Workers in hotels have the right to earn a living wage upon which to support themselves and their families. They are entitled to work safely and to be treated with dignity and respect while at work. They should have the right to training and to have their craft skills accredited on the national qualifications framework. Quality employment is the key to addressing the long-standing challenge of retention of qualified staff in this industry. It is incumbent upon all stakeholders to ensure that the hotel industry is an attractive career option for school leavers, adult workers, workers retraining from other industries and for native and migrant workers alike.
While the union's goal of fairness at work has remained unchanged over the decades of our involvement with the industry, the composition of membership has changed significantly. More than half of our membership is now female. In the past decade, most particularly with the arrival of accession state workers since 2004, our membership has become more ethnically diverse. We mirror the industry, in that two thirds of our members in hotels are Irish born and one third are migrant workers.
SIPTU represents the worker side on the joint labour committee, JLC, for the hotel industry. We represent workers at enterprise level in hotels stretching the length and breadth of the country. We also represent the interest of hotel workers in Ireland at a European level via the EU social dialogue mechanism and internationally through our work with the International Union of Food, Agriculture, Hotel, Restaurant, Catering, Tobacco and Allied Workers' Associations, IUF, the global confederation of hotel workers based in Geneva.
Our membership in the hotel sector has a clear and immediate interest in a viable sustainable hotel industry that meets the hospitality and accommodation needs of the domestic and overseas markets. Indirectly, tens of thousands more SIPTU members service the tourism and hospitality industry in food and drink production, public and private transport, restaurants and catering, cultural institutions and State agencies.
Minimum rates of pay and other working conditions for workers are determined by the JLC for the hotel industry. SIPTU represents the worker side on the committee. The IHF and the Irish Business and Employers Confederation, IBEC, represent the employer side. The chair of the committee is an independent ministerial appointee.
Pay and conditions arrived at through negotiation by the worker and employer representatives at the JLC mechanism are given the force of law in the industry through an employment regulation order, ERO, made by the Labour Court on foot of the agreed proposals. The order covers all hotels except those located in the cities of Dublin and Cork. In these areas, statutory minimum rates of pay and other working conditions are in accordance with entitlements under the various other labour laws. The statutory minimum rate of pay for hotel workers in areas not covered by the order, that is, where the national minimum wage determines the minimum wage rates, is €337.35 per week.
The order sets out the statutory minimum terms and conditions of employment for the majority of grades in the hotel sector. Certain grades are exempted from the order, namely, managers, storemen and receptionists. The order covers rates of pay, working hours, overtime rates, breaks, holidays and deductions for meals and lodgings.
In respect of pay rates, the order sets forth the statutory rate of pay for a fully trained adult worker in named positions, workers who are undergoing formal structured training and workers who are aged under 18 years. The rate of pay for a fully trained adult chef, waiter, bar person, porter and accommodation assistant is €354.43 per week. There is provision for a higher rate of pay for head chef of €399.99, for head waiter of €373.11, for head bar person of €372.38 and for head porter of €373. The rate of pay for workers under the age of 18 is €248.31 per week. Workers undergoing formal structured training are entitled to certain rates of pay. If they are aged over 18 years, stage 1 training earns them €265.93 per week, stage 2 training earns them €283.55 per week and stage 3 training earns them €319.20.
The JLC-ERO is a crucial mechanism for determining fair rates of pay and working conditions in the hotel industry. The system should be strengthened to ensure that hotel workers receive their entitlements under the ERO. The ERO system in the hotel industry has served workers and employers well. It provides a mechanism whereby the industry's stakeholders can meet and address issues particular to the industry in an efficient and agile manner. Amendments to the ERO that are agreed by the parties and the Labour Court can be brought into effect over a short timeframe.
