I welcome the opportunity to participate in the debate on the Industrial Relations (Amendment) Bill 2009. I congratulate the Minister of State, Deputy Calleary, on his work on the Bill and also on his appointment to the office he now holds. I wish him continued success in everything he does.
The main purpose of the Bill is to strengthen the existing system relating to the making of employment regulation orders, EROs, and registered employment agreements, REAs, and to ensure their continued effective operation. The Bill also provides for the amendment of the definition of "worker" under section 23 of the Industrial Relations Act 1990.
I hope the debate on the Bill will lead to a number of practical outcomes that will be of assistance in meeting the current economic challenges and reflect what is occurring in the marketplace. I do not doubt that the decisions we make on the Bill will have a profound effect across the economy, particularly as certain of the matters with which it deals have an impact on our competitiveness.
Ireland's is a small, open, island economy which must survive by competing in world markets. As everyone is aware, the country faces the most challenging economic crisis in its history and there is a need for us to underpin enterprise and our capacity to trade successfully in world markets if we are to sustain jobs. Ireland is competing in a rapidly changing and uncertain environment and we must ensure we do not undermine our capacity to sustain employment by having unrealistic labour costs.
I had the opportunity to meet many representative bodies in the past couple of months. Each of them brought to my attention their concerns about labour costs and their level of competitiveness as a result of certain regulations in place. One such body, the Irish Small and Medium Enterprises Association, ISME, carried out a survey which found that 45% of its members' firms had been obliged to introduce pay cuts since the beginning of the year. The average size of the reductions was approximately 13%. Mr. Mark Fielding of ISME stated 49% of member firms surveyed had put in place a pay freeze.
I have spoken to people involved in the marketplace who are not members of ISME, each of whom informed me that they had been obliged to conduct root and branch assessments of their costs and engage in the appropriate curtailment thereof. The Minister of State may be interested in hearing that in the recent past I invited a large number of people involved in business to attend a conference I organised. One of the main speakers at the conference stated people must "cut, cut and cut again" in order to survive. Members should acknowledge that this is the clear message from those whose fingers are on the pulse of marketplace developments when they get the opportunity to exchange views with me and others.
A number of Members have mentioned and rightly commended employer and worker representatives on both the hotel and catering joint labour committees, JLCs, on working together in recent months to find a satisfactory method of harmonising the formula for calculating Sunday premia. They have succeeded in reaching agreement on replacing the double time payment as these higher premium rates were having a crippling effect on the viability of services and the prospects for retaining jobs in the hospitality sector. Such sensible and pragmatic action by the social partners in response to changing circumstances makes sense at a time when the economy is losing thousands of jobs each week. We must explore new approaches to operating well trusted mechanisms for establishing minimum wages and conditions to protect workers in vulnerable sectors.
I have listened with interest to the comments of the Minister of State who has mentioned that adjustments must be made, by agreement, to the basic pay rates scheduled to take effect in the retail trade and agriculture sector. It is clearly acknowledged that Ireland has suffered a significant loss of international price competitiveness due to the appreciation of the euro, inflation and wage increases in excess of productivity. Our statutory minimum rates are high by international standards in both absolute and comparative terms. For example, Ireland has the third highest minimum wage in the European Union. If one considers further competitiveness issues, wage bills can constitute approximately 70% of one's carrying costs. Consequently, when competing with our EU partners, having minimum wages that are the third highest in the European Union puts us on the back foot before we even begin. I cannot highlight sufficiently the importance of addressing issues that will encourage and assist the economy to be at the forefront in a real competitive sense.
It is reassuring that the employer and worker representatives in various sectors have responded to this challenge. They recognise what would happen were there blind adherence to the provisions of earlier arrangements made in different economic circumstances. They knew that sticking to an outdated series of regular wage increases would reduce further the ability of exposed lower wage sectors to respond through wage and price adjustments to changing economic circumstances. They knew that failure to adjust to new circumstances could have a detrimental effect in the form of increased unemployment among lower skilled workers. These developments constitute a welcome acknowledgement by the employer and worker representatives in these sectors of some harsh realities and are evidence of their willingness to find practical solutions.
