IBEC, THE GROUP that represents Irish business, has found that four out of 10 (39%) companies are not in a position to award pay increases this year.
The organisation released the findings of its latest private sector pay survey of 400 companies today, which had a similar result to its last pay survey carried out in November 2014.
Of the 61% of companies awarding a rise, the median pay increase is 2%.
Ibec said the new public sector pay agreement must benefit the entire country, not just public sector workers – most of whom are set to make over €2,000 extra between now and 2018.
The organisation said the new deal needs to “deliver the necessary and very significant reform to work practices that is still required”.
Ibec CEO Danny McCoy said public sector workers “have made a central contribution to Ireland’s recovery through pay reductions, productivity and an ongoing commitment to the delivery of public services”.
“As economic circumstances improve it is appropriate that pay rates are revised. However, the across the board pay awards in the new agreement puts the public sector at odds with the reality of the private sector, where four out of ten companies cannot afford to increase pay this year.”
This increases the risk of pay rates at particular grades of the public sector drifting significantly from the equivalent rate of pay in the private sector. This has the potential to create unrealistic wage expectation in areas of the private sector that remain under severe pressure. The new pay agreement also allows very little flexibility to adjust pay rates in particular areas of the pubic sector where skills shortages are leading to severe recruitment and retention problems. The approach should have been more responsive to wider labour market trends.
“Money spent on pay awards is money that is not going on recruiting new staff or on much-needed public investment. In the next budget it is crucial that all decisions are informed by the broad needs of the country.
“To ensure the maximum number benefit from the recovery, the priority must be to reduce the income tax burden right across the economy. The Government should move to further reduce the punitive marginal tax rate. This can be done while also reducing the deficit and debt levels, and prioritising a balanced recovery across different sectors and regions,” McCoy said.
‘Bad deal for taxpayers’
Ibec expressed particular concern that the new public sector pay deal puts in place “overly-restrictive rules around out-sourcing, which could ultimately damage the ability of the public sector to meet the needs of citizens and businesses alike”.
McCoy claimed that new restrictions on out-sourcing “could result in it being a bad deal for taxpayers”.
“The interests of the service provider are being put ahead of customer needs. Ireland already has the fourth lowest level of public sector out-sourcing in the OECD. This agreement will further restrict the ability of Ireland to benefit from the quality and efficiency of services that outsourcing can provide.
“There is no desire for national pay agreements in the foreseeable future. Enterprise level bargaining will remain the norm over the coming years. However, there is merit in establishing open channels of dialogue between government, Ibec and the trade union movement to manage expectations and safeguard competitiveness,” McCoy stated.
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