Public sector pay deals: Bridging the gap between the two sides

Elaine Loughlin, Bernard Harbour and Eddie Molly examine and discuss recent public sector pay deals

Securing a fresh deal paramount to all at table but discontent mounts amongst workers

After three collective deals, government and the public sector unions are well aware of the motto, strength in unity.

Despite inflicting pay cuts on a haemorrhaging staff count and asking public sector employees to work longer and do more with less, people stayed at their desks, on wards, in classrooms and on the beat.

And so the economic downturn passed with very little downing of tools. This was largely done to the series of collective agreements between the Government and unions.

However, in recent weeks, the State has gone through a shaky time and the threat from public sector workers continues to loom.

Unrest has bled through to actions and threats from teachers, gardaí, nurses, junior doctors and other public servants.

To avoid all-out protests, strikes and utter chaos Minister for Public Expenditure Paschal Donohoe and his government know they have to keep public sector unions on side through collective agreement.

This is exactly why he reached out to the Irish Congress of Trade Unions (ICTU) last week to invite it back to the bargaining table.

And while the offer to discuss the “anomalies thrown up by the Labour Court recommendation” to gardaí was seen as a partial climb- down, Mr Donohoe was able to sell it as a two-phase negotiation and not the beginning of a successor to Lansdowne Raod.

Renegotiation of the Lansdowne Road Agreement is not due to begin until September of next year, Whether the Government can hold out until then is a different matter.

However, securing a new agreement will be paramount — for both sides. Croke Park, Haddington Road and Lansdowne Road all laid paths which public sector unions were able to sell to their members and the Government ensured stability over a specific timeframe.

Croke Park was the first of what was to be a series of public sector pay deals which also had significant reform at its core. The deal came after the imposition of two pay cuts, and although it promised no compulsory redundancies, workers were expected to work harder with less.

Bernard Harbor of Impact said: “It was a big win for unions to be able to say we are in crisis but your job is safe. From that perspective Croke Park was a success and was seen to be a success.

“It also brought a lot of order at a time when public service morale was very low, co-operation was hard to get because of pay cuts and so on, so it brought order to that,” he says.

As the economy continued to spiral into the abyss more cuts were required. After the failure of Croke Park II, which public sector workers roundly rejected, the Haddington Road agreement was hammered out.

The deal went against the promise laid out in Croke Park, of no more pay cuts, but reductions were targeted at those earning over €65,000.

The agreement was also subdivided by sector with various measures being imposed on those in health, education, defence and other areas. As the economy finally got back into gear public sector workers began to clamber for a restoration of pay which had been swiped from them during the dark days of recession.

The Lansdowne Road Agreement, which is still in place, has started giving back a little. However, those workers now feel that pay restoration is not happening as quickly as it should and there is increasing discontent and calls for a new deal.

Have public sector pay deals been a success? Only time will tell.

As INTO assistant general secretary Peter Mullan said: “There have been cutbacks. I don’t think the system is as good as it was.

“But certainly Croke Park and the other agreements have enabled public services to still be provided, it’s not a Rolls Royce model but it didn’t stop completely.

“While the country did limp through there have been a lot of casualties,” he says.

Croke Park: Overhauling the way public service operates

Background

Budget 2010 inflicted the second round of pay cuts across the public sector at levels of up to 10%. The measures announced at the height of the recession meant that someone on a salary of €25,000 saw their annual pay drop to €23,750, while those earning €50,000 were cut to €47,000.

Those lucky enough to be on €250,000 a year before Budget 2010 saw their pay reduced to €212,500.

It was in this context that negotiations between government and public sector unions — which became known as the Croke Park Agreement after the place where talks were held — began.

What were the aims?

As the recession continued to hurt all sections of society, public sector workers were concerned that they would be hit with more pay cuts or even the possibility or compulsory redundancies. Public sector unions went into negotiations seeking some security for workers.

Government on the other hand wanted to deliver reform and to increase productivity while reducing staff levels and cutting the overall pay package.

An overhaul in the way the public sector does business was at the heart of the agreement.

What were the key elements?

Introduced in 2010, the Croke Park Agreement was negotiated to run until 2014 and had a target of saving €3.5bn, or 20%, from the pay bill.

Public sector workers were promised that no compulsory redundancies would be made, however, public servants were required to be flexible about redeployment.

But a reduction of 37,000 public sector workers — or a 12% cut in the workforce — was projected through not replacing those who retired or left of their own will.