The current ERO was agreed after negotiations between SIPTU and the employer bodies, the IHF and IBEC. The primary change in the current order over the previous one is an adjustment in the rate of pay for Sunday working. In spring 2009, the employer bodies would have made a case to SIPTU regarding the trading circumstances in the industry at the time. They argued that Sunday trading was being curtailed by the terms of the existing order. The parties entered into negotiations on the matter and by 6 July were in a position to issue a joint notice of proposal of our intention to adjust the rates of pay applicable on Sundays to take account of current trading circumstances. The Labour Court made an order reflecting the joint proposal and the new ERO became legally binding on 16 September. The new order adjusts the rate of pay for Sunday working from double time to time and one third.
Some commentators have argued that the JLC-ERO system is outdated and inflexible. SIPTU would argue that the negotiations that took place in 2009 to amend the hotel industry ERO as per the aforementioned sequence and timeframe demonstrate the robust and agile nature of the JLC system in addressing the needs of a specific industry in a speedy fashion.
Pay and conditions for workers in the hotel industry are set through the ERO as just described as well as a number of other mechanisms. Workers in the unionised segment of the industry have their terms and conditions negotiated between SIPTU and their employers by means of a collective bargaining agreement. Unionised hotels provide good quality employment. Generally, staff in unionised hotels are paid a fair day's pay for a fair day's work, have appropriate rest breaks and annual leave, provision for sick pay, occupational pension schemes that secure decent retirement income and health and safety provision that minimise the risk of accident and injury. In certain geographical areas, namely, the urban areas of Dublin and Cork, the ERO is not applicable because workers have historically been sufficiently organised to bargain terms in excess of the ERO. Thus, while there is statutory provision for the existence of an ERO in these areas, an ERO is not currently in operation. The minimum pay and conditions of hotel workers in these geographical locations is legislated for by means of the national minimum wage and other basic employment legislation.
There is another segment of the hotel industry which does not apply the aforementioned mechanisms — that in which the statutory minimum terms, whether ERO or other employment laws, are disregarded. These hotels do not comply with the applicable statutory requirements and do not meet their legal obligations as employers. In other words, these hotels are operating outside the law. By its very nature, the hotel industry is labour intensive; it is a people industry. In some hotels — for example, in the business hotel segment of the market — labour costs can represent as much as 60% of operating cost. Employers who undercut the statutory rates of pay can attain a significant competitive advantage, although this advantage is founded on illegality. It is crucial that we have a level playing field across the industry, ensuring that one hotel cannot gain advantage over another through underpayment of wages.
Unfortunately, the segment of the market that undercuts competitors by denying staff their entitlements is sizeable. Official data from the National Employment Rights Authority, NERA, gives us an indication of the extent of non-compliance. In 2008, NERA carried out 142 inspections and found a compliance rate of just 22%. In other words, 78% of hotels were found to be in breach of their employees' employment rights. A total of 51% of hotels were not paying the appropriate hourly rate and 41% were not paying the correct overtime rates, or any at all. NERA commenced a compliance campaign in 2009, working with Fáilte Ireland and four of the employer bodies in the industry to disseminate information to employers on their obligations.
While SIPTU commends NERA, Fáilte Ireland and the employer bodies for undertaking this campaign, we were somewhat disheartened at the persistent level of industry disregard for workers' rights. NERA's year-end inspection results for 2009 showed that based on 131 hotel inspections, there was a compliance rate of only 27%. Therefore, in 2009, some 73% of hotels inspected persisted in breaking the law in respect of their staff's entitlements. The argument made by some employers that they did not know their obligations is completely unacceptable, not least due to the awareness campaign being undertaken by the various industry bodies.
SIPTU believes that the long-term implications for the tourism industry of this persistent level of disregard for workers' rights in the hotel industry needs to be considered. Overseas visitors consistently tell us that they choose Ireland for our scenery and our people. It is not acceptable that a band of cavalier hotel employers are allowed to treat people in the industry with such blatant disregard and jeopardise the image of Ireland of the welcomes.
