Public sector pay - Talks enter a turbulent period

The extravagant pay increases awarded by the Higher Review Body to high earners in the public service was a form of “benchmarking”, as many of those covered by the report — including judges, chief executives of semi-state companies and agencies and university presidents — were excluded from that process.

One of the exceptions of course — as always — was the political class. In a neat double whammy, the cabinet benefited from benchmarking as TDs and from the Higher Review Body’s increases as ministers.

One salient detail of that report that has gone largely unnoticed will play into pay negotiations in the new year as well as the second report of the benchmarking body, due out in early January.

It was the decision by the review body to place a value for the first time on the gold-plated pensions enjoyed by the public service. Essentially, those working on behalf of the State receive a defined benefit scheme. In return for paying only 5% of their salary to the State-backed scheme, they are entitled to receive a generous proportion of their salary, which rises with the length of service, to a maximum of 40 years. And, of course, pension increases will be commensurate with the pay increases awarded to public servants.

By placing a value on it, the actual increase that was awarded to higher paid public servants was reduced by 15%. In effect, that means that Taoiseach Bertie Ahern, his cabinet colleagues, and 2,000 other top earners would have been awarded increases of a staggering 37.5% since 2000 (Mr Ahern’s increase would have been €76,000 rather than €38,000). If the discount had not been made, the public outcry may have turned into mutiny.

The belated and slightly mean-spirited decision of the Government to forego its pay increases for a year is minimalist but it is the least it could do as it enters into national pay negotiations preaching the message of tighter economic circumstances and restraint.

And already that 15% devaluation is proving significant. Yesterday’s Industrial Relations News reported that one of the country’s main public service unions, IMPACT, has forecast that most benchmarking awards are “likely to be zero”. Another huge public service union, the PSEU, has agreed.

Both the 15% discount for public sector pensions allied to some evidence that suggests private sector comparators have lagged behind their public service counterparts may lead to that zero assessment.

Such an assessment will give some solace to critics of the first benchmarking process, who questioned its complete lack of transparency in arriving at its controversial conclusions.

But will the temporary pay freeze by ministers be enough to convince unions that restraint should determine the cost of living rises to be negotiated in the new year? It is unlikely. Unions have pointed out that the massive rises awarded by the review body reflected huge increases in pay for executives in the private sector. Those rises were not matched among lower-paid workers whose pay rises in that time have not been much higher than the rate of inflation.

Expect some turbulent negotiations ahead.