Government versus unions: How to craft the next public sector pay deal

At 2pm on Monday, Government officials and representatives of public sector unions will sit down to begin formal talks on the first new public pay agreement in three years.

The current public sector pay deal, Building Momentum, was first struck at the height of the Covid-19 public health emergency. Since then, the country has endured a cost-of-living crisis exacerbated by the Russian invasion of Ukraine and rampant inflation that has only begun to slow this year.

Like everyone else, inflation has hit 385,000 public sector workers, from nurses and gardaí to teachers and civil servants, in their pockets. Lower than expected corporation tax receipts and war in the Middle East have brought further unwelcome economic headwinds and international turmoil.

The pay talks come with the clock ticking towards the expiration of Building Momentum at the end of 2023, in just five weeks’ time. Both sides insist a deal can be done in that timeframe, but neither believes it will be easy.

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Throw in the looming general election, which must be held within the next 16 months, and a heady mix of pressures form the backdrop of the pay talks due to kick off between the unions and the Department of Public Expenditure (DPER).

This raises questions: have the unions have blown their chances of a more generous deal by not pushing harder for talks earlier, when inflation was higher? Or, on the flipside, has the last-minute nature of the talks left the Government vulnerable to public sector pay demands as a busy period of elections approaches?

We’re in a very uncertain and volatile world ... I’m not sure what that world will look like in a year’s time

The Government’s pay offer and the strategy of the Irish Congress of Trade Unions’ (Ictu) public services committee (PSC) are closely guarded, as would be expected before talks begin in the Workplace Relations Commission (WRC).

Broadly, it can be expected that the unions will seek pay increases to offset the impact of inflation on their members’ salaries. One non-pay fault line has already emerged, however.

On one side is the Government’s desire for a multiannual pay deal which it says would provide certainty to public service workers and the exchequer. It would have the added political benefit to the Coalition parties of offering the likelihood of industrial peace during a general election campaign.

On the other side of the divide are the unions signalling that they will not agree to a multiannual deal unless the remnants of emergency laws brought in after the economic crash are finally scrapped.

Minister for Public Expenditure Paschal Donohoe has said he is willing to engage on the issue, but also raised the hackles of the unions by saying he was “not aware of any practical impact” of the remaining clauses in the Financial Emergencies Measures in the Public Interest Act 2009, the legislation put in place following the 2008 financial crash to reduce pay.

The matter is a sensitive one on the eve of formal talks. One source in the labour movement said: “I would not underestimate the trade unions’ determination to deal with that issue on behalf of their members ... it needs to be taken seriously by Government.”

They, and others, also highlighted the current recruitment freeze in place for certain staff in the health service as an issue that could throw a spanner in the works at the talks.

It is no surprise, then, that both sides have suggested that the upcoming talks – in the polite parlance that generally precedes tough negotiations – will be “challenging”.

One curious feature of this round of public pay talks is how late the Government has left it before seeking formal negotiations. The Cabinet signed off the invite little more than six weeks before the current public sector pay deal is due to end on December 31st.

A suspicion in some quarters that the Coalition’s invitation may have been delayed as inflation fell – in the hope of not having to offer as hefty a pay increase – is rejected by those within Government circles; they insist it has simply taken time to get to the point where a pay deal can be achieved.

One source also points to discussions between DPER and the unions since as early as April, on a clause in the current pay deal that allows for talks on the potential for a different approach to sectoral bargaining, saying: “It’s not like there has been a vacuum.”

More broad-based preliminary talks have been taking place in recent weeks and these are said to have progressed to the point where Mr Donohoe believed it is the right time to take the process to the next stage at the WRC.

What I want to see is an agreement that recognises the cost-of-living crisis and that obviously works for the different groups and grades

A union source took issue with any suggestion they have not been pushing for negotiations to happen sooner, saying that a more accurate characterisation is they have not been “desperate” for them to start.

This is because if there is no agreement, the unions have other options such as groups of public sector workers making individual sectoral pay claims.

On the possibility that a better deal could have been secured for members when inflation was higher, the source said: “I’m not sure inflation is going down that fast.”

They pointed out that Building Momentum pay increases “still didn’t cover the full cost-of-living increase” caused by inflation and this “has to be addressed”.

Sinn Féin’s public expenditure spokeswoman Rose Conway-Walsh dismisses the suggestion that falling inflation strengthens the Government’s hand. “Even though inflation is down, prices aren’t down,” she said.

She would not be drawn on what level of pay offer Sinn Féin believes should be made to the unions, though she said the party would like to see a multiannual deal to provide “certainty” to workers.

“What I want to see is an agreement that recognises the cost-of-living crisis and that obviously works for the different groups and grades,” she said.

She said she did not have concerns that a deal cannot be agreed at this point.

During an interview with RTÉ Radio 1 last week, it was put to Mr Donohoe that a short, one-year pay deal would give the unions a lot of power in the build-up to the general election.

His reply did not directly address the tricky politics the Coalition would face in such a scenario.

Instead, Mr Donohoe said union leaders are guided by their members’ interests and are “aware of the economic conditions.”

“We’re in a very uncertain and volatile world. I’m not sure what that world will look like in a year’s time,” he said.

“While I have every confidence to believe the Irish economy will continue to grow ... I think there’s also a merit in getting an agreement now.”

I would not underestimate the trade unions’ determination to deal with that issue on behalf of their members ... it needs to be taken seriously by Government

Later in the week, Mr Donohoe said he wants to deliver two things in any deal. The first is certainty on “how we can put more money back in people’s pockets in the context of a new wage agreement and that it be affordable to the taxpayer”. The second is that “in return for that, we have industrial peace”.

One seasoned observer of industrial relations said there are two possible outcomes in terms of the longevity of any agreement.

The first is that, with inflation falling, it could be in the interests of both sides to make a deal that lasts between 18 months and two years. Alternatively, the unions could go for a short-term deal “because they got a bit burnt on inflation” in the current pay deal, Building Momentum.

The observer was upbeat on the prospect of an agreement before the end of the year.

“When the parties agree to engage, there’s a reasonable, legitimate expectation that an understanding or agreement will come from it,” they said. “Both sides have too much to lose by not having an agreement.”