The Bill will further assist that process of adjustment by updating the wage fixing procedures that have been in place for a considerable time, since 1946, through the introduction of the following important changes. It will introduce a set of principles and policies to which regard should be hand in making proposals for employment regulation orders, EROs. It will introduce a set of procedures to be followed when a joint labour committee decides to formulate proposals for an ERO. It will ensure Oireachtas scrutiny of EROs and registered employment agreements, REAs. Moreover, it will introduce the power to amend the EROs within six months in the case of error and will set a fixed term of office for the chairman of a JLC.
Although conscious of time, I wish to touch on a further point, namely, the proposed amendment to introduce an inability to pay mechanism. This is highly important, given the need to find new approaches to modernising the existing machinery and ensuring it fits better alongside new developments such as the national minimum wage. I welcome the Minister of State's confirmation that he intends, following further consultations with the social partners, to frame an amendment to the Bill providing for the inclusion of an inability to pay mechanism in employment regulation orders and registered employment agreements. This is only right and fitting as there is no point in having such mechanisms in place when, at the end of a long process, there is a real inability to pay. Consequently, it is appropriate to have in place a mechanism clearly adopted and appropriately pursued on the basis of inability to pay. At present, an employer in Ireland who is subject to the statutory minimum terms of an ERO or an REA cannot avail, regardless of his or her commercial circumstances, of the possibility of either seeking cost-offsetting measures or pleading inability to pay in a manner consistent with such procedural arrangements as have been developed previously in Ireland by employer and trade union organisations at national level. I understand the Minister of State and his departmental officials have a good handle on this issue and already have entered into consultations with employer and trade union interests regarding the feasibility of devising a suitable inability to pay mechanism which could be adapted to the specific context of EROs and REAs, respectively.
Successive national pay agreements have included inability to pay clauses which have enabled firms experiencing difficult economic conditions to plead inability to pay the terms of the national agreement and to seek to have a dispute over the matters resolved through formal procedures. The mechanisms established under such agreements have featured a number of basic ingredients such as a requirement that genuine efforts be made by the parties at enterprise level to reach agreement. In addition, they include the opportunity for referral, if necessary, of a disagreement to the Labour Relations Commission for conciliation and the opportunity to have the expertise, if necessary, of an independent assessor who I gather is nominated from a panel submitted by the social partners made available to report on the economic, commercial and employment circumstances of the firm. They also include further opportunities for an attempt at conciliation and referral, if necessary, to the Labour Court for a binding determination.
In 1998 the National Minimum Wage Commission recommended that provision be made for an inability to pay clause in the context of the proposed introduction of a national minimum wage. Under section 41 of the National Minimum Wage Act 2000, it is provided that when an employer cannot afford to pay the national minimum wage due to financial difficulty, an application can be made to the Labour Court which can, following an inquiry, exempt the employer from paying the rate for between three months and one year. In other words, we already have experience of dealing with some quite sophisticated safety valve mechanisms that can address the plight of employers in difficulties. These mechanisms have been tried and tested under successive national pay agreements. In addition to having such tried and trusted mechanisms under successive national pay agreements, a particular model of such arrangements already has been incorporated in statute in the case of the National Minimum Wage Act. While the Minister of State, Deputy Calleary, and his Department understand and have a good handle on the matter, we must adapt such a mechanism to the current situation for small and medium-sized enterprises, in particular. It is important to listen to ISME and other representative bodies which make submissions to Oireachtas committees, directly to the Department or through the various mechanisms in place but we should not forget that many small enterprises which are the lifeblood and backbone of some parishes in which they employ one or two people and which may not be affiliated to a national organisation are suffering. This is particularly true of the retail and catering sectors, some of which are covered by employment regulation orders. Construction and electrical contractors are covered by registered employment agreements. Representatives of electrical contractors made certain submissions to the Joint Committee on Enterprise and Small Business, with which I am sure the Minister of State and his officials are familiar. A raft of submissions have been made but there is consistency and continuity in each. I welcome the tones I have heard from the Minister of State and his officials in trying to address and adjust what we recognise as a sensitive issue in terms of costs, wages and survival. I refer to survival for both sides. We must recognise we are in a difficult and challenging time. We must identify the real challenges and opportunities available to ensure we shape our legislative framework to respond appropriately.