:21 PM in Features tagged: Ireland / Government / wages / Industrial Action / William Fry / The Living Wage

In Search Of The Living Wage

The number of pay-related industrial disputes is on the increase, as unions and workers both seek remuneration on the back of stronger business performance, but are such calls justified?

The recent spate of pay-related industrial disputes and actions in retail and transport, including the ongoing strike actions taken by Luas drivers, has highlighted ever-increasing pressure on employers to increase wages, as the Irish economy continues to recover.

While unemployment rates continue to fall and the economy expands, many employees insist that they cannot make ends meet on minimum wage, as the costs of living, rent, bills and insurance continue to soar, particularly in light of other social problems, like the current housing crisis.

A Hot Summer

A summer of simmering industrial unrest looks increasingly likely, with an escalating number of pay demands recently being made by trade unions in both the public and private sectors of retail and transport.

Pay-increase demands have been made by the staff unions of Penneys, Medtronic, Yves Rocher, Irish Cement, Dunnes Stores, Transdev (Luas), Dublin Bus, the National Bus and Rail Union, and ESB, among many others.

In addition to the ongoing and increasing number of industrial disputes, the issue of pay came further to the fore on a national level with an increase in the national minimum wage to €9.15 per hour in January.

The Low-Pay Commission was set up in 2015 to make recommendations regarding the national hourly minimum rate of pay without creating significant adverse consequences for employment or competitiveness. It found that the wholesale and retail sectors had the second-highest percentage of workers on minimum wage.

Industry Response

A number of large retailers, including Lidl, Aldi and Ikea, have recently introduced a ‘living wage’ scheme for the payment of their staff.

The living wage has been defined as an hourly wage rate that should provide employees with sufficient income to achieve an agreed acceptable minimum standard of living.

In Ireland, the Living Wage Technical Group has set the living wage at a rate of €11.50.

Employers should note that while the UK introduced the mandatory National Living Wage for workers aged 25 and above, the living-wage recommendation is not governed by statute and is not a legal obligation in Ireland.

Recent survey data jointly released by CIPD and IRN demonstrates the increased ability of employers to award pay increases to their employees, with half of all employers surveyed expecting to increase pay in 2016.

The survey concludes that stability was the primary factor in determining the length of any pay agreements, with nearly half of all survey respondents seeking a pay agreement in excess of 18 months’ duration. The survey also found that 82% of respondents in the retail and distribution sector found developments in the living wage to be of relevance to them.

Retail Impact

Retail Ireland has expressed its concern in relation to the impact of transport disputes and actions on the sector’s profits, in particular, the Luas strikes.

A Workplace Relations Commission (WRC) proposal was recently unanimously rejected by SIPTU members. It provided for pay increases of 8-10% for drivers over the five-year term of the current Luas contract, as well as two long-service increments worth a further increase of 7.2%.

This was to be offered in the context of the introduction of lower entry rates for new recruits and productivity measures. The implications of the dispute are far-reaching. Industrial action in the transport sector has obvious negative consequences for business trade.

The director of Retail Ireland, Thomas Burke, stated, “The Luas is a crucial part of Dublin’s transport infrastructure and carries 15% of total daily shoppers into the city centre. At a time when retail businesses are only getting back on their feet after six years of recession, this interruption to transport services has the potential to seriously impact traders in the city centre and along the Luas routes.”

Furthermore, in light of the WRC proposal in the Luas dispute, the National Bus and Rail Union has submitted pay claims to the WRC with respect to drivers in Bus Éireann and Dublin Bus.

It remains to be seen whether the trade unions will seek to have this applied as a benchmark in other sectors and if this will lead to widespread transport strikes in the future if pay-related demands are declined.

While Transdev has currently placed all Luas staff on protective notice and warned of pay deductions if the current wave of strikes at Dublin’s light-rail system continues, if agreement is not reached between Transdev and Luas staff unions, it has the potential to wreak havoc with the retail sector’s annual profitability for 2016.

Legislation

Retailers, in particular, have also been affected by the raft of legislative changes introduced in 2015 by the Industrial Relations (Amendment) Act 2015. The Act reintroduced a mechanism for the registration of employment agreements (REAs), provided for a new statutory framework for the Labour Court to examine and establish rates of pay and conditions of employment in certain sectors, and amended the law in relation to collective bargaining and the power of the Labour Court to make legally binding orders regarding terms of employment against employers who do not have collective-bargaining measures.

While the act was introduced with little commotion, its impact is widely felt already, with recommendations being given by the Labour Court in respect to pay and bonuses.

The expected continued growth of the Irish economy can only be viewed positively. However, employers should be prepared to face increased demands to review pay substantially. In any such review, employers must balance the expectations of employees against the requirement for sustained growth and competitiveness of the business. Productivity measures, cost-offsetting measures and longer payment agreements are often conditions sought by employers to ensure that pay increases are sustainable. n

William Fry’s tier-1-ranked Employment & Benefits Department regularly advises on pay-related disputes and industrial relations. For further information on legislative changes related to this article or to discuss any other aspects of employment law, contact a member of its team.

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