Government committed to no further reductions in public sector pay rates, other than those applied in 2009 and 2010.

It was also agreed that a review of the position on public service pay would take place in the Spring of each year of the Agreement.

Did it succeed?

Overall the Croke Park Agreement succeeded in what it set out to do.

The deal established a collective pay agreement which the vast majority of public sector employees signed up to.

Almost €1bn was shaved off the public pay bill between June 2010, when the agreement was signed and the end of 2012.

A further €847m was saved through non-pay or efficiency measures during the same period.

In the first two and a half years of the agreement the numbers working in the public sector were reduced by 18,700.

The Third Progress Report of the Implementation body published in July 2013 found: “The overwhelming majority of commitments around cost extraction and changed work practices have now been substantially delivered”.

Likewise unions were happy with the stability which the agreement provided.

But in the end, the Croke Park Agreement didn’t go far enough and Government had to go back into talks with public sector unions — first through Croke Part II and then Haddington Road — to find an additional €1bn in savings as the country continued to feel the pain of an unprecedented economic downturn.

Croke Park II: Deal died before it ever got off the ground

What is the background?

Although the original Croke Park Agreement was due to continue until 2014, the economy was in such dire condition, that the Government was required to find additional savings little over half way through the deal.

And so in early 2013, the Government was forced to go back to unions to extract more money and savings out of an already squeezed workforce.

Going into the talks, Impact’s general secretary Shay Cody described the negotiations as “probably the most difficult ever”.

However, unions were given little or no choice — renegotiate the original Croke Park Agreement which had already produced over €1.8bn in savings or face compulsory pay cuts across the board.

What were the aims?

The Government had to secure an extra €1bn in savings from the public sector on top of the considerable reductions in the payroll through the initial Croke Park deal.

What were the key elements?

The promise of no compulsory redundancies set out in the first Croke Park deal continued.

However, the most controversial element was a pay cut for some in the public sector. Although lower-paid employees were protected, those earning over €65,000 a year faced cuts ranging from 5.5% to 10% as they went up the pay scale.

This aspect was particularly hard to swallow for unions and their members as pay had been ring-fenced as untouchable in the first Croke Park Agreement.

Premium payments were also addressed, the deal recommended that payment for working Sundays should be reduced from double time to time and a half, and that premiums for Saturday working should be abolished outright. Overtime payments were also altered.

The Government had wanted to increase the distance for redeployment from 45km under Croke Park to 100km, but this suggestion was rejected.

Did it succeed?

The deal was an outright failure as it was not accepted by public sector workers and so was never implemented.

The Government threat to impose a 7% pay cut on all 290,000 public servants if the deal was rejected was not heeded by public servants, the vast majority of whom voted to reject the new proposals.

While Siptu and Impact, the two biggest unions, recommended that its members accept the deal, some of the other significant unions including the Irish National Teachers’ Organisation (INTO), made no recommendation to members ahead of a ballot.

In the end, a number of influential unions including Siptu, the INTO and the Irish Nurses and Midwives’ Organisation (INMO) rejected the agreement. It was a dead deal before it even got going.

Lansdowne Road: Agreement began the process of reversing cuts in pay

The background

Although the Haddington Road Agreement addressed the massive hole in the State’s coffers, when agreeing the deal unions were still aware that the country’s finances would not remain in crisis forever.

And so as part of the negotiations, the Irish Congress of Trade Unions wrote to the Department of Public Expenditure and Reform advising if the economy improved significantly enough, public sector workers could lodge a claim seeking improvements.

What were the aims?

As the economy began to turn a corner, public sector workers felt that their pay and conditions did not now reflect the acceleration of the recovery.

Public sector unions called for talks on the restoration of pay and other allowances that were taken from them through the Croke Park and Haddington Road Agreements.

The Government saw that the two previous collective agreements had achieved stability in a time of economic turmoil and were eager to keep all public sector unions around the table.

The Lansdowne Road Agreement began the process of reversing pay and pension cuts introduced for staff since 2008.

What were the key elements?

For the first time in many years, those working in the public sector received a bounce in income. It was agreed the measures would be introduced on a phased yearly basis between 2016 and 2018. This year, workers received an average of €1,000 more in their annual income.

Under the deal, employees saw some benefits from the beginning of this year when the pension levy threshold increased to €26,083. This was up from the previous threshold of €15,000.

