A partnership agreement for 2009 will have to be viewed in the dramatically changed economic environment, writes Michael McDonnell.
It might seem strange to be already writing about the next pay talks. But if we are to enter into national pay talks for an economic situation that will prevail in 2009, we had better start those new talks now.
The concept of national pay agreements remains as valid as it was in 1987 when the first agreement came into force. What is different is that the Irish economic and industrial relations scene has changed dramatically. As indeed has the employer/employee relationship in many sectors.
We began national pay agreements at a time when days lost through strikes was at a very high level. In 1986 the number of days lost due to industrial disputes was more than 309,000. (By 2004 this figure had dropped to under 9,000.)
It was also at a time when the labour laws were antiquated by today's standards. There was no equal pay legislation, no equality legislation, no legislation covering part-time workers or no legislation covering the maximum time that can be worked. There are now 25 Acts covering employment rights and industrial relations.
And we now also have benchmarking for the public service with part 2 coming soon.
National pay agreements have been beneficial. They helped to stabilise industrial relations, helped to keep the economy stable during a spectacular growth period and helped achieve real earnings increases - 40 per cent over the past 20 years.
Clearly national pay agreements have proven themselves. But the growth levels of the late 90s and early part of this century have now receded, our economy is switching from a low-cost to a high-cost based economy and services are replacing manufacturing as the key drivers.
Despite these fundamental shifts the premise on which the national pay talks has been conducted has not changed, and it must, if national agreements are to be sustained.
The concept of agreeing a fixed rate across all categories of employment without reference to performance or competitiveness has remained the holy grail. But it cannot continue to be that way.
The Irish economy requires a more expansive approach. It does now and it most certainly will in 2009. Now is the time to begin the reform, to redefine the objectives. Competitiveness was the buzz word in the talks just finished. But it was never defined other than in terms of being cheaper.
Being cheaper is not how you compete if you do not have the necessary scale. And the vast majority of Irish organisations don't have the scale. Therefore, they need to raise their performance in providing goods and services that meet their customers expectations every time.
That is why the next round of pay talks should begin now and a formula should be found to focus on areas such as research and technical skills, on greater skills training, on expanding higher education opportunities.
Performance measures should be linked to pay and used to determine increases above an agreed level.
It is not only in the private sector that performance should be rewarded. Such initiatives encourage a high-quality public service. Why should there not be a system where an outstanding civil servant, teacher or university lecturer is rewarded. A more transparent benchmarking process, one more openly debated within the national pay talks, is essential.
There has been a radical change in the relationship between employees and employers, with employees now more likely to make clear choices when applying for positions. The contract between employer and employees is no longer just one way.
The next national agreement must take this new scenario into account and seek to have the Government revisit the Industrial Relations Acts 2001 and 2004. While employees are showing more flexibility in deciding where to work, the application of these Acts is eroding the concept of voluntarism. We are drifting away from the long-held voluntary system of industrial relations through the use of new right to bargain legislation. If this drift is allowed to gather speed, our ability to attract inward investment will ultimately be undermined.
It is difficult to disagree with much of the legislation that has substantially improved the working conditions and opportunities of the Irish workforce. Much of the success of the legislation has to be credited to the professional human resources managers who have been in the frontline, ensuring that the various Acts have been adhered to within their organisations.
But it is clear that some industrial relations legislation is not being used for the purpose it was designed for. While the 2001 Industrial Relations Act, amended in 2004, was aimed at low-pay, non-union indigenous companies, 30 per cent of the cases brought to the Labour Court by the trade unions were against larger indigenous companies and multinationals.
For almost 20 years we have debated every few years on whether a national agreement is worthwhile. National agreements have served Ireland very well and now the debate should shift to what type of national agreement is best suited to the Ireland of 2009 and 2010.
Now is the time to start the debate, not in 2008.
Michael McDonnell is director of Chartered Institute of Personnel and Development in Ireland.