I move: "That the Bill be now read a Second Time."
I am pleased to be the first Minister to present a National Minimum Wage Bill to the House. The Bill delivers on the Government's commitment to introducing a national minimum hourly wage. The Bill will ensure that tens of thousands of low-paid workers will secure an increase in their pay to a level that reflects the status of this country as a modern developed economy and a caring society.
The commitment to introduce a national minimum wage contained in the programme for Government was, in essence, a social policy commitment placed in the framework of an assault on exclusion, marginalisation and poverty. However, the Government also recognised that, as a social policy issue, it had significant economic implications. The terms of reference of the National Minimum Wage Commission reflected this. I indicated my concern to protect those workers who are vulnerable and prone to being exploited, especially women and young people. We also have to protect employment and competitiveness, and the Bill strikes the right balance. The outcome is both a victory for jobs and the rights of workers.
The Bill is an historic development which will influence the lives of many thousands of workers, both now and in future. Our economy has been radically transformed in recent years. 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 success. Many thousands of workers are paid rates which are no longer acceptable. A statutory minimum wage will greatly alter how we as a society view and value the work undertaken by thousands of workers which has historically been categorised as being of low skill, low esteem, dead-end and, consequently, low-paid. Such views have, to some extent, marginalised the workers concerned, reduced work incentives, and promoted a dependency culture, as well as subjecting them to low levels of income. Many of these workers are women and young people. However, the work performed by such workers has an intrinsic value to society that must be recognised and fairly rewarded.
The National Minimum Wage Commission was the first step towards fulfilling the Government's commitment to introducing 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 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 in order to ensure that both employers and workers had adequate time to prepare for the introduction of a national minimum wage.
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 one. 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. The 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 now and in the future. The Government believes the introduction of a rigid automatic rate setting mechanism would not be the best way of addressing this issue. Since April 1988 I have stated that I consider that 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 also included a recommendation that the initial rate, will be £4.40 per hour from 1 April 2000, and that it should be increased to £4.70 from 1 July 2001 and to £5.00 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, from 1 April, in accordance with the legislation, have an entitlement to the new national hourly minimum wage. The new agreement, once ratified, will apply to various workers at different stages throughout 2000 and may apply to some with effect from 1 April. The agreement does not provide a different regime of timing or 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 separate from increases granted under the legislation.
All 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 a national minimum wage. The Bill has been drafted in the context of the existing statutory minimum wage fixing machinery. Current statutory minimum rates of pay are specified in a number of employment regulation orders and registered employment agreements, covering various occupations and industries ranging from agricultural workers to the construction industry. Employment regulation orders and registered employment agreements go beyond minimum wage fixing and include conditions of employment.
The National Minimum Wage Commission examined the question of whether the Joint Labour Committee/Employment Regulation Order system should continue to operate following the introduction of the national hourly minimum wage. The commission recommended that no changes be made to the Joint Labour Committee system and concluded that they should continue to set rates of pay and conditions of employment for the sectors covered by the committees. I have accepted this recommendation, subject to the proviso that where the minimum amount of pay prescribed in an Employment Regulation Order is less than that prescribed by the Bill, the employee's entitlement to remuneration will be in accordance with the Bill. This will also apply in relation to Registered Employment Agreements.
The Bill strikes the right balance between the desire of society to prevent the exploitation of workers on low pay and the necessity to share the fruits of recent economic growth more fairly against the need to continue to grow employment and create wealth in our economy. I will now outline the purpose of the most significant sections of the Bill, which I hope all sides of the House can support.
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 or particular provisions of it will come into operation. 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 it being no longer than one calendar month. The selection of a pay reference period for a 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 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. In relation to the review mechanism for the national minimum hourly wage, it is necessary in line with the recommendations 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, 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. If varying or rejecting the recommendation, the Minister must make a statement to the Oireachtas of the reasons for that variation or rejection.
Section 14 prescribes that an employee aged 18 or over must be paid for his or her working hours in any pay reference period at an hourly rate of pay that, on average, is not less than the national minimum hourly rate of pay unless sections 15, 16 or 39 apply. An employee under the age of 18 years 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, being 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, who continues in employment on reaching that age. A job entrant must be paid by his or her employer for his or her working hours at an hourly rate of pay that, on average, is not less than 80% of the national minimum hourly rate of pay 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 national minimum hourly rate of pay 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 rate of pay in the first, second and third year of training. An employee, aged 18 or over, undergoing a prescribed course of study or training authorised by his or her employer must be paid for his or her working hours at an hourly rate of pay that, on average, is not less than 75% of the national minimum hourly rate for the first year of training and 80% of the rate for the second year of training, and 90% for the third year of training. These percentage rates are to apply pro rata to each one-third of the duration of a course of study or training if it is less than three years.
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.