Those earning up to €24,000 a year received a 2.5% pay increase through a partial reversal of the 2010 public service pay cut.

While employees on yearly wages between €24,001 and €31,000 increased by 1% through the same mechanism.

From January, the pension levy threshold will increase to €28,750, while the second pay rise will kick in from September of next year and will see salaries up to €65,000 increase by €1,000 a year.

Restoration of the temporary pay reductions for staff earning more than €65,000, which were negotiated as part of the Haddington Road Agreement, will begin on April 1, next year. But these cuts will not be fully restored until January 2018.

Most retired public service staff will receive about €1,680 more in their pensions over the lifetime of the deal as part of a parallel pension restoration initiative.

Was it successful?

The deal is not due to be renegotiated until the third quarter of next year, so it still remains to be seen whether it will have been successful.

Minister for Public Expenditure and Reform Paschal Donohoe will have a mammoth task in keeping public sector workers at bay until then.

Haddington Road: An extremely difficult pill for public sector staff to swallow

Public sector pay deals: Bridging the gap between the two sides

Background

After the Croke Park II deal was roundly rejected by public sector workers, unions and government had to go back to the drawing board.

With the troika in town, there was a realisation public servants would have to give a little more as the country struggled to keep the lights on. And so discussions began on what became known as the Haddington Road Agreement.

What were the aims?

The agreement aimed to provide a road-map for workers and Government on pay, conditions and hours. It was hoped a deal would be drawn up to last from 2013 to 2016.

The Government of the day had to shave an additional €1bn off its pay bill over three years as part of an agreement with unions. Like the original Croke Park deal, Government sought to get more out of less, through efficiencies and longer working hours for employees.

However, having failed to get Croke Park II past a vote of union members, significant watering down of some of the harsher measures would have to be included.

What were the key elements?

Perhaps the most controversial measure in the deal was a pay cut to those earning over €65,000. The scale of the cuts ranged from 5.5% to 10% for the highest earners.

Although the deal was signed off on as a whole, the agreement included a series of specific measures targeting sectors including teachers, health workers, gardaí and prison officers.

Croke Park II measures on overtime and premium payments had been a particular sore point for workers. The newly negotiated deal saw Sunday premia retained and there were fewer cuts to overtime. Management was, however, asked to reduce the overall number of staff rostered on Sundays while hospital workers were directed to make an extra effort to concentrate care provision from Monday to Saturday.

Allowances were also targeted under Haddington Road, for example members of the defence forces saw the border duty allowance axed.

Likewise, teachers had their supervision allowance — which was worth more than €1,500 annually — cut. Although unpalatable, many accepted these cuts as they saw some benefit for their younger colleagues. Under the package, the reductions in pay for newly qualified teachers implemented under a previous budget was partially rowed back on.

Was it successful?

The package was an extremely difficult pill for public sector workers to swallow, but it passed.

The very fact that workers voted in favour of reduced salaries, cuts to additional allowances and increased working hours had to be deemed a success in itself.

Virtually all public service unions signed up to the collective agreement.

From a union point of view, all the measures, protections and procedures in the original Croke Park Agreement remained in force, except where they had been explicitly changed by the Haddington Road Agreement. As a result, a certain level of protection was maintained.

Ireland needs a pay rise

Bernard Harbour, Impact trade union

Public sector pay deals: Bridging the gap between the two sides

For all its imperfections, Ireland’s public service pay system has a coherence and basic fairness that’s been highly valued by successive governments, and by the people who work in our hospitals, colleges, council depots and civil service settings.

Public employees are not all paid the same amount in the same way. But, by and large, comparable jobs attract broadly similar salaries regardless of where you happen to work.

What’s more, while it has its modest number of high earners, the public sector is not burdened by the obscene gaps between boardroom rewards and shop floor pay that are now entrenched in much of the private sector.

Though hated, even the pay cuts of the 2009-2011 period were ‘progressive,’ in that higher earners lost more than those on low and middle incomes. And the Lansdowne Road deal — the first agreement for almost a decade to put money back in purses and pockets —also favoured those at the bottom of the pile.

This basic fairness is underpinned by an approach to pay determination that, in good times and bad, treats everyone in broadly the same way. This is key to understanding the uproar that greeted last month’s Garda pay awards.

Nobody begrudges improved incomes for gardaí. But the Labour Court recommendations upset the balance of fairness by treating one group significantly more favourably than the rest.

