I thank the House for taking Second Stage of the Bill today and, hopefully, the remaining Stages tomorrow. It is intended to implement this measure with effect from next Saturday. Legislation such as this cannot be introduced retrospectively. While it is never my desire to rush legislation through the Oireachtas, it has not been possible to bring this Bill to the Seanad before today.
I am pleased to be the first Minister to introduce a National Minimum Wage Bill. The 1997 commitment to introduce a national minimum wage was a social policy commitment placed in the framework of an assault on exclusion, marginalisation and poverty. It was one of a number of measures designed to alleviate social exclusion in our society. In making that commitment the Government also recognised that, like many initiatives on social policy, it had significant economic implications. The terms of the reference of the National Minimum Wage Commission reflected this. I indicated my concern to protect those workers who are vulnerable and prone to be exploited, particularly women and young people, and to do so in a way which protected employment and competitiveness. I have always maintained that no pay is worse than low pay. The Bill strikes the right balance and the outcome is both a victory for jobs and for the rights of workers.
All sides of the House agree that low pay is a major problem in our economy. It is timely to proceed as proposed with a measure that will influence the lives of many thousands of workers. Our economy has been radically transformed. Employment has reached new levels and unemployment has been significantly reduced. Real earnings of employees have improved substantially, although not all employees have equally benefited from our economic progress. Many thousands of workers are paid rates which are no longer acceptable. A statutory minimum wage will greatly alter how, as a society, we view and value the work undertaken by thousands of workers.
The National Minimum Wage Commission was the first step towards fulfilling the Government's commitment to introduce a national minimum hourly wage. The commission was appointed by the Government on 18 July 1997 to advise on the best way to implement the commitment. I take this opportunity to thank the commission members, Evelyn Owens, Rita Ahern, Carmel Bolger, Phil Flynn and Peter Malone for their valuable contribution to this important policy initiative. I published the commission's report on 5 April 1998.
The commission recommended, inter alia, that a target date of 1 April 2000 be set to implement the commitment. It also recommended that the national minimum wage should be measured against the median earnings of all employees. In taking this view the commission went on to state:
The initial rate for the national minimum wage should be set at around two-thirds of median earnings and should take into account employment, overall economic conditions and competitiveness.
These two issues – the implementation date and the initial rate – have been central to the debate that followed the publication of the commission's report.
The Government has, from the beginning, accepted that the national minimum wage should be introduced from 1 April 2000 and I have repeatedly stated this since April 1998 to ensure that both employers and workers have adequate time to prepare for the introduction of the national minimum wage. I regret that to ensure introduction of the minimum wage on 1 April, the debate in this House has to be limited.
The debate in the select committee resulted in some changes, particularly to strengthen the measures designed to prevent unscrupulous employers from avoiding their responsibilities and from victimising employees. I have broadened the scope of the Bill and accepted amendments which significantly alter the basis for calculating the average minimum hourly rate of pay. In removing from the text some components initially reckonable for the purpose of calculating that average, I was also responding to representations I received from trade unions when the detailed text of the Bill was published. The design of this legislation, therefore, has followed considerable and lengthy consultation not only with ICTU and IBEC but with the public generally by way of the widely publicised report of the minimum wage commission and the interdepartmental group which worked out the details of the legislation.
On the issue of what hourly rate should be set for a national minimum wage, the commission recommended that it should be set at around two-thirds of median earnings and should take into account employment, overall economic conditions and competitiveness. Some people have tended to focus on the first element of this recommendation and ignore the latter element. The Government does not have that luxury. In deciding on the rate I considered that, in line with the thrust of the commission's recommendation, the impact of any proposed rate on employment and competitiveness must be taken into account.
An ESRI impact study puts figures on the realities facing us in this regard in deciding on the appropriate rate – reduced employment, increased unemployment and reduced competitiveness. It would be easy in the current economic climate to disregard the impact of a high minimum wage but I must have regard to the welfare of the economy and, more importantly, the employment opportunities of its people in the future. The Government believes that the introduction of a rigid automatic rate setting mechanism would not be the best way of addressing this issue. Since April 1998 I have stated that I consider the appropriate rate should be £4.40 from April 2000. After considering the results of the ESRI impact study I remained even more convinced that this was the appropriate rate.
The recently negotiated Programme for Prosperity and Fairness has also included a recommendation that the initial rate, which will be £4.40 per hour from 1 April 2000, should be increased to £4.70 from 1 July 2001 and to £5 from 1 October 2002. Mechanisms for adjusting this rate are contained in the Bill and agreement by the social partners to specific increases in the rate during the lifetime of the new agreement will be dealt with in that context. I also welcome the commitment of the trade unions and employers in the Programme for Prosperity and Fairness that no repercussive claims related to or following on from the application of the national minimum wage will be made by trade unions or employees.
