Following the recent High Court Case new proposals in relation to JLC/REA's have been made by the government:
24-Nov-10 at 18.17 | Resolve HR Admin
Following today's decision to reduce the Minimum Wage rate to €7.65. The Government has signalled that the ERO and REA rates should be reviewed. In particular the Catering,...


15-Jul-09 at 12.50

After the electricians strike where to next for national wage agreements??

By Enda Mc Guane

Last week in the Resolve HR Blog we looked at the Electricians strike and some of the options open to employers facing pickets. Now that it looks like the issue will be resolved this week (with a 4.9% pay increase) we want to take a look at the bigger picture. The Registered Employment Agreement (REA) system, it's links to social partnership and the future role or otherwise of nationally reached agreements in setting pay and other terms and conditions of employment.


In order to look at the REA system lets focus on the most topical one, the Electricians. There are currently three parties involved in the Electricians REA the Electrical Contractors Association (ECA), which is part of the Construction Industry Federation (CIF) and which represents approximately 56 of the bigger contractors. The Association of Electrical Contractors Ireland (AECI), which represents approximately 260 contractors. These two bodies represent only 316 of the estimated 3,000 plus electrical contractors in business in Ireland. The Technical Engineering and Electrical Union (TEEU) represents workers, estimates put its electrician membership at 10,500 approximately half the electricians in Ireland. Between them these bodies form the National Joint Industrial Council, which through the auspices of the Labour Court sets the rates of pay and other terms and conditions for all electricians nationwide through the REA. Outside this process is the National Electrical Contractors Ireland (NECI) group, which represents approximately 700 electrical contractors and which is in the midst of taking a legal challenge against the REA. This is due to be heard in October at the same time as the Quick Service challenge to the JLC (see previous Resolve HR Blog on JLC for details). So to summarise, as it stands the electrical contractors REA which sets pay and other terms and conditions for a whole industry, is agreed by representatives of approximately 13% of employers and 50% of employees. Regardless of arguments about the relative size of the parties represented in the process, it still doesn't sound very democratic does it??


Lets next examine the links between the REA and Social Partnership. While the REA system predates social partnership by many years, in recent years both the REA and the JLC systems have tended to award pay increases in line with the percentages agreed through the partnership process. In effect they have become a rubber stamp for Social Partnership whilst also ensuring that other terms and conditions specifically relating to their industry are maintained. The Social Partnership process emerged in the mid 1980s as a means of combating high unemployment and high levels of industrial relations disputes. This consensus model provided a (then) new way of regulating relationships between the Government, Employers and Trade Unions in the form of agreed action plans. When Social Partnership started the Irish economy and business environment was vastly different from the one we have today. The Irish economy hada mouch more limited exposure to the world economy and we had a reliance on basic manufacturing industries that tended to be highly unionised and a limited amount of employment legislation. Where as today Ireland is a more open economy, which brings with it a whole new set of challenges.


As the economy has developed the focus in the private sector has shifted to the services industry and to high tech manufacturing with an emphasis on value adding activities. These industries require different skillsets and more flexible and fluid organisational structures to allow them to react to the international environment, to which the Irish economy is now fully exposed. In many cases these newer industries have adopted a more proactive and creative approach to managing their staff.  The legal nature of the Employment relationship has also changed, it is now guided by vastly more legislation then was the case in the 1980's (some of it developed from social partnership proposals). Much of this legislation focuses on the establishment of basic minimum standards for various aspects of the employment relationship from pay rates to dispute resolution. For example the National Minimum Wage Act 2000 sets minimum hourly wage rates for all businesses in Ireland (currently €8.65, the second highest in the EU). When the REA/JLC system and Social Partnership process were established these were not in existence. (In fact one of the points of argument in the upcoming challenges to the REA/JLC systems will be whether it is legal for the bodies operating within these systems to set minimum rates of pay which differ from rates governed by the National Minimum Wage Act.) In tandem with these changes the nature of Social Partnership changed, as the Celtic Tiger took hold it became more and more about dividing up the spoils among the parties in the shape of wage increases and tax breaks and less about agreeing practical solutions to economic challenges. This is best typified by the agreement reached in late September 2008, as we entered the worst economic depression in 80 years the Social Partnership process awarded pay increases of 6%. This agreement bore no relationship to the economic realities facing most businesses in Ireland, which were in the midst of attempting to cut costs in any way the could including agreeing wage cuts with their staff. Given that the Government is currently borrowing €30.5 million per day to fund public services, it will be interesting to observe the Social Partners responses to An Board Snips proposals in the Autumn.