The rationale underpinning these provisions, as stated by the commission and the interdepartmental group, is that, all other things being equal, an experienced employee is of more value and more productive than a new entrant or trainee. It is also equally important that those seeking employment would not be prevented from getting the opportunity to enter work because of their lack of experience or training.
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 if 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 section reflects the recommendation of the interdepartmental group in the statement that all gross payments, which can be regarded as making up the rate for the job, should be considered to be reckonable, such as basic pay, bonus payments, commission, piece and incentive rates and allowances for special duties. The group also recommended that all premia payments paid to an employee in relation to normal or standard working hours should be included as reckonable pay.
I recognise that the issue of what should constitute reckonable pay for national minimum wage purposes is difficult and has given rise to differing views, but the general principle advocated by the interdepartmental group, namely, that the general rate for the job should be the applicable criterion, provides a basis for addressing this issue. I would be concerned to ensure 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. That is why, in addition to providing for changes in pay structures that may arise in the future, there is a degree of flexibility provided for in allowing the Minister to amend by regulation the Schedule of components, as appropriate, after consultation.
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, subject to it being a pay reference period falling within 12 months immediately prior to the employee's request and not relating to the employee's current pay reference period. This process should help identify any under-payment and allow the parties to resolve the dispute without recourse to the enforcement provisions of the Bill.
Sections 24 to 28 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 with such a decision may appeal it to the Labour Court for determination. The rights commissioner or the Labour Court in dealing with an appeal, if satisfied that an employee has not been paid his or her entitlement under the Bill, will be empowered to award arrears of remuneration owing to the employee and to award reasonable expenses to the employee.
Another mechanism to ensure employers will adhere to the provisions of the Bill will be the appointment of inspectors by the Minister under section 32. An employee who feels that he or she could not openly identify themselves by taking a case to a rights commissioner may, under section 33, request an inspector to investigate if his or her employer has failed to pay the employee's appropriate entitlement to remuneration under this Bill. It will be an offence under section 34 for an employer to refuse or to fail to pay an employee for each hour worked at an hourly rate of pay that on average is not less than the employee's entitlement to his or her minimum hourly rate of pay under this Bill. Section 36 provides for appropriate penalties to be imposed for offences committed contrary to the provisions of the Bill.
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 39 implements that recommendation without undermining the thrust of the legislation.
Section 39 permits the Labour Court to grant a temporary exemption to an employer if satisfied that the employer is unable to pay the national minimum wage and if the employer were compelled to do so, the employee would likely be laid off or would have his or her employment terminated. An employer will only be entitled to be granted one temporary exemption by the Labour Court which shall not exceed one year. A number of other safeguards will apply, including the convening of a Labour Court hearing to examine the application, and an employer must obtain the consent of each employee or the majority of employees affected to make the application to the Labour Court.
As evidenced by the ESRI impact study, repercussive or spill-over claims by those employees for whom the legislation is not intended to benefit could undermine the purpose of the legislation as well as negatively impacting on their own employment and on national competitiveness. It is, therefore, vital that the State's industrial relations machinery should not be used by such employees to further such claims. The National Minimum Wage Commission recommended that the social partners and the Government conclude an agreement that "any claims on foot of the introduction of the minimum wage would not be recognised or accepted by the Labour Court". The interdepartmental group endorsed this approach but also recommended that a provision be included in the legislation.
Accordingly, section 41 will implement that recommendation. 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 its operation. As I mentioned earlier, 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.
I will, in accordance with section 11 by order, set the initial national minimum hourly rate of pay at £4.40 per hour from 1 April 2000. Having considered the findings of the ESRI study, I am satisfied that this hourly rate strikes the right balance between the need to ensure that vulnerable sectors of the workforce, mainly women and young people, are not exploited and the need to ensure that employment and competitiveness is maintained. As I said earlier, the recently concluded negotiations for a successor to Partnership 2000 included an agreement by the social partners that the national minimum wage hourly rate be increased to £4.70 from 1 July 2001 and to £5 from 1 October 2002. The Government will consider this recommendation at the appropriate time in accordance with section 12 of this Bill.
My Department will launch an intensive publicity and information campaign if the Bill is approved by the Oireachtas 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. The present complement of labour inspectors is ten and they are responsible for the enforcement nationwide of an extensive array of highly complex labour-employment legislation, employment regulation orders and registered employment agreements. The need for additional resources for the inspectorate arising from the national minimum wage legislation has been acknowledged by both the National Minimum Wage Commission and the interdepartmental group on the implementation of a national minimum wage. Accordingly, the Government has agreed, at my request, to assign significantly increased staffing resources to the inspectorate to enable delivery of an enforcement service in respect of the national minimum wage legislation and other employment rights legislation. The additional resources consist of seven labour inspectors and three support staff.
This Bill heralds a new era as to 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 to determine disputes between them and an employer, an effective system of enforcement and a transparent method to review the hourly rate.