Provisional agreement reached on new EU minimum wage rules

European Parliament and European Council negotiators have reached a provisional political agreement on new rules for setting adequate minimum wages in the European Union.

The deal, if adopted, would introduce measures aimed at promoting collective bargaining on wage setting and better enforcing existing statutory minimum wages.

It would see common rules for a minimum wage, but it would not by itself set a minimum wage.

The planned directive has yet to be confirmed by official votes before becoming law. Member states would then have two years to transpose the directive into national law.

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The rules would require the 21 EU countries with statutory minimum wages, including Ireland, to assess if their existing statutory minimums ensure a “decent standard of living” for employees, according to a European Council statement.

Six EU countries do not have a minimum wage and will not be required to introduce one. Denmark, Finland, Sweden, Italy, Austria and Cyprus all rely instead on collective pay bargaining.

According to Central Statistics Office data, 6.4 per cent of Irish employees earned the national minimum wage or less in 2019.

When assessing the decency of their minimum wages, the 21 affected states may consider real prices of services and a basket of goods or apply commonly used comparators such as 60 per cent of the gross median wage and 50 per cent of the gross average wage, the statement adds.

It was agreed that statutory minimum wages should be updated at least every two years and that social partners would be involved in the process. Countries where less than 80 per cent of workers are covered by collective bargaining would need to establish an action plan to progressively increase the practice, the statement continues.

The agreed text also introduces the obligation for EU countries to set up an enforcement system.

European Commissioner for Jobs and Social Rights Nicolas Schmit said the planned directive is the right instrument to ensure in-work poverty becomes “something of the past”.

Irish Congress of Trade Unions assistant general secretary Owen Reidy cautiously welcomed what he said was an apparent compromise on an “important issue”. He stressed that the deal’s text has not yet been widely released, however.

Proposals to increase collective bargaining power are significant for Ireland, he said, as it ranks in the middle of the European league table, with OECD data showing 34 per cent coverage in the State in 2017.

It is “positive” for workers, Mr Reidy added, that the State would be encouraged to engage more with social partners on wage matters.

Siptu research officer Michael Taft welcomed the proposal for benchmarking the minimum wage at 60 per cent of the median wage. This would result in a “substantial increase” in Ireland’s minimum wage, although he said it would need to rise further to become a living wage.

Welcoming the political announcement, a spokeswoman for the Department of Enterprise, Trade and Employment said Ireland has supported the proposal’s principles since it was first published and actively contributed to discussions and negotiations on the text.

She said the department expected to have sight of the draft agreement shortly and would then analyse it before it is presented for formal endorsement. The two main elements of the proposal – minimum wage adequacy and promoting collective bargaining on wage setting – are issues the department continues to progress ahead of any adoption of the draft directive, she added.

Further, she said Tánaiste Leo Varadkar had received the Low Pay Commission’s report on progressing to a living wage and would bring forward proposals in the summer.

In nominal terms Ireland’s monthly minimum wage of €1,775 is the second-highest in the EU, following Luxembourg (€2,257) and just ahead of the Netherlands (€1,725), according to Eurostat data from earlier this year.

A 2021 Economic and Social Research Institute report found Ireland’s minimum wage was seventh-highest in purchasing-power terms, however.

The national minimum wage increased by 30c in January of this year to €10.50 for people aged 20 and over. Adults aged 18 and 19 are now paid at least €8.40 and €9.45 per hour respectively, while teenagers under the age of 18 must be paid at least €7.35 per hour.