Questions have been raised about how the legislation interacts with the pay provisions in the recently negotiated Programme for Prosperity and Fairness. A worker on a wage which is less than £4.40 an hour will on 1 April, in accordance with the legislation, have an entitlement to the new national minimum hourly wage.
The new agreement will apply to various workers at different dates throughout 2000 and may apply to some with effect from 1 April. The agreement does not provide a different regime of timing, flat or percentage increases for those whose pay would be altered by the legislation on 1 April. Consequently, it will be open to such workers to pursue the basic pay increases under the Programme for Prosperity and Fairness separately from increases granted under the legislation. All of the relevant terms of the draft pay agreement would apply in these, as in all cases, but that is a matter separate from the establishment of the national minimum wage. This Bill strikes the right balance between the desire of society to prevent the exploitation of workers on low pay and to share the fruits of recent economic growth more fairly and the need to continue to grow employment and create wealth in our economy.
I would like to draw attention to some of the more important provisions of the Bill. Section 1 provides the Short Title and permits the Minister for Enterprise, Trade and Employment by order to appoint a date on which the Bill will come into effect or dates on which particular provisions of the Bill will come into operation. As I said earlier, I intend that the Bill shall be implemented with effect from 1 April 2000.
Section 10 is central to the operation of the Bill. The pay of an employee may vary from time to time due to particular circumstances within the workplace, for example, working on different shifts or working on a bank holiday. The purpose of a pay reference period is to allow these variations that may arise to be averaged over the pay reference period. The employer may choose the pay reference period which best suits his or her pay patterns, subject to its being no longer than one calendar month. The selection of a pay reference period for the national minimum wage under this Bill does not alter an employee's existing pay period. To ensure that an employee is informed by his or her employer as to the period which the employer has selected, section 42 of this Bill will, accordingly, amend section 3 of the Terms of Employment (Information) Act, 1994, to provide for this requirement.
Section 11 enables the Minister for Enterprise, Trade and Employment by order to prescribe the national minimum hourly rate of pay having taken into account the impact the proposed rate may have on employment, overall economic conditions and competitiveness in the economy. It is appropriate at this point to inform the Seanad that I intend to create a monitoring committee, representative of ICTU, IBEC and Government, to observe the implementation of the national minimum wage and to review its effectiveness and enforcement. I have already arranged that the ESRI survey which contributed data for the debate up to now will be continued after the introduction of the national minimum wage. I will ask the monitoring committee to report to me at regular intervals and I intend to table those reports before the Dáil and Seanad.
In relation to the review mechanism for the national minimum hourly wage, it is necessary, in line with the recommendation of the interdepartmental group, to provide two mutually exclusive alternative mechanisms. Where a national agreement is in existence, or proposed, and contains a recommendation to the Minister for Enterprise, Trade and Employment in relation to the national minimum hourly rate of pay, then section 12 will apply. However, where these circumstances do not apply, section 13 provides that the Labour Court can be requested by an organisation substantially representative of employees or employers to make a recommendation to the Minister for Enterprise, Trade and Employment. In either case the Minister may accept, vary or reject the recommendation and if varying or rejecting the recommendation then the Minister must make a statement to the Oireachtas of the reasons for doing so.
The age at which the national minimum wage should apply is far from uniform in the systems which we have studied. In the UK the full national minimum wage applies from age 22 with a sub-minimum from age 18. In our case we should err on the side of the protection of young persons but have regard to the link, however remote, between the need to retain people in the education system and a rate of pay which encourages them to enter employment.
Section 14 prescribes that an employee who is aged 18 or over must be paid the full national minimum wage unless they are trainees or first time job entrants. An employee under age 18 must be paid for his or her working hours at an hourly rate of pay that, on average, is not less than 70% of the national minimum hourly rate of pay.
Section 15 concerns the entitlement of a job entrant. This is an employee who enters employment for the first time after reaching the age of 18 years or, having entered into employment before reaching the age of 18 years, continues in employment on reaching that age. A job entrant must be paid 80% of the NMW in the first year of having commenced employment for the first time, after reaching the age of 18, or the first year of employment after continuing in employment on reaching the age of 18, and 90% of the NMW in the second year of having commenced employment for the first time, after reaching the age of 18, or the second year of employment after continuing in employment on reaching the age of 18. Any employment under the age of 18 is not reckonable for this section.
Section 16 implements the recommendation of the National Minimum Wage Commission that employees undergoing training should be paid 75%, 80% and 90% of the national minimum hourly wage in the first, second and third year of training. Regulations will prescribe the criteria to which a course of study or training must comply in order for an employer to apply the sub-minimum rates.
