I welcome Mr. Fitzmaurice from ISME. Perhaps you would introduce your colleagues, please.
Presentation by ISME.
Mr. Fitzmaurice
I am accompanied by Mr. Bill Brown, a member of the national executive of ISME and chairman of the National Union of Security Employers and Mr. Jim Curran, head of research for ISME.
ISME, in anticipation of presenting to the committee, conducted a random survey of 100 companies in the Munster area over the last two weeks; 47% were in the field of manufacturing, 47% in services and 6% in distribution. Of those companies, 67% reported job vacancies. On average there were two vacancies in each company and it was taking between four to six weeks to fill each vacancy. Sixty per cent of these vacancies were for unskilled personnel. The security section of our industry also reports they are operating at 10% to 15% below par which represents 800 to 1,200 jobs.
How many jobs?
Mr. Fitzmaurice
Eight hundred to 1,200 jobs. An Bord Glás in its report of the last two weeks stated that it is operating at 13% below par which represents 4,700 full-time or part-time jobs. The AIB report, conducted by AMARACH specifically on SMEs, suggests we will need a net immigration of 12,000 people over the next ten years to sustain the SME industry. This represents lost productivity which is unrecoverable. We are performing at an under-capacity. It is a welcome problem in some ways. The INOU welcomes a falling rate in unemployment. This problem should have been addressed three years ago. I take issue with the suggestion this morning that employers did not anticipate this take-off. We have strenuously reported to politicians for the last four years that a serious problem was arising in the employment sector. In 1997, we challenged FÁS to work with us on a scheme to place people. We identified 400 jobs in specific industries and worked with them to fill those vacancies. We had to abandon the project after six months as a result of people not turning up for interview. This is not a new problem; it has been emerging for some time.
ISME, as a body, feels we are at the coalface of industry. We are owner-managers. Like the hotel industry we are aware of what is happening well in advance of academic research. I cite our various reports on bank overcharging, bank audits and difficulties with pensions. More importantly, three to four years ago we identified a problem with literacy. The number of employees presenting without basic skills has not been addressed by FÁS. Between us - Bill Brown and myself - we have 20 to 30 years experience as owner-managers. Not once in those 40 years has FÁS made an unsolicited telephone call to either company. That is indicative of the situation in the marketplace. The problems we are facing are a lack of numbers presenting for employment, poaching of staff by multinational companies, lack of funds for training and a lack of profit sharing schemes. Multinational companies can reward staff by giving them share options. The shares have a nominal value for the multinational. Let us say the share value is £1; when that is presented on the open market it could sell for £20 and as such the employee receives multiple value. That is capital gains at 20% rather than 40% which would happen if we were giving that as a direct cash incentive.
We have asked the Minister on successive occasions if he would permit us to operate a simple profit sharing scheme with which to reward our staff, to let us take 10% of our net profits and give it in a tax efficient way to our staff. We have had no reply. Multinationals and large companies have the resources to put tax efficient schemes in place. They employ accountants and tax consultants. Most of our managers are not in that position. There are five or six issues which need to be addressed. A national think-tank which incorporates businesses and not too many Government agencies should be established. I am referring to the hotel industry, CIF, ISME or IBEC, people at the coalface of the industry. There is an over-emphasis on the national minimum wage; there should be a national minimum income. Our employees are worried about what they are taking home. The first £150 or £200 of income should be tax free. This would take us out of competition with social welfare and would mean a greater participation rate by all sectors, especially women over 35 years of age. Some serious work must be done to reduce the scope of the black economy.
The Department of Social, Community and Family Affairs should interact with the Revenue Commissioners. It is bizarre, to say the least, that Departments report variances of 30% to 50%. We would be imprisoned if we reported variances of that level to the Revenue Commissioners. The Departments have, with due respect, the resources to ensure their figures are right. We feel that those defined as unemployable should be removed from the unemployment statistics as they cause confusion. The facts are not being recorded. The LES scheme should be incorporated into employment and should be run by employers. The money directed towards that scheme should be used to train people to work in our companies. That would result in greater returns to the Revenue.
My colleague, Mr. Brown, will give a brief account of the security industry which is labour intensive.