A well-founded perception of inequity then made demands for accelerated pay recovery for the majority of public servants — those who had abided by the Lansdowne Road agreement — inevitable. By conceding that it would address the problem, the Government finally acknowledged this reality last week.

Some commentators said the Government had effectively chosen higher pay over tax cuts or improved services. But it’s far more accurate to frame it as a choice between stability and chaos in both our exchequer finances and public service delivery.

The Government and most opposition parties rightly recognise the value of having a functioning public service pay deal in place. The certainty provided by the Lansdowne Road agreement and its recent predecessors was arguably the main load-bearing wall in Ireland’s economic and fiscal recovery.

Aside from saving billions of taxpayers’ euro, these agreements also underpinned stability in public service delivery during the worst economic and fiscal crisis this island has seen in modern times.

When the Garda pay awards put Lansdowne Road on life support last month, the Government simply had to act to prevent the deal — and the stability it underpinned — from collapsing.

By separating the Garda problem from the broader task of negotiating a successor to Lansdowne Road, Minister Donohoe’s “two-phased approach” has neatly created the space for the Public Service Pay Commission (PSPC) to do its work before the second — and, frankly, more difficult — exercise begins.

Since the spring, Impact and other unions have been calling for fast-tracked negotiations on a successor to Lansdowne Road. So we welcomed the minister’s acceptance that they should now start in the first half of 2017, rather than at some unspecified time the year after.

This revised timetable means that, if the talks are successful, new provision for 2018 pay increases can be included in next October’s budget.

But let’s remember that, for all its passion and volume, the November row between unions and Government was essentially about whether and when talks should take place.

That argument is behind us, but the negotiations (particularly the main event in the middle of next year) will be extremely challenging for all concerned.

For instance, the report of the Public Service Pay Commission (PSPC), which is set to inform Government and unions on how best, and how quickly, to continue the unwinding of the legislation that introduced pay cuts and the so-called ‘pension levy,’ will also look at public-private and international pay comparisons (taking account of living costs), while placing a value on public service pensions and job security.

The initial ICTU submission to the PSPC was open to like-for-like comparisons of the pay of private and public sector workers who do similar jobs or perform work of equal value. But the media debate on this legitimate policy issue tends to be poorly informed and highly emotive.

Public service unions will have to work hard to maintain the popular support for pay restoration revealed in a recent Red C poll, which found that nearly two-thirds of people supported public service pay recovery even if it limited the scope for tax cuts.

We continue to insist that the economy and exchequer finances are far stronger than anyone expected when Lansdowne Road was signed in the middle of last year.

We are not alone in this. Even Ibec chief Danny McCoy recently agreed that faster public service pay restoration was a reasonable aspiration, albeit with his usual caveats about affordability and reform.

On the other side of the argument, Brexit and other international developments have undeniably created more uncertainty than existed when the calls for faster negotiations first emerged earlier this year. Fears over the impact of Britain’s departure from the EU will dominate the backdrop to our discussions in six months’ time.

But, while most public servants and their unions accept that any new pay agreement must be sustainable, there’s a broader context too.

The union-backed Nevin Economic Research Institute recently reminded us that the value of Irish wages has been stagnant in all sectors (public, private and voluntary) since 2008.

Ireland needs a pay rise, not just to give some relief to struggling families, but also to sustain and increase domestic demand in an economy facing new uncertainties in export markets.

And fairness demands that all workers see their wages recover, regardless of whether they work in a private company, a public body or a community sector organisation.

Bernard Harbor is head of communications with Impact trade union

Pay restoration demands will set us up for another fall

Eddie Molloy, Management consultant

Public sector pay deals: Bridging the gap between the two sides

Investigations into the collapse of the economy in 2007-2008 concluded that no one in authority shouted stop or, if they did, they did not shout loudly enough.

The consequences of this failure of politics, government and public administration were truly catastrophic and continue to be experienced today, with thousands of families living in cheap hotel rooms, one tenth of the population waiting a year to see a doctor and glaring gaps in vital infrastructure like water and broadband.

In spite of this searing experience, there is a very unsettling sense of déjà vu that the country is heading inexorably towards another crash.

The Fiscal Council, established in the wake of the 2007-8 disaster, specifically — in a nutshell — to shout stop if ever we were heading for the rocks again, has calculated that we are in grave danger of repeating the disaster.