SIPTU's prime objective when representing the interests of hotel workers is to promote and support high-quality employment in the industry. In the area of education and training, the hotel industry education and training forum, made up of SIPTU, the IHF, IBEC and Fáilte Ireland, aims to address some of the deficiencies in the industry in respect of skills accreditation by modernising the skills passport. With our forum partners, we intend to hold a series of roadshows around the country in June aimed at underscoring recent positive developments in respect of approved prior learning and skills accreditation. We believe these joint events send a positive message to potential and existing hotel workers about opportunities for training, development and skills progression in the industry.
In a time of crisis, it is incumbent upon all stakeholders to be innovative and come up with positive measures to address the many challenges facing the industry. SIPTU and a broad coalition of supporters will launch a new initiative to support hotels that treat their staff fairly — the Fair Hotels campaign. Notwithstanding the high level of non-compliance in the industry, there are many good hotel employers that treat staff fairly. Treating staff fairly involves recognising their fundamental human right to a collective voice at work by means of a collective bargaining agreement. We believe that hotels that treat staff fairly are deserving of recognition and support. We intend to encourage consumers who wish to make an ethical choice when spending money on a hotel to choose the fair hotels for leisure, meetings and conferences.
So far the Fair Hotels campaign has received a very positive response from Fair Hotels employers. They see the benefit to them of letting consumers know they treat their staff fairly. Workers see the logic in supporting hotels that provide high-quality employment. Both employers and workers understand that the issue of undercutting through underpayment must be addressed in order to level the playing field. Consumers are supportive of the campaign because they want to make informed choices when deciding. We intend to publicise the campaign at home and in the key overseas markets for the hotel industry — namely, Britain, Germany, France, Italy, the USA, Australia and the Nordic countries.
The hotel industry faces a number of difficult challenges at present. Some of these derive from the global and domestic economic downturn; others derive from factors unique to the hotel industry in Ireland. Declining demand in the domestic and overseas market segments, over-capacity, falling room rates and below-cost selling are all issues that have had a direct negative impact on our members' job security and quality of employment. SIPTU members and officials have had to negotiate responses to these industry challenges as they present themselves in the hotels in which our members work.
Over the past two years, we have had to negotiate changes to our members' terms and conditions of employment in every hotel in which SIPTU members are employed. These negotiations have included but are not restricted to job losses, changes to pay rates, new work practices and reduced working hours. Even with these new agreements in place, our members remain extremely concerned for their job security. They are now also bracing themselves for the unknown — that is, the NAMA effect. "How will the transfer of more than 200 hotels to NAMA affect my hotel?" is a question being posed by our many of our members. We must be honest and say that the answer to that is unknown; the precise implications of NAMA will only emerge over time. However, what we do know is that it is imperative for a sustainable industry that NAMA's involvement does not undermine the viability of hotels that provide good jobs and a good product to customers. The State must ensure that workers are treated fairly in the so-called NAMA hotels.
Last year was a bad year for Irish tourism. An 11% drop in overseas visits in 2009 masked an even sharper decline of 20% in the number of business visitors and a 13% drop in the overall number of nights spent in Irish hotels by both domestic and international visitors. However, it must be noted that while the number of international visitors did fall dramatically, the domestic market held up relatively well, with a fall of only 2% recorded for overnight stays and an increase in the number of visits to hotels over the 12 months. With regard to the hotel industry's capacity to respond to this downturn in demand, we must agree with the assessment in the Peter Bacon report conducted for the Irish Hotels Federation that there has been a clear absence of a level playing field for hotels within the industry over the past 18 months.
