Deconstructing the pay deal

DURING PREVIOUS national pay agreements, many employers took it for granted that they paid the national terms, especially in the absence of locally agreed pay reviews and scales.

The economic downturn has many more employers and senior managers questioning whether they must meet the new 6 per cent pay rise applicable over 21 months following a three-month pay freeze in the private sector.

The decision of the Construction Industry Federation (CIF) not to ratify the pay terms may lead to a "free-for-all" in the construction sector. It has also provoked more queries over whether other employers must abide by the negotiated terms, which work out at 3 per cent annualised.

The general answer is that they do not have to pay these rises, but many complications lie behind that stance. We still operate a "voluntarist" system of employment relations, despite more than two decades of national-level "social partnership". These are the special deals hammered out between the government, the Irish Congress of Trades Unions (Ictu) trades union umbrella group and the two main employers' lobbies, Ibec and the CIF.

Essentially, if you have employees who are affiliates of Ictu, they will expect compliance with the pay terms or its opt-out provisions.

If your staff are not members of a trade union but your organisation is affiliated to one of the main employer groups, such as Ibec, there is at least a moral force, if no strict legal requirement, to abide by the agreed pay terms under the Towards 2016 pay pact.

In Ireland we have developed a hybrid system between continental European-style corporatism and an Anglo-American deregulated labour market which we like to call "social partnership".

It is credited with positive properties and its advocates would have you believe that it was the main driver of competitiveness and export-led dramatic growth in the late 1990s, later producing full employment.

Times have changed with the recession, and the concept of social partnership, which never percolated extensively to workplace level, is no longer as widely lauded. Instead we have concerns over the less-obvious aspects of social partnership pay-fixing such as the minimum wage and legal pay rates fixed by registered employment agreements and joint labour councils which carry the force of law.

After signing the new pay terms, Ibec's director general Turlough O'Sullivan said: "Everyone knows that we are in dramatically changed economic circumstances and importantly the agreement recognises that there will be employers who will be unable to pay the terms". Others would need to agree cost offsets with their staff to meet the terms, he added.

The second Towards 2016 pay terms include some comfort for hard-pressed employers in that the pay terms are not automatic and should be negotiated at local level, taking account of the economic, commercial and employment circumstances of each employer, assuming that there are employee representations structures in place.

As in the previous pay terms, employers are entitled to full co-operation with normal ongoing change and the need for continued adaptation and flexibility to address competitiveness.

The problem is that one person's "normal ongoing change" can seem like "extraordinary change of employment conditions" to another. In the end, it is in the hands of the Labour Court to decide on what constitutes "normal ongoing change".

The new pay agreement introduces a voluntary arbitration mechanism for employers, employees and trade unions to avail of the services on an independent third-party.

An opt-out mechanism was introduced six years ago where an employer is unable to pay part of the pay terms and/or requires cost offsets in return.

In this circumstance, a labour relations commission appointed independent assessor would look at the management accounts and make a recommendation which can ultimately be decided by the Labour Court on a non-binding basis.

Where an employer is unable to implement the pay terms in full and there is no local agreement, the case can be independently assessed as part of a process chaired by the Labour Relations Commission (LRC) and can then be subject to a binding Labour Court recommendation.

A dispute between Siptu union members and Georgia Pacific Ireland suggests that many companies are liable to pay the new pay terms unless they either successfully claim an inability to pay or can show that they have an agreed, separate pay and reward system in place. However this usually would only arise if a group of employees sought the national terms and then referred the issue to the LRC.

Gerald Flynn is an employment specialist with Align Management Solutions. gflynn@alignmanagement.net

In a recent case, the American- owned Georgia-Pacific, manufacturers and marketers of tissue and related chemicals with a plant in Finglas, Dublin, was advised to pay the national increases.

The dispute concerned a claim by administrative and supervisory staff that their pay be determined in accordance with national pay agreements.

In rejecting this claim, the management said that since 2003, these workers were actually paid more than they would have been under national pay agreements.

This dispute was referred to the Labour Court in September, with a hearing in October.

Siptu argued that the company should comply with the terms of the national wage agreement as there was no formally agreed alternative arrangement.

Georgia Pacific management pointed out that the company was a good employer, reflected by its current salary and that staff had not been disadvantaged by being outside the national wage agreement. The managers added that application of the terms of the national wage agreement would limit the companys ability to reward those who added most value to the business and paying the national pay rounds in addition would not be affordable.

In his recommendation, the Labour Court chairman Kevin Duffy stated: "In the absence of any formally agreed alternative arrangement for pay determination, the terms of the pay agreement associated with national partnership agreements should apply."