Mr. Brown
We thought it might be useful for the committee to have some background information on the industry. In 1997, we identified a difficulty in filling positions and undertook to try to professionalise the industry which had a bad image. In some ways, that image remains. We developed a national standard and training levels which would be included in licensing at European induction level. We also agreed on the formation of a JLC with the social partners in SIPTU. Wages increased over that period because of our inability to locate staff. In 1997 the average security man would have earned £195; in 1998 it would have been £217; the figure for 1999 is £240 and this year it will be £282 per week. That is an overall increase of 44.6% which transfers also into an employer's PRSI, training costs, holiday entitlements and insurance, all based on the hourly rates of a security officer. On its own, that does not mean a great deal, but if it is put into perspective, in a large industrial property it would mean an increase in the security budget from £180,000 in 1997 to £260,000 this year. In a large shopping centre it could increase from £499,000 in 1997 to £720,000 this year. Those are massive increases.
In relation to the INOU concerns on matching, our industry can guarantee that we can take any person, regardless of age, sex or level of education and find a role and a suitable schedule for him or her.
The INOU submission filled in important gaps which existed in the consultant's report. Mr. Allen referred to the 11,000 people set aside. I understand that part of the reasoning behind that, from a social welfare point of view, was to disperse the people who were deemed to be consistently signing on and had to be paid but who were queueing in deplorable conditions. We upgraded the employment exchanges and tried to disperse those who had previously had to queue in them or to pay them in post offices, thus relieving the logjam in the exchanges. Is Mr. Allen saying that the 11,000 should be registered with FÁS and should have to visit its offices? I have always been satisfied that the connection between unemployment exchanges and FÁS is nil. It may have improved over the last few years but there is a long way to go to achieve the service and co-ordination between the Department of Social, Community and Family Affairs and FÁS because they operate out of two different Departments. That is always a problem. How should those 11,000 people be dealt with?
Those were the objectives when it was introduced, but as well as giving people improved signing on conditions or enabling them to go the post office, they were obliged to withdraw from the labour force. Their eligibility for training and employment schemes was curtailed. In recent times there was only one training scheme they could go on - the CORI scheme. The idea throughout Europe at the time was to introduce pre-retirement payments. I have ameliorated my view since the scheme was introduced; initially the organisation was very angry about it. We now see the motivation behind it, although we still think it was the wrong move.
Where to go from here is a different matter. If the people in that situation were brought back onto the full live registration and put through the employment action plan, I would not like people to think that I proposed that. Most of that is seen by people as harassment, even when it is done in the most sensitive way. The way forward for that group would be to reintroduce access to employment and training programmes, to enable interaction with the local employment service and to organise mail shots to make them aware that there are opportunities for them. It is not a reactivation through the employment action plan; it is an opening up of opportunities for them, making them aware that there are employers who, unlike ten years ago, are crying out for their work if they can prepare themselves for labour force participation.
In his submission on behalf of the Irish Hotels Federation, Mr. William Power referred to the level of employment. He mentioned head chefs earning £25,000 a year and supervisors earning £15,000. The hours worked, however, were not indicated. I would like to meet the chef earning £25,000 per year because the hotels I stay in cannot keep chefs. The reasons I am given by comis chefs for leaving are the low level of pay and the extremely long and unsociable hours they have to work. I am not saying that Mr. Power is incorrect. However, how many hours does a head chef have to work to earn £25,000? I spent some time in hotels over the summer and average earnings for some of the people working behind bars and serving food was £100 a week gross. That is a long way from £25,000. The real problem with the hotel and catering industry is that the level of pay is grossly inadequate for the hours worked and the job they have to do.
The level of training by hotels and hotel groups is also very low. In many cases hotels only take people on a casual basis over the summer months. During the summer I was in a hotel in the south in which 95% of the staff were non-EU nationals and most of them were hardly getting enough money to keep them alive. If they had not been fed in the hotel they would have starved to death. There is a great deal of severe exploitation in the hotel industry, although perhaps not in those organised by the trade union movement, but definitely in those which have resisted trade union organisation.
Does Mr. Power agree with that?
I will ask Mr. John Power to get the detailed figures.
I would like to meet that chef earning £25,000 per year. Mr. Brown commented on the security industry. The problem in that industry, in which I was involved myself at one stage, is the number of cowboys operating who are not registered with any organisation and are not under any control. They only take on people who are unemployed, employ them illegally at weekends and undercut those companies which are prepared to offer reasonable levels of pay and employment conditions.
