More than 20pc of employers planning wage hikes next year
IBEC still warns of tough times for staff
Published 19/07/2010 | 05:00
THE worst may soon be over for workers as one-in-five employers plans to give pay rises next year.
The Irish Business and Employers' Confederation (IBEC) has revealed that 22pc of bosses will boost their employees' wages in 2011 -- but the majority still intend to freeze pay.
The coming months will, however, remain tough as 15pc of firms plan to cut salaries this year, with the overall pay bill forecast to drop 3pc by the end of 2010.
Almost three-quarters of bosses intend to impose pay pauses this year, but this is predicted to drop to 65pc by next year.
Overall, pay is expected to rise during 2011 by a modest 0.3pc -- the first increase in the last two years.
This renewed optimism among employers is predicted despite a warning by the International Monetary Fund last week that wages needed to fall further if Ireland wanted to improve its competitiveness.
But IBEC said next year's pay rises would be much lower than in other countries, and that labour costs would continue to decline as workers do more for less -- meaning that employers' labour costs would not be affected by the modest rise in wages.
The planned pay increases will buck the trend of the last two years, when the majority of employers chose to freeze wages and defer payment of the national pay deal.
However, it is unlikely that public sector workers will benefit from increases as their pay, although safe from cuts, has been frozen until 2014 under the Croke Park deal.
IBEC said exporting and foreign direct investment companies were the ones most likely to award the increases, while struggling sectors like retail would freeze pay.
"It will be the first time in the last few years that employers are contemplating pay increases," said Brendan Butler, IBEC director of international affairs.
"It is positive given that the pay bill was down by 9.8pc last year, and will be down 3pc this year.
"It reflects a little bit of confidence coming back although the timing is not right for a new national pay deal as there is still too much uncertainty," he added.
The pay predictions are made in a new IBEC document that aims to attract investors, called 'Ireland as a place to do business'.
It says labour costs have plummeted in the last two years, and that other factors -- including the flexibility of the workforce and high education levels -- make the country attractive for business.
The document says the European Commission estimates that labour costs fell by close to 3pc in Ireland last year, at a time when they rose in most EU countries.
It says the commission forecasts that the overall fall in labour costs will be 9pc between 2008 and next year.
Pay cuts were not widespread across the private sector during the recession, although companies reduced their pay bills by cuts in bonuses, shift and overtime rates -- or job losses.
A minority, or a quarter of firms, cut basic pay rates and the average decrease was 12pc last year, while the average drop across all companies was 2.4pc, according to IBEC.
In the public sector, wages dropped by an average of 14pc when the Government imposed a pension levy and €1bn pay cut.
The IBEC document points out that the economy is out of recession and that energy, housing and rental costs are falling along with the cost of living.
It also notes that the country still has a competitive 12.5pc corporation tax rate.
Meanwhile, Labour Affairs Minister Dara Calleary urged unions and employers to be more flexible when it came to agreements that set legally-binding minimum wage rates.
He said both parties needed to recognise they were going through an unprecedented economic crisis.
The minister said he would consider an 'inability to pay' clause for employers who can prove they are in temporary financial difficulty.