2/1/15

Year of the Pay Rise

Anne Marie Walsh- Industry correspondant



Workers at more than half of companies are set to get a pay rise in 2015 – the first widespread increases since the economic crisis.
IBEC, the group that represents Irish businesses, will today publish a study covering hundreds of companies which suggests the average pay increase will be 2pc.

Larger employers are more likely to improve basic pay, with three out of five businesses with more than 50 staff expected to increase wages.

IBEC Chief Executive Danny McCoy said it is vital that pay demands are “moderate” but following years of tax hikes, pay freezes and some cuts, unions have already begun winning wage increases worth many multiples of the near zero rate of inflation.

“Pay will increase for most in 2015, but not all. The economy is recovering strongly, but we have a long way to go,” said Mr McCoy.
The IBEC report comes as the Irish Independent can reveal that the leaders of major unions, including SIPTU, the TEEU and Mandate, are revising their pay strategies and gearing up to increase the amounts they will seek.

Experts differ on how much pay has been reduced since the beginning of the financial crisis as cuts varied widely across sectors.
The private sector was worst hit initially. However, in recent times the public sector workers have carried the higher burden, while the private sector has stabilised and some workers have already benefited from increases.

“The economy in money terms is still about 6pc below its pre-crisis peak

and overall price levels are below where they were in summer 2008. This needs to be reflected in pay expectations,” said Mr McCoy.
“Many companies remain in survival mode and simply cannot afford pay rises. It is vital that pay demands are moderate, so we don’t lose the hard-fought competitive gains of recent years.”

According to IBEC, increases are most likely to occur in high-tech sectors such as medical devices (91pc increasing pay), pharma-chemical (89pc), electronic services/telecom (81pc) and electronics manufacturing (87pc).
The Technical, Engineering and Electrical Union told the Irish Independent its strategy for the new year will be to lodge claims for 5pc increases over 12 months, 50 times the current 0.1pc rate of inflation.

The head of SIPTU's manufacturing division, Gerry McCormack, said its standard 2pc pay claim over 12 months will rise to between 2.5pc and 3pc.
He noted that at some employers, including THK in Dublin, the union recently won a 6pc pay rise, which kicked in yesterday.
"We haven't decided yet on our pay claims policy but we are predicting a higher settlement level going forward," he said.
"The total increase will be around 6pc, with the phasing and length to be agreed, but it may be 30 months on average."

He said lower-paid members on 39-hour weeks have won an average €1,560 pay rise over the last three years, with general operatives on average incomes of €39,000 enjoying €2,200 - and top earners on €80,000 getting an increase of €5,300 over the same time frame.
General Secretary of the TEEU Eamon Devoy said claims for 5pc per year are being served on all "viable companies".

"It is by and large a catch-up claim to take account of a long period of pay standstill, rising prices and the many stealth charges and taxes imposed on working people who are finding it difficult to make ends meet."

Mandate is in talks with Penney's, which is resisting its claim for a 3pc pay rise, and will shortly serve claims on Marks and Spencer and Tesco as pay deals end shortly.
Assistant General Secretary Gerry Light said if there are signs of a further economic uplift, it will review its pay policy but it is also focused on improving wages by winning banded hour contracts for part-time workers.

Unions have also lodged claims with many of the commercial semi-state companies, including a demand for a 3.5pc yearly pay increase for the next three years at the ESB.
Public sector unions are preparing for talks with the Government on refunding €2bn in wage reductions during the recession.
But pay rises are not predicted across the board.

Before Christmas Minister for Labour and Employment Ged Nash announced that he is getting a new body to examine the minimum wage. Labour is likely to push for a hike in the €8.65-an-hour rate later in the year.
In its new pay survey, IBEC found that 49pc of companies gave some form of pay increase last year but as many as 57pc will do so this year.The real debate will be over how much those increases should be.

IBEC Head of Policy and Chief Economist Fergal O'Brien said there is no justification for pay rises above 2pc.
He said inflation is close to zero and the benefit to consumers from a drop in fuel prices will be double the cost of the water charges next year.

"Those employers who agreed 2pc increase in 2014 would have expected inflation to be higher," he said.
"There's not a cost of living benchmark driving that. It's in recognition of a number of years of pay freezes and recognition that take-home pay has been hit, but that's because of what the Government took out of it."

He said employers could not get the wage increases back by hiking prices as this would make them uncompetitive as long as inflation is near zero.

In its report IBEC notes that there is scope for the Government to help workers by reducing tax further than it did in last October's Budget.
The vast majority of workers have lost between 8pc and 10pc of their take-home pay to tax as a result of the series of austerity Budgets.
The data was collected by IBEC in November and involved reaction from 462 companies.

Irish Independent