This brings us to our next point, who exactly do the Social Partners represent? Figures for height of the boom indicated that out of a workforce of approximately 2.1 million only 653,597 workers or slightly more then ¼ of the workforce were members of a trade union. Half this membership was in the public sector. IBEC at the peak of the boom had 7,500 members. However when you factor out all the public sector entities that are members you find that in reality IBEC represents a low percentage of employers nationwide. In fact both parties have seen a serious decline in the percentage of their membership drawn from the private sector since the 1980's, however this has been compensated for by the increase in members from the public sector as both recruitment and the establishment of public sector bodies boomed during the Celtic Tiger.


So to summarise Social Partnership and its related systems are agreed by the representatives of relatively small percentages of employers and employees, yet they are applied nationally. They have been superceededed by the amount of employment legislation currently in existence and the nature of modern employee relations, are cumbersome and out of touch with economic reality. To demonstrate this last point we only need to look again at the Electricians REA, following last weeks strikes the REA members have agreed a 4.9% increase in pay. This is an amazing outcome at a time when the construction industry is haemorrhaging jobs and there are tens of thousands of unsold houses in the country. For the employee representatives it reflects a victory in the battle to maintain terms and conditions of employment. We suggest that this may be another pyric victory repeating what happened in SR Technics. In that case managements drive to reduce costs including terms and conditions of employment (many of which were left over from the days when the business was a semi state body) was resisted despite them flagging the levels of competition from cheaper economies. The company subsequently lost a number of high profile contracts (including Aer Lingus) due to its costs and ultimately folded with the loss of hundreds of jobs. For the employer representatives' agreeing to an increase of 4.9% shows a complete lack of understanding for the economic realities facing many smaller electrical contractors today. The longer-term outcome for all parties involved in the REA can only be a further reduction in their membership as more jobs are lost.


We suggest that it's now time to take a different approach, when faced with managing costs many businesses attempt to cut out the middleman and deal direct. This is what now needs to happen in relation to Social Partnership and the other systems like the REA and JLC. As the Irish Economy has evolved so too has the employer/employee relationship We have one of the best educated work forces in the world, people in all occupations from solicitors to nurses to electricians undergo formal third level education and receive internationally recognised and accredited education awards through the HETAC/FETAC system. People's expectations have changed and the employment relationship has had to change to keep pace in terms of flexibility, training, progression and reward. There is now a large framework of legislation in place to ensure that all employee's benefit from full employment rights and entitlements and if they don't there are a myriad of ways this can be rectified through NERA or through recognised third parties like Rights Commissioners or the EAT. Employees have the right to be consulted at local level as a result of the Provision of Information and Consultation Act 2006. In many businesses the current recession has led to greater cooperation between employers and employees as they seek to keep businesses afloat and avoid job losses. Social Partnership should now go back to basics and focus on relationships between employers and employees at local level and what works for each of them in the context of their operating environment. This allows them to make the best decisions for their business and deal with their own economic challenges. It also gets rid of the one size fits all approach and removes them from the impact of decisions reached in pursuit of "national agendas" which are often more of a hindrance then a help at local level. The Social Partners would receive this idea with derision, but then again they would for without the social partnership process what exactly would any of them have to do??  Its time to cut out the middleman!!