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,...


30-Jul-09 at 15.07

Inability to Pay Minimum Wage

By Enda Mc Guane

Following the publicity generated at the MacGill Summer School around the National Minimum Wage, this weeks Resolve HR Blog will take a look at the Act in more detail. We will also explore some of the options open to employers finding it difficult to pay the Minimum Rates and the options open to them.


What is the National Minimum Wage Act 2000?

Introduced in 2000 the National Minimum Wage Act sets a legal minimum hourly wage rate for any experienced adult employee (one who has held employment of any kind in any 2 years over the age of 18). Since 01 July 2007 the rate has been €8.65 an hour, which is currently the second highest of Europe. It is an offence not to pay the minimum wage and the National Employment Rights Authority (NERA) has been very active over the last two years in ensuring that all employers comply with the Act. In the first Quarter of 2009 NERA conducted 477 inspections relating to the National Minimum Wage Act and made awards to employees of arrears totalling €56,503.


There are some exceptions to the Act, for example industries governed by REA's and ERO's, which entitle their workers to higher minimum wages. For more information on these click here


There are also a number of exceptions, which allow employers to pay less then the Minimum Wage Rate. These include people employed by a close relative such as a spouse, parent or grandparent and employees in statutory apprenticeships such as apprentice carpenters and electricians. Other exceptions, and the adjusted Minimum Wage Rates are listed below:


Employee Categories 

Legal Hourly Rate

% of Min Wage

Experienced adult worker 



Aged under 18



First year from date of first employment aged over 18



Second year from date of first employment aged over 18



Aged over 18, in structured training during working hours*



1st one third period



2nd one third period



3rd one third period




* N.B In relation to the training rates each one-third period must be at least 1 month and no more than 1 year. The Act also stipulates certain criteria, which the training course must meet if the trainee rates are to apply.


What counts as pay for meeting the Minimum Wage Act requirements?

Gross wage includes the basic wage/salary and any shift premium, bonus or service charge. Any employee receiving (board) and/or accommodation (lodgings) from their employer, can have the following amounts included as part of their wages calculations:

  • €54.13 for full board and lodgings per week, or €7.73 per day
  • €32.14 for full board only per week, or €4.60 per day
  • €21.85 for lodgings only per week, or €3.14 per day


What does not count as pay when meeting the Minimum Wage Act requirements?

  • Overtime premium
  • Call-out premium
  • Service pay
  • Unsocial hours premium
  • Tips which are placed in a central fund managed by the employer and paid as part of wages
  • Premiums for working public holidays, Saturdays or Sundays
  • Allowances for special or additional duties
  • On-call or standby allowances
  • Certain payments in relation to absences from work, for example, sick pay, holiday pay or pay during health and safety leave
  • Payment connected with leaving the employment including retirement
  • Contributions paid by the employer into any occupational pension scheme
  • Redundancy payments
  • An advance payment of, for example, salary: the amount involved will be taken into account for the period in which it would normally have been paid
  • Payment in kind or benefit in kind, other than board and/or lodgings
  • Payment not connected with the person's employment
  • Compensation for injury or loss of tools
  • Award as part of a staff suggestion scheme
  • Loan by the employer to the employee


Paying less then the National Minimum Wage

Similar to the Social Partnership wage rates there is a process allowing an employer to plead inability to pay. Any employer can apply once to the Labour Court for an exemption from the provisions of the national minimum wage for a set period of between three months and one year. When applying to the Labour Court the employer must be able to demonstrate, that if they have to pay the Minimum Wage Rate then they will be forced to lay employees off or make them redundant. Employers can only apply for an exemption for staff receiving the full minimum wage rate and not for any of the categories with reduced rates listed above. Before making their application to the Labour Court the employer must have gotten agreement from the employee or the majority of employee's affected by the application and must be able to demonstrate this to the Court. This can prove difficult for some employers who do not have any formal employee consultation process in place. However these systems can be set up quite quickly utilising the basic guidelines contained in the Employees (Information and Consultation) Act 2005. An employee forum can also be very helpful when it comes to achieving other cost savings and getting employees to buy in to any plans to help the business survive the recession. In any event it represents good Industrial Relations practice for employers to have some communication process in place for their staff.  


It is also important to remember that while all the current debate is about reducing the National Minimum Wage Rate, last November ICTU requested a review of the current rate of €8.65. This is still being considered by the Labour Court who are likely to report on this in September. It seems inconceivable that they would increase the rate and the current posturing by all the Social Partners will enable them to do nothing and leave the rate as it is.


Of more importance to the industries governed by ERO's and REA's is the recent proposal by the Minister for Labour Affairs to introduce an inability to pay clause to these agreements. They currently do not have a formal way of pleading inability to pay. As many of the latest wage rates agreed by these bodies merely rubber-stamped the increases agreed by the social partnership process. There are grounds for arguing that an inability to pay clause can be inferred into these agreements, as one exists in Social Partnership. In any event it looks like nothing will happen until late September. Given the number of Hotel, Bar and Restaurant Groups entering the examinership process over the last few weeks a formal inability to pay clause is needed sooner rather then later.