FULL RECOMMENDATION
INDUSTRIAL RELATIONS ACTS, 1946 TO 1990 SECTION 26(3), INDUSTRIAL RELATIONS ACT, 1990 PARTIES : CONSTRUCTION INDUSTRY FEDERATION (CIF) - AND - IRISH CONGRESS OF TRADE UNIONS (ICTU) DIVISION : Chairman: Mr McGrath Employer Member: Mr Brennan Worker Member: Ms Ni Mhurchu |
1. Dispute concerning the application date of an agreed pay increase.
BACKGROUND:
2. The dispute concerns the timing of the payment of an agreed wage increase due to construction craft workers and operatives. The increase, which amounts to £7.39 per week for craft workers and pro rata for operatives, was negotiated between the Construction Industrial Committee of ICTU and the CIF, in the context of Annexe 3 of the Programme for Competitiveness and Work (PCW), which provides that:-
"The parties agree to review, during the final phase of this Agreement, the application, implementation and operation of Labour Court Recommendation No. 13340 (10 July 1991) and the Working Party's Report on Pay Rates for Construction Craft Workers and Operatives".
Approximately 70,000 workers are affected by the dispute, comprising 40% craft workers and 60% non-craft workers. The Unions claim that the increase should apply from the 1st of April, 1997. The CIF's position is that the increase should not come into effect until the end of 1998. The parties requested that the Court investigate the matter of the application date of the increase and a Court hearing took place on the 26th of June, 1997, in accordance with Section 26(3) of the Industrial Relations Act, 1990.
ICTU's ARGUMENTS:
3. 1. The employers contend that a long period of notice of the proposed increase is required so as to enable them to provide for it in future tenders. The unions do not accept that this approach is valid or reasonable. The commitment to review the industry rate is set out in PCW, which was concluded in January, 1994. While the level of increase which might be provided in the review could not have been anticipated, the fact that a further increase would become due, during the final phase of the agreement, was clearly evident. Moreover, having regard to the background against which this commitment was provided and the context in which the review was to be carried out, the adjustment which it would provide could easily have been anticipated and incorporated into tender prices, if this was considered necessary. In that regard, the unions had sought to agree the amount in advance of the commencement of the final phase of PCW but the employers had resolutely refused to conduct the review before the commencement of the period prescribed in the Agreement.
2. As was the case with the last special increase arising from LCR13340, the proposed increase will only apply to those workers in the industry who are in receipt of basic rates only. Given the buoyant nature of the construction industry at the present, the vast majority of workers are in receipt of enhanced payments and in consequence the impact of this increase on overall wage costs within the industry will be minimal. Following the application of the last special increase, which represented a 28% increase in basic rates, the CIF suggested (in August 1993) that there was a resultant increase in overall pay costs of 8%. If that level of increase was correct, the increase now proposed (which represents a 3% increase on basic rates) should result in an overall increase of only 0.7% in a full year.
3. An examination of Central Statistics Office data of average earnings in the construction industry would suggest that the last special increase had little if any impact on actual overall pay-costs (details supplied to the Court).
4. Despite the stability in average earnings, the buoyancy in the industry has also led to a significant increase in building costs. It is estimated by the Royal Institute of Architects in Ireland that tender prices have been increasing over the past two years by approximately 10% per year. On this basis employers are more than capable of absorbing whatever increased wage costs might result from the application of this increase.
5. The Labour Court recently investigated a dispute between the Electrical Contractors' Association, which is a constituent body of the CIF, and TEEU concerning the pay of electricians in the construction industry. In its recommendation the Court proposed that an agreed increase of £33.00 per week should be applied with the first phase of £14.50 retrospective to 1st of January, 1997. This has been accepted by the employers. The circumstances of electrical contractors, with regard to tendering, is no different to that of other construction firms. The cost of the electricians' settlement would be significantly greater than that for mainstream construction workers and if these costs can be absorbed retrospectively there is no valid basis for suggesting that the minimum cost increases which would result from the full concession of the unions' claim in this case could not likewise be absorbed.
6. In providing that the review of wage rates was to take place during the final phase of PCW it could reasonably be inferred that any resulting adjustment in rates would take effect during this phase also. This is particularly the case having regard to the modest level of the increase proposed. Additionally, the Unions agreed to a pay pause at the commencement of PCW and to a longer Agreement than in the rest of the private sector in consideration of the commitment to review the basic rate at the end of the Agreement. These variations were accepted in anticipation of the additional increases being applied during the currency of the extended Agreement.
CIF's ARGUMENTS:
4. 1. Most, if not all, construction work is now carried out under fixed price contracts and employers will not be in a position to recover this increase. Coming on top of two phases of PCW and the first phase of Partnership 2000, this increase will be far in excess of anything allowed for by employers for 1997.
2. The increase represents a rise of 3% and although it will be confined to those employees in receipt of the basic rate only, the impact across the industry will be uneven. In some sectors, employers will face an increase in labour costs of the full 3%.
3. Basic wage rates in the industry are already set to rise by 5.4% in 1997. A further 3% increase is unjustified when set against the background of record low inflation with consumer price increases averaging 1.4% per annum.
4. An examination of basic rates alone does not give a true picture of real earnings in the construction industry. For example, even craftsmen on the basic rate are paid meal and tool allowances and most of them are in receipt of at least an hour a day travelling time as well. When these allowances are taken into account a different picture emerges and it can be seen that the real minimum earnings in the industry for craftsmen are about £298.00 per week.
5. Employers became aware of the amount being claimed by the unions barely two months ago which gave insufficient time for the cost to be included in the vast majority of contracts, many of which will run to the end of next year.
6. The anomaly increases agreed in 1991 were negotiated within the context of the local bargaining clause of PESP. Similarly, this present increase should be implemented within the time scale set out in the local bargaining clause of Partnership 2000, i.e. not earlier than six months following the commencement of the second phase which, in the construction industry, would mean that the increase would apply at the end of 1998.
7. This increase arises directly from an analogue agreement in local authority employments through which craft rates are kept broadly in line with the average rate in a number of outside employments. In those employments, increases have been agreed from time to time in excess of those provided for by national wage agreements in return for concessions from the employees in terms of improved productivity, changes in work practices, reduced manning etc. The concession sought in return for the increase is that it be implemented at the end of 1998.
8. Competition in the construction industry is now intense with many CIF members having to compete with firms from Northern Ireland who do not pay the rates and have the conditions of employment provided for in the Registered Employment Agreement. Also, an increasing number of contractors within the state do not comply with the terms of the REA. While there have been significant increases in activity in the construction industry, contractors are, at present, completing projects tendered for last year at very tight prices. In fact, there has been only a marginal increase in profit before tax for construction companies, between 1.5% and 1.9%. These increases are based on independent research in the past year into the most recent published accounts of the 34 largest companies filed in the Companies Office, including main contractors and civil engineering contractors.
RECOMMENDATION:
The Court, having considered all of the issues raised by the parties in their oral and written submissions, recommends that the £7.39 be paid with effect from the 1st of September, 1997.
Signed on behalf of the Labour Court
Tom McGrath
14th of July, 1997______________________
M.K./S.G.Deputy Chairman
NOTE
Enquiries concerning this Recommendation should be addressed to Michael Keegan, Court Secretary.