We appreciate the Chairman's consideration in ensuring that the Restaurant Association of Ireland was invited to appear before the committee to discuss protecting and developing investment and employment in the restaurant industry. My colleague, Mr. Paul Cadden, is national president of the Restaurant Association of Ireland and is an owner-operator of a restaurant in Dublin. To discuss developing the Irish restaurant industry we must address major issues which affect it such as the following: employment and employer rights; the anti-business JLC format; pay rates; the minimum wage; overheads, including commercial rates; bank charges; and, above all, how we keep businesses open and people in jobs?
The Restaurant Association of Ireland sees one-third of Irish restaurants facing closure, with more than 80% operating at a loss. In November 2009 we launched a ten-point plan to protect existing employment, create new jobs and ensure the viability of the restaurant sector, a copy of which we sent to all Members of the Oireachtas.
I will set the scene for the current crisis facing the sector. Irish restaurateurs pay the highest catering wage rate in Europe, the minimum hourly catering rate in Ireland is €9.32 as opposed to €5.38 in the UK and €1.93 in Spain. Ireland has the highest excise duty on wines in Europe and Irish food cost inputs are 24% above the European average. The source of this information is the cost of food preparation report commissioned by Fáilte Ireland.
Currently, the Irish tourism industry, in particular the hospitality sector, is facing a crisis. This crisis has been illustrated in the report of the tourism renewal group launched last September, which identifies survival and recovery recommendations. The Restaurant Association of Ireland's ten-point plan is fully consistent with the survival recommendations on investment and marketing, reducing access costs, prioritising public spending and supporting sustainable enterprises.
Founded in 1970, the Restaurant Association of Ireland is the professional body of the Irish restaurant industry. Its primary functions are to promote and defend the interests of its members. The association has established itself as the representative voice of the restaurant and catering sector in Ireland.
The restaurant sector is a critical part of the tourism and hospitality industry. It employs 64,000 people, of which one in four are tourism jobs, and contributes €2 billion to the Irish economy each year. Not alone does it encompass a large number of owner operated SMEs but is also a crucial supporter of small businesses, local agriculture and food producers throughout the country. A vibrant restaurant sector is crucial to a successful tourism product and is the fabric of a progressive society. Restaurateurs have adapted to the downturn by reducing costs and menu prices but this is not enough. A series of urgent actions are now needed as the current business environment is unsustainable. Each week last year, 2,500 people lost their jobs. Many restaurants have had to cut staffing levels by one third. The Restaurant Association of Ireland cannot highlight enough the importance of restoring consumer confidence in the country.
How do we keep restaurants open and keep workers employed? The Restaurant Association of Ireland would like to see a reduction in the national minimum wage from €8.65 per hour to €7.65, the abolition of the JLC structure and minimum rates of pay, which are 8% higher than the minimum wage, and the abolition of Sunday premium payments. This will help the sector be more competitive and help businesses survive. The joint labour committees, employment regulation orders and registered employment agreements are effectively a throw back to the 1970s and 1980s when there was a lack of legislation to protect employees' interests. Since then there has been significant new legislation and updating of old legislation to cover areas like the minimum wage, unfair dismissals, holiday entitlements, hours of working and other entitlements. As a result of all this legislation, employees' rights are fully protected and covered whereas employers' rights are significantly diminished by virtue of the legal status of employment regulation orders and registered employment agreements. What has happened is that national legislation has become the base from which higher impositions have been imposed upon employers. For example, there is currently much debate about the appropriateness of the national minimum wage. In the catering industry the minimum wage is 10% higher than the national minimum wage. In addition, a 33.3% premium applies to Sunday work. In essence, employment regulation orders, registered employment agreements and joint labour committees were for another time and should be abolished.
The current regulated and statutory wage rates do not reflect the dramatic worsening of the business performance of the restaurant sector during the past 12 months. The national minimum wage is now the second highest in the EU and the highest after tax, more than twice that of the US, the largest economy in the world and 26% higher than the UK, our near neighbour directly competing for jobs just over the Border. Since its introduction in April 2000, the national minimum wage has increased by 55% while inflation during the same period amounted to a cumulative 34%. The Restaurant Association of Ireland supports the Minister for Finance's call at the MacGill summer school that the minimum wage be reduced as it is now directly impacting on job maintenance and creation. With inflation as of August 2009 at -5.9%, the Restaurant Association of Ireland is advocating a reduction of the minimum wage from €8.65 per hour to €7.65 per hour, the rate set in May 2005, which is the level to which our GDP is expected to fall to this year.
Unless the Government takes urgent action to address the cost factors it controls, businesses will continue to have little choice but to put people on the live register to bring their cost base down, thus ensuring they can survive. Ultimately, this will cost the Exchequer more in social welfare payments and tax foregone. The Restaurant Association of Ireland has advocated the abolition of Sunday premium payments. To put this in context, restaurants are seven day a week operations with Sundays being a prime dining out day. Furthermore, the current economic climate has reduced restaurants to a three day, Friday, Saturday and Sunday, operation. This means that on one of the three days of business, restaurants pay time and one third, that is, €12.10 per hour plus employers' PRSI and holiday accrual. Factoring this in, it is still not viable for many restaurants to open on a Sunday. By treating Sunday as a normal working day, many restaurants will open and will create an employment opportunity for workers.
We are currently advocating a reduction of at least 10% in local authority charges. Regulatory burden is crippling restaurant businesses across the country and is a barrier to development of the sector. The 2009 Fáilte Ireland food cost report has proven that Ireland is the most expensive country in Europe in which to run a restaurant. For example, waste licence fees have increased from €1,200 to €4,000. The introduction in some local authority areas of grease trap monitoring fees has added huge costs to restaurants with many owners closing down or shedding staff. Other local authorities have introduced profit making levies and taxes, including a sunshine tax on outdoor seating, music performance rights, business improvement district levies and HACCP regulation. These are unsustainable and are driving restaurants out of business.
The Restaurant Association of Ireland would like to see the prioritisation of a food tourism strategy as a jobs creation mechanism plus the establishment of and a dedicated restaurant division in Fáilte Ireland. The association believes that more than 3,000 new jobs can be created if a strategy is developed and implemented. The Government and policy makers need to address the situation of landlords charging extortionate rents on premises with many restaurant owners locked into 25-year leases with no downward rent reviews as an option. This is forcing many owners to close.
Deputies and Senators know the value of the Irish restaurant sector in terms of employment in their local areas. The Restaurant Association of Ireland is hoping that Members will address these urgent issues which will benefit not alone our organisation but constituents in the areas they represent.
I am happy to take questions.