An average annual wage figure of £12,000 was mentioned and it was stated that a survey was carried to find out that figure. The organisation, however, frequently disagrees with the introduction of a minimum hourly rate. Even if the rate was set at £5 per hour, it would be less than that. When we talk about the average, is that the average earnings for a 39 hour week or a 49 hour week? If a minimum rate of £5 is introduced by Government order it would be substantially less that £12,000 per year. Why does the ISME consistently oppose the introduction of a minimum hourly rate of pay?
I was impressed by Mr. Allen's explanation of the difference between the household survey and the live register. It is often difficult to compare urban and rural situations. In a county such as Mayo, geography has a great impact on live register figures. The register shows very little change from year to year because in some locations there is simply no employment. Similarly, some counties have an ageing population, which might not be the case in a large urban centre. Can the national live register figures be broken down on a regional or county basis? This might explain to my urban colleagues why these mismatches are genuine. Mr. Fitzmaurice has said that 60% of available jobs are for unskilled workers. How can the mismatch in relation to skills and to the variation between the urban and rural situations be explained?
Can Mr. Power tell us the percentage of workers in the hotel industry from overseas? It is difficult to find an Irish employee in a hotel or restaurant in urban areas, whereas the opposite is the case in rural areas. I agree with Mr. Fitzmaurice that profit sharing is a great incentive to people to take up jobs and to stay in them. This idea is worth exploring.
Mr. Fitzmaurice cannot deny that owners and managers of small companies are making good profits and that the economy is booming. There is room for increased activity and this is difficult because of labour shortages. Mr. Fitzmaurice mentioned the question of larger companies providing shares or share options to employees. A share option scheme is subject to income tax and not capital gains tax. Until the option is exercised the increase in value is subject to income tax. It is now possible for companies to buy back their shares. Would ISME consider a share option scheme whereby a company could buy back the shares of the employees?
The South Inner-City Community Development Association runs a very successful Youth-reach scheme in conjuction with FÁS. Many of the participants come from Oliver Bond House, socially and economically one of the most deprived housing schemes in the country, and a nicer and better turned-out group of young people one could not meet in the whole of Ireland. The scheme provides continuing second level education and teaches, for example, reception skills and cooking skills. I know that Jury's hotels employ a number of people from the Liberties area. Could hotels encourage development associations, on a strictly localised basis, to set up courses in conjuction with FÁS so that the skills required by the hotel and catering trade would be sought in a local area rather than on a centralised basis?
Mr. Allen appeared to glide over the question of the employment action programme. I accept that everyone wants to feather his or her own nest but the programme is an incentive to people to sign off the live register. The Department of Social, Community and Family Affairs has a duty to put such programmes in place in order to manage numbers on the live register.
Mr. Brown
I would not like people to think the security industry today is the same as it was in the time recalled by Deputy Bell. If the problem lies with cowboy practices in the industry I ask the committee to urge the Department of Justice, Equality and Law Reform to hasten the passage of proposed licensing legislation. It is the responsibility of other Departments to deal with companies which employ casual labour and do not comply with Revenue and other requirements.
Is Mr. Brown saying that what I have said is not correct?
Mr. Brown
I would have been happy to accept the picture painted by Deputy Bell four or five years ago. I could not accept it now. The industry has progressed enormously within the last couple of years. We have, for example, a JLC under the Labour Court. I am concerned that the shortage of Labour Court inspectors will cause problems for compliant companies and make things very easy for people in the black economy.
If Mr. Brown leaves his card I will supply him with some names.
Mr. Fitzmaurice
We have been very critical of the proposed minimum wage, although not for the reasons one might expect. We were not consulted about the matter and we think it is a fudge. We should be speaking about minimum income. Employees are interested in what they take home. The fact that the Government will take 30% in taxes and PRSI out of the minimum wage is a disgrace. If the Government estimate an amount as the minimum required to live on, how can it justify taking contributions from it? The proposal will also impose a floor which cannot be removed. Due to our membership of the euro we are left with very few fiscal instruments which we can manipulate. We believe that people should take more money home. Many small companies employ people, for social or family reasons, to do jobs in packing or manual handling which could be automated. It may become impossible for small employers to retain such workers at £6 per hour and they may be forced to shed, rather than protect, the people who are most vulnerable.
With regard to Deputy Cooper-Flynn's suggestion of profit sharing, I hope the Government will consider the introduction of a simple profit sharing scheme for employees. Deputy Ardagh mentioned profit margins. Multinational companies are reporting profits between 30% and 40%, net in some cases, with labour costs of between 3% and 8%. Small and medium enterprises report net profits in low single figures, sometimes as low as 1%, and our labour costs can be as high as 60%.