Regrettably, they don’t yet seem quite able to shout stop loudly enough such that everyone gets the message and takes the necessary evasive action. The nearest thing to a clear, forceful voice on the matter is John Moran, former secretary general of the Department of Finance.

Reading between the lines, the Fiscal Council is saying that the recent 2017 budget crossed the line of fiscal prudence and that things have become even more parlous in the aftermath of the pay settlement for gardaí.

That in turn has triggered an avalanche of claims from other public service unions, and with the impact of Brexit, already acutely felt in the agri-food sector, for example.

The precariousness of the unfolding situation may be crystalised in a recent exchange between a senior trade union official, Bernard Harbor of Impact, and a radio presenter about union demands to bring forward the renegotiation of the Lansdowne Road Agreement and the demand that €1,000 due to public servants next September, as part of the LDA, should be paid much sooner.

When it was put to Mr Harbor that if the €1,000 payment were brought forward it would cost €20m per month, money that has not been allowed for in the budget, his response was, “Well it will have to be found”. Just like that, and just like that for the €50m that “will have to be found” to pay for the Garda settlement.

The Government has insisted that there is no money available for such unplanned deals and that the money will have to be found from resources already earmarked for other purposes. The Fiscal Council has warned that the only way around this will be a combination of higher taxes or further cuts to public services.

Inevitably, the target of such cuts will be the softest targets like mental health services, support for exhausted carers etc. That is what has happened before when push came to shove; un-unionised Special Needs Assistants were the first to be let go when the Croke Park Agreement was being negotiated.

It is to the great credit of trade union leaders that they contributed to industrial peace and to the economic recovery by negotiating the sequence of agreements named after Croke Park, Haddington Road and Lansdowne Road.

It is also to the great credit of their members, 300,000 public servants that they endured the cuts to pay, additional working hours and other concessions, while continuing to deliver services to ever larger numbers of citizens.

But it also has to be said that, in all the circumstance of the time, public servants got a damned good deal.

There were no compulsory redundancies, pensions were paid and annual increments continued for many, regardless of performance.

However, all of this was only made possible by the State continuing to borrow billions right up to the present day to fund these settlements. This €100m addition to the national debt will now be paid for by all taxpayers, including those in the private sector who suffered much greater hardship as a result of the crash.

As the parties now wind up to engage on “a successor to Lansdowne Road”, there are a number of factors that need to be taken into account, apart from the “anger of our members…. and their legitimate entitlement to pay restoration”.

Firstly, there is nothing “special” about public service workers. When challenged by Patricia Callan of the Small Firms Association about the chasm between public and private sector pensions, Sinn Féin TD, Louise O’Reilly responded “well public servants are special”, a term that is commonly heard.

They are no more special than the baker who bakes our bread or the mechanic who gets our car back on the road, and certainly not so special, compared to any other workers, that they are entitled to a 10% premium on private sector pay and vastly superior pensions.

Secondly, public service unions are so disproportionately powerful, compared to other interests, that when the Government gets into the tent to negotiate with them it seems to forget that it is not just the employer of 300,000 workers but also the Government of the whole population.

The Lansdowne Road Agreement constituted a pre-emptive grab in April 2015 of the ‘fiscal space’ that would be available for the October budget. Around 30% of the funds needed for all other infrastructural and service recovery programmes was already in the bag, spoken for, before any other agenda like health or homelessness got a look in.

Thirdly, whenever public service union spokesmen are challenged about the disparities between public and private sector pay and conditions they quickly say they are not going to engage in “divisive them and us comparisons”.

However, it is precisely such comparisons with the private sector that drove the infamous benchmarking “ATM” deal in 2003 and that today has triggered the spate of demands for increases similar to those conceded to Luas drivers and the gardaí.

More than any other factor, the stance of public service unions in the next six months will determine whether or not all the painful sacrifices of the past decade are for nothing and the hard work of recovery is blown away.

If they persist with their demands for “accelerated pay restoration” and succeed in securing unaffordable pay increases from a weakened government, then another damaging economic setback and consequent social disruption is on the cards.

In this dangerous context, let’s hope that the Public Service Pay Commission produces verifiable facts and comparisons and not a repeat of benchmarking and that union-government negotiations do not replicate social partnership in its end-of-life, degenerate form, when it had virtually come to replace cabinet government. Only courageous leadership on all sides can prevent another crash.

Eddie Molloy is a management consultant.

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