It is clear to us that there is a significant reluctance of the part of some Irish banks to write down their impaired assets on the banks' own balance sheets and recognise the bad debts that have arisen due to the failure of certain developers to repay loans for hotel construction and maintenance. The perverse consequence of this is that banks are allocating working capital to these technically insolvent hotels to keep operations open, and this is crowding out financial support to smaller, older and less leveraged hotel operations. As a result of this crutch, hotel investors can continue operating and availing of tax allowances on their investments against their total sources of income. In effect, there has been a substitution by hotel investors of the traditional profit maximisation objective with one that seeks only to keep hotels in operation in order to claim capital allowances. Already, SIPTU has seen the devastating effect of this on the competitiveness of previously viable hotels.
As we have highlighted, the future for the industry remains uncertain, even after NAMA has taken over the loans associated with many hotel properties, and we are not in any way reassured that the future of the industry will be more sustainable or viable after the NAMA transfer. Although the banks, due to self-interest, will not foreclose on loans or deny working capital to troubled hotels to avoid impairment of their own balance sheets, it will be in the interest of the State to preserve the asset value of NAMA hotels in order to maximise the price upon disposal and prevent excessive value depreciation if the premises is closed. Ultimately, an unfortunate conflict of interest will emerge for the State between the price maximisation objective of the disposal of a hotel and the crowding out of private enterprise by supporting a technically insolvent hotel in order to shore up its value.
Cannibalisation by the highly leveraged of the smaller and solvent players in the industry is a situation neither the employers nor SIPTU wish to see. Standing on the sidelines, it would be easy for the trade union movement to throw stones and say that the industry brought this misfortune upon itself. We believe that tax incentives for the hotel industry have had a catastrophic impact on any attempt to build up a decent and sustainable tourism industry in the country, but we cannot turn back the clock and our clear focus now is on being constructive and finding a way to work with others to generate and support a sustainable and profit making hotel industry that provides quality employment.
A number of proposals have been made to facilitate the exiting of a number of technically insolvent hotels from the sector. Leaving aside the ludicrous suggestion that initial investors could continue to claim capital allowances after a hotel is closed, there is also the proposal from the Department of Finance to abolish the clawback clause on accelerated capital allowances in the event of a hotel closing down within seven years of construction. However, replacing one type of subsidy in the form of tax relief, with that of another in the form of debt forgiveness, would not, as the Bacon report suggests, be necessarily cost neutral to the Exchequer.
There are a number of problems with this. It assumes that all those investors associated with technically insolvent hotels would not have the means to repay the clawback. In other words, the revenue foregone from abolishing the clawback was never realistically collectible, so there is no real loss to the Exchequer. However, we must recall that the capital allowances were written off on the tax liability arising out of investors' total income. Just because a hotel is technically insolvent does not infer any information on the performance of other assets belonging to the investor. Furthermore, there are no guarantees that if this clawback is repealed technically insolvent hotels will exit the market for precisely the same reason that NAMA may not close hotels immediately, which is to preserve asset value should the loan be defaulted upon and NAMA comes into possession of the hotel property. In short, SIPTU would be categorically opposed to any such measures.
SIPTU believes that first and foremost, the Financial Regulator must step up pressure on the banks, particularly those participating in the State-backed guarantee scheme, to write down in an orderly and timely manner the impaired assets above a certain value among the loans remaining on their balance sheets after the transfer of the other loans to NAMA. At present, there is little or no information on the number of loans associated with hotels that are destined for NAMA and it is not clear whether some hotels, which are technically insolvent, will be transferred across. A speedier write down should have the effect of stemming the flow of working capital into technically insolvent hotels and should result in the sale of hotel properties. Clearly, issues arise with regard to a State agency directly subventing a hotel and it is our view that these matters need to be dealt with in a manner that recognises the importance of the continuance of sustainable employment in these entities.
SIPTU also believes that there is a significant role for Fáilte Ireland to review the stock of hotels in the country and it could work along with the local authorities on varying local development plans to modify planning permission available for hotels in particular areas. This should have the effect of altering the planning permission type available for a hotel to alternative purposes and thus ensure that not all hotels sold in the coming years can re-enter the hotel stock. I thank the Chairman and committee members for their attention.
