Minimum wage: €1 pay cut only likely to affect new employees
Published 25/11/2010 | 12:05
THE minimum wage is to be cut by €1 to €7.65 per hour but the move is only likely to affect new employees.
Employer groups last night said their members were unlikely to slash the pay of workers on the existing rate.
IBEC director general Danny McCoy said struggling businesses might try to renegotiate hourly rates down to the new level but expected it was most likely to be introduced for new recruits.
ISME agreed that cutting existing pay was unlikely and there could be legal difficulties due to protections for employment contracts under the Payment of Wages Act.
The Government is expected to introduce the cut – the equivalent of a 12pc reduction for someone on the wage – shortly after next month’s Budget.
About 47,000 workers are currently understood to be earning the minimum wage.
And there is a new threat to other legally binding minimum-wage rates for thousands of workers across a variety of industries, including construction, electrical, hairdressing, and catering.
The new plan says a review to “eliminate anomalies” in Registered Employment Agreements and Employment Regulation Orders will take place within three months.
Finance Minister Brian Lenihan's four-year recovery plan described the current minimum wage rate of €8.65 per hour as a “barrier” to younger, less-skilled workers entering the labour force, and as a contributory cause in small firms going out of business. The current rate, it added, was the second highest in the EU in “absolute terms”. Barrier
“Our circumstances have changed dramatically in the last three years,” the plan added. “Price levels have reduced and earnings have adjusted downwards to help preserve jobs. A reduction in the minimum age level – as proposed by the OECD – can also be expected to remove a barrier to job creation.”
But the cut in the minimum wage, which had been widely anticipated, was heavily criticised last night.
The Migrant Rights Centre said it “will place those with the lowest incomes, including migrant workers, in an impossible situation”.
Mandate general secretary John Douglas said the minimum wage was introduced in recognition of the “huge wage inequality” that exists in this country.
“Now, more and more households are struggling to get out of debt,” he added. “Every person in Ireland knows they will be punished for the greed of a few, and the mismanagement of our economic affairs.”
Sean Healy, of Social Justice Ireland, said it would mean €40 a week less for the lowest paid in society, and was “unjust and unnecessary”.
However, the cut was cautiously welcomed elsewhere.
“The decision to reduce the social welfare budget and minimum wage, while regrettable, is unavoidable, due to the negative impact on the labour market,” Mark Fielding of ISME said.
The Irish Hotels Federation said the reduction would be of “major help” to the struggling sector.