Private sector pay surge unlikely, but IR system must shape up - McGinty

A leading employer figure has rejected the notion that we are heading for a surge in pay this year, commenting that for the most part pay deals have been hovering around the 2% mark. Speaking to IRN, Brendan McGinty, ex-Ibec IR & HR expert - now managing partner of newly established Stratis Consulting – also expressed concern about the danger of “revolving door” syndrome in high profile disputes.


Brendan McGinty told IRN this week that most organisations are now facing into what he described as a ‘black box’ of a “hard Brexit” and the implications of the tax and trade decisions of the new Trump administration in the US.


The one-time employer member of the trouble shooting National Implementation Body, said that anything that creates uncertainty, leads to investment decisions being delayed and depresses recruitment decisions, must be addressed. In the case of Brexit, he believes that any risk to the openness of the UK labour market for Irish emigrants would put upward pressure on unemployment and could exert downward pressure on wages here.


Strikingly, he estimates that about €16 billion could be saved by linking future pensions increases for public servants to rises in the cost of living “instead of maintaining the link to pay rises of whoever is doing that persons job”.


Mr McGinty’s expectation is that private sector pay rises will remain close to the 2% we have seen in recent years, which he says represents real income growth at a time of benign inflation and when the Government has introduced modest tax cuts (about 0.5% in the last Budget). He plays down the 4% pitch by ICTU’s private sector unions, by observing that their ‘level of claim’ is below the 5% “upper level” that they sought last year.


But he detects an appetite among employers to dilute three year wage deals in the current uncertain climate, with more companies now preferring two-year arrangements.


WARNING ON ‘OUTLIERS’


Mr McGinty says there is also a need to differentiate between what he refers to as “restorative” deals on base pay, and ‘cost of living’ deals without productivity. "The former tend to create higher ‘outlier’ settlements that if wrongly interpreted can add pressure on the general pay settlements”, he cautions. 


The positioning by unions has been influenced by these outliers, such as Luas and Dublin Bus, which given their “publicised circumstances can be no predictors of general pay movements”, he suggests.


Turning to the IR system in general, Mr McGinty detects an element of drift, suggesting there are no “compass points” to guide the actors in what he says is an increasingly fragmented system. Employers can also underestimate the challenges faced by union officials - perhaps a reference to the likes of LUAS - who need to maintain their own influence in the case of “competing sources of information, advice and direction”. 


MUSTN’T BE ‘STEPPING STONE’


The ex-WRC board member suggests that the dispute resolution agencies need to understand developments in workplace innovation, keep abreast of reward trends and encourage the development of ADR systems, and how these might interact with the state system. 


He raises an old chesnut that has bedevilled industrial relations for decades: “revolving door syndrome”. On this tendency to push claims to the limit, the Gardai dispute being a good example, he says: “There are serious consequences ... from any dilution of the Labour Court as a ‘court of last resort’ when it is used as a stepping stone to further discussions ...”. 


On public service pay agreements, Mr McGinty acknowledges the successes achieved in terms of pay savings and reforms under recent public service agreements. And he agrees that the Government should honour commitments made under the Lansdowne Road Agreement on pay restoration, but he questions the idea of full restoration, because this notion "assumes that the original rates (i.e. pre benchmarking) were appropriate, which they were not”. 


Mr McGinty recently established Stratis Consulting, along with senior partners, Liam Doherty and Brendan McCarthy. He will expand on his views at the forthcoming IRN conference on March 9th.