Section 19 and the Schedule to which it refers sets out what components of an employee's pay are reckonable and non-reckonable when calculating whether an employee has been paid at least the minimum hourly rate of pay to which he or she is entitled in accordance with this Bill. The basis for this is the report of the National Minimum Wage Commission. The conclusion of the commission was that there was a clear choice between opting for a definition which recognises basic pay only – which has the merit of simplicity – and one which includes other forms of remuneration. The commission concluded that the latter more accurately reflects how people are paid and recommended an approach which accommodated current pay arrangements. That is the route I have chosen. However, I have provided that those employees who should mainly benefit from the introduction of a national minimum wage are not deprived of this benefit by manipulation of reckonable and non-reckonable pay components, and this will be closely monitored.
Section 23 has been designed to provide a structure that allows any potential dispute to be resolved speedily between an employee and an employer. An employee will have the right to request from his or her employer a written statement of his or her average hourly rate of pay during a particular pay reference period. This process should help identify any underpayment and allow the parties to resolve the dispute without recourse to the enforcement provisions of the Bill.
Sections 24 to 29 provide that a dispute which has not been resolved between the parties may be referred by either party to a rights commissioner for a decision and any party aggrieved by such a decision may appeal it to the Labour Court for a determination. Another mechanism to ensure employers will adhere to the provisions of the Bill will be the appointment of inspectors by the Minister under section 33. An employee who feels that he or she could not openly identify themselves by taking a case to a rights commissioner may under section 34 request an inspector to investigate whether his or her employer has failed to pay the employee's appropriate entitlement to remuneration under the Bill.
It will be an offence under section 35 for an employer to refuse or to fail to pay an employee their legal entitlement. Section 37 provides for appropriate penalties to be imposed for offences committed contrary to the provisions of the Bill. In section 36 I have paid particular attention to the need to protect employees against employers who might attempt to circumvent the legislation. The section includes the prohibition on the victimisation of employees for exercising or proposing to exercise their rights under this legislation. If dismissed for exercising his or her rights under the legislation, an employee may bring an unfair dismissal case against his or her employer and the general requirement to have one year's continuous service under the Unfair Dismissals Acts, 1977 to 1993, is set aside. There is a prohibition on the reduction in the hours of work of an employee without a corresponding reduction in the duties or amount of work of the employee. There is also a prohibition on employers from changing the status of non-reckonable components to reckonable status.
The ESRI impact study highlights the potential impact the national minimum wage could have on employment levels. With this in mind, the interdepartmental group recommended that provision be made for an "inability to pay" for firms in difficulty within certain parameters. Section 40 implements that recommendation without undermining the thrust the legislation in that exemptions can only be granted by the Labour Court and then only for a period up to one year.
Section 42 is designed to guard against the introduction of the national minimum wage being used to justify pay claims by better paid workers which would undermine competitiveness. The effect of the section is that the Labour Relations Commission and the Labour Court or a conciliation and arbitration scheme in the public sector may not recommend in favour or endorse any claim or part of a claim referred to it which is based on the restoration of a pay differential between an employee and another employee who has secured or is to secure an increase in pay as a result of this Bill. Similarly, the Labour Court may not accept a proposal for an employment regulation order from a joint labour committee or register an employment agreement or vary a registered employment agreement if the proposal, agreement or variation is based on the restoration of a pay differential between an employee and another employee who has secured or is to secure an increase in pay as a result of this Bill. As I said earlier, the Programme for Prosperity and Fairness contains an agreement by ICTU and employers that trade unions or employees will not make such claims.
The remaining sections of the Bill primarily provide safeguards for employees arising from the operation of this Bill. The Schedule lists reckonable and non-reckonable pay components in calculating the minimum hourly rate of pay of an employee. I propose, subject to the passage of this Bill through the Oireachtas, to bring the legislation into operation from 1 April 2000.
My Department will launch an intensive publicity and information campaign so that employers and employees will be aware of their obligations and entitlements. I recognise that enforcement of the national minimum wage is critical to the achievement of its objectives. Accordingly, the Government has agreed, at my request, to assign significantly increased staffing resources to the inspectorate to enable proper enforcement of the national minimum wage legislation. An additional seven labour inspectors and three support staff will be appointed and this will bring the total number of inspectors to 17.
This Bill marks a new step forward in how society views and values the work undertaken by workers who have until now been confined to the margins of our economic progress. The Bill will ensure that 163,000 workers will receive an improvement in their pay as and from 1 April 2000. The Bill provides a fast and cost-free method to employees of determining disputes between them and an employer, an effective system of enforcement and a transparent method to review the hourly rate. I commend the Bill to the House.