The Irish Hotels Federation welcomes the minimum wage. Its impact on our industry will be minimal. For the last three years we have had in place a quality employer scheme which is fully vetted and based on best employment standards. As of now over 55% of all hotel workers working in such organisations are covered by the scheme. The figures quoted are based on independent research carried out on our behalf by the Dublin Institute of Technology. According to the survey, there are chefs earning over £50,000 but the figure at the lower end is about £15,000. The average per chef is over £20,000. There is an absolute demand for chefs with the necessary skills who can command whatever they want. The difficulty is getting them.
There is an increase in the number of overseas employees but, to an extent, this is forced on us because of the difficulty in getting employees here. Non-nationals probably account for between 10% and 15% of all employees in the hotel sector and tend to be employed in those areas where there is a high turnover. Many of the core and more skilled staff would still be Irish nationals.
One of the core objectives of the federation and the quality employer programme is to prevent exploitation. We get involved with FÁS-type organisations and hotel schools in countries such as Sweden and Finland and, more recently, the Czech Republic, with a view to placement in quality employer properties over which we can stand and in which we know that the quality of employment available exceeds most European standards and compares with any other service industry.
Mr. Fitzmaurice made a number of points relevant to our sector. Labour costs to turnover in the hotel sector can be anything from 35% to 40%. As such it is a major cost. In the case of multinationals, pharmaceuticals and high-tech, one is talking about percentages in single figures. We are therefore involved in a high labour intensive industry. On the other side, we believe the wages on offer are attractive.
As Deputy Ardagh mentioned, CERT, in conjunction with local community groups, set up towards the end of last year training courses for people living in Ballymun and Clondalkin which have proved very successful. About 40 people have been trained in both locations and the plan is to extend the courses on offer throughout the country. The same has been done in a rural context in the Curragh and Kilmallock. This has been built on and is done in conjunction with local industry which provides support by way of work experience and employment at the end of the training period.
On the business of employing foreign workers and our attitude to it, we firmly regard our employees as our greatest asset. We regard the Irishness of those people as something we can market abroad. We are therefore very keen to ensure maximum native employment. We are only resorting to imported employees where specific skills are required or where we are unable to get unskilled workers locally. That is our attitude in that situation.
I thank Mr. Allen in particular for his submission. As we all know there is a social dimension to this issue. Phrases such as "discouraged workers" have been used. This committee does not seek to minimise that issue but unfortunately it does not come within our remit, which is to protect the national finances. The fact that we are focussing on the possibility of fraud or its extent does not mean that we are not concerned about the other issues. I thank you for very valuable reflections in your submission. Would you like to respond to some of the questions asked and comments made?
I thank you for your comments and the latitude given in making the initial presentation. On the urban/rural question, the live register gives breakdowns county by county and even exchange by exchange. That is one of its advantages over the ILO survey which, I think, only allows regional comparisons. I do not know what happens if one compares county by county on the differences between the ILO survey and the live register but both measures have fallen dramatically in the last number of years. While it is true that there are problems in rural areas in people getting employment, at the same time employment has risen and unemployment has fallen in all areas, even in counties such as Longford and Donegal which have been left behind. Transport to work is a mismatch issue in rural areas and coming much more to the fore in our work. If it exists at all, it obviously leads to people requiring a higher wage at the far end in order to receive the take-home pay they would receive if they were working in an urban area. Yet, industries in rural areas are less likely to be able to provide that higher wage. There are major developmental problems at which we are only really beginning to look.
On the issue of skills, it is useful to distinguish between hard and soft skills. For the long-term unemployed, both urban and rural, the skills mismatch is in the soft skills area. People have had to survive for a long period without working and to do this you have to change your mindset and get into certain habits that protect you but they are not very good habits if you then need to go out to work. They are also extremely destructive of people's self-esteem. The most important thing you need when you apply for a job is a sense of self-esteem. You have to say to an employer, "I am worth employing because. . . . .", but, as you have spent the last number of years of your life thinking, "I am not worth anything because I cannot get a job", that level of personal development should by no means be underestimated. The fact that people have that low level of self-esteem presents a barrier to them moving into employment but it should not lead them to be seen as unemployable from a long-term perspective. That is a crucial element. Hard skills is another matter. The long-term unemployed need to go through short skills development before they get to hard skills.
