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News : Irish Economy Last Updated: May 25, 2011 - 6:02 PM

Bruton to propose changes to employment/ wage setting mechanisms in sectors such as retail, distribution, catering and hotels
By Finfacts Team
May 25, 2011 - 6:09 AM

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Minister for Jobs, Enterprise and Innovation Richard Bruton TD said on Tuesday night that following a decision of Government, the Report of the Independent Review of Employment Regulation Orders (EROs) and Registered Employment Agreement Wage Setting Mechanisms (pdf), was published and it sets out a time-limited programme for a decision to be taken and announced on an action plan before the end of June 2011. Sectors of the economy affected include retail, distribution, catering and hotels

The new proposals will include some of the recommendations in the report which was produced by the chairman of the Labour Court, Kevin Duffy, and Dr Frank Walsh of UCD.

EROs are minimum pay and conditions' terms agreed by a joint labour committee (JLC) comprising union and employer representatives and an independent chairman. REAs are collective agreements between employers and unions which are registered with the Labour Court and are enforceable in law.

The report recommends an overhaul of the existing arrangements, not an abolition as called for by IBEC, the business lobby group.

Duffy and Walsh said lowering the basic wage rates set under joint labour committees was “unlikely to have a substantial effect on employment.”

The Minister said that the report’s overall finding that the basic framework of the current JLC/REA regulatory system requires “radical overhaul so as to make it fairer and more responsive to changing economic circumstances and labour market conditions” is consistent with the commitment in the Programme for Government.

“There is no adjustment as traumatic for any worker as the loss of a job, and the retail, hotel and catering sectors - - the major sectors affected by these wage-setting mechanisms - - have suffered a 20% loss in employment in the past three years. Furthermore, in many cases businesses are competing directly with the UK market where wages are 25-30% lower in these sectors; while rates of pay in the sectors covered by the JLCs have increased much faster than the National Minimum Wage, in some cases by more than 20%.

“That is why it is important to formally begin a time-limited process of agreeing a series of urgent reforms to these mechanisms.

“As part of the process of finalising a comprehensive action plan, as required by the revised MOU (EU-IMF agreement), I will immediately begin discussions with relevant social partners and also with the European Commission Services. To this end I will make copies of the report available and set out a series of proposals for discussion based on the recommendations in the report and other issues raised in the report.

“It is my intention to complete discussions with relevant parties by Friday 10th June ahead of submitting a final action plan to Cabinet before the end of the month.”

IBEC said the report favours maintaining the antiquated JLC system, which was totally out of touch with the need to create and sustain jobs.

IBEC will be engaging with the Government in the coming weeks and will urge it to reject the report's findings and instead to abolish the antiquated JLC system and bring the REA wage setting framework into the 21st century.

According to IBEC director of industrial relations Brendan McGinty: "The JLC system preserves a 37% average premium above minimum rates that apply in the UK. Getting wage costs back into line is an essential part of our economic recovery and is needed to stimulate growth and create jobs.

"IBEC rejects the assertion that the main justification for the JLC system is the absence of any other system of determining pay and conditions of employment, beyond the statutory minimum in the sectors concerned. These employers and workers should be free to determine their own arrangements in the same way as the overwhelming majority of those in the private sector do.

"Tinkering with the antiquated system of wage rules will do nothing to help the many thousand of companies desperately trying to say afloat,"
concluded McGinty.

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