I will deal with the filling of vacancies in the security industry later. On the employment action plan, I did not mean to be dismissive; I was aware that the Chair was trying to move me along quite quickly. We very much support the idea of intervention to help people who are unemployed to get back to work, that is, the activation process. We are critical however that it has not happened. Because we have not been engaged in activation for so long, where it was introduced in areas where it had not been part of the normal conditions for signing on, there was a reaction which is perfectly understandable but is not a good reason for not doing it. It will take a period of time for it to be seen as normal that there will be this level of intervention and that you will be asked to show that you are looking for work. There is a reaction against it in that way. We are critical of it because it is only preventative. We believe a similar intervention is required for people who are already long-term unemployed.
We are also critical of it because activation is only the beginning of a process. When you call somebody into your office and say to them, "I am bringing you in to reactivate you so that you look for work" and they say to you, "Great, what I want is training, skills or personal development," you have to be able to say, "Here it is." You cannot say, "Go away again, we will speak to you in six months". To some extent, that is being delivered and, to some extent, it is not. I presume the delay in the roll-out of the programme relates to the delivery of resources but you have to offer something to keep them activated rather than just pick them up and throw them back down again.
The last point I would like to make has to do with the comments of employers about FÁS. This is perhaps quite an odd comment for me to make. It also comes very strongly from work the INOU has recently done with the Small Firms Association, chambers of commerce and others about prejudice against unemployed people in various areas. In the interviews we could not find one employer - they are all small firms - who had one positive thing to say about FÁS. I come from a background where it is very hard to find an unemployed person who will say a positive thing about FÁS. We have therefore been critical about it over the years and the services it provides. A few shifts have taken place in what FÁS provides. The work it is doing now in terms of matching people is much better and the integration of the local employment service and the innovations there are adding to that, patchy though some of it might be.
I am struck by the criticism of the security industry. I would have accepted that five years ago, but I will not accept it now. When an unemployed person sees a job vacancy in the security industry or in the hotels industry, their reaction is to think that if they get the job they will have to work long hours, if things change they will be turfed out the door, they will have very low pay, they will be involved in split shifts and have all sorts of extremely anti-social conditions, and will not be treated very well. That is a major problem. If it is true that the jobs on offer have moved up-market and that they are worth taking and have a long-term perspective, we have a major job to get that message through to disadvantaged people who want and need those jobs. Part of that is for employers to realise that they are not the only people who have changed - the labour market has changed, the State institutions have changed, the community organisations have changed - and to stop saying they will not go near FÁS, community organisations, the long-term unemployed and so on. That is simply not good enough. We all have to change.
There is plenty of food for thought in those three responses. I will come back to some of those points with the Accounting Officers. I thank you all and ask you to move to the back to allow other groups to come in.
The Civil Service Commission has already joined us. I welcome the representatives from IBEC, the Construction Industry Federation, the Small Firms Association and the Galway Chamber of Commerce. I will call Mr. Boyle from the Civil Service Commission first.
I would remind witnesses that we operate under section 10 of the Committees of the Houses of the Oireachtas (Compellability, Privileges and Immunities of Witnesses) Act which grants certain rights to persons who are identified in the course of the committee's proceedings. Mr. Boyle, Secretary and Accounting Officer of the Civil Service Commission, you are welcome. Would you introduce your accompanying colleagues?
Mr. Boyle
Thank you, Chairman. I am accompanied by Ms Niamh O'Donoghue, head of large volume recruitment programmes, and Ms Patricia O'Grady, head of change management; she also has responsibility for co-ordinating some important research in the areas of recruitment and retention.
You are both welcome. We will turn now to the Construction Industry Federation. Mr. Kevin Kelleher, Director General, you are welcome. Will you introduce your colleague?
I would like to introduce my colleague, Mr. George Hennessy, director of economic affairs.
I call Mr. Kieran Crowley, Chairman of the Small Firms Association.
Mr. Crowley
Thank you, Chairman. I am accompanied by the director of the Small Firms Association, Mr. Pat Delaney.
I call Mr. Jarlath Feeney, chief executive of the Galway Chamber of Commerce.
Mr. Feeney
Good afternoon. I am on my own, so there is no need for introductions.
Last, but certainly not least, I call Mr. Brian Geoghegan, director of economic affairs with IBEC.
Mr. Geoghegan
Thank you, Chairman. I am accompanied by Mr. Aebhric McGibney, economist with IBEC.