Talking Point: Pay rises before 2013 are unrealistic
Brendan McGinty, Irish Business and Employers Confederation (IBEC) director of industrial relations, examines the results of the organisation's latest pay survey.
This week IBEC published its latest pay survey for the fourth quarter of 2011, which found that 74 per cent of companies will either freeze or reduce basic pay rates in 2012. While some companies will hire over the coming months, pay expectations need to reflect current economic realities; pay rises in 2012 are unrealistic.
Our pay survey of more than 400 companies found that more than two-thirds (69 per cent) of companies intend to apply a pay freeze for 2012, while about 5 per cent expect to reduce basic pay, by a median of 9 per cent. Across all respondents the average expected change to basic pay rates is projected at +0.4 per cent.
Almost a quarter (23 per cent) of companies expect to increase basic pay rates, by a median of +2 per cent, with more than half (58 per cent) of these expecting improved productivity, seven out of ten (72 per cent) improved processes, just under half (48 per cent) increased workforce flexibility, and 65 per cent expecting new product or service development.
Two out of five companies (41 per cent) expect their total pay bill to stay the same in 2012, with one in three (30 per cent) expecting their total pay bill to increase, by a median of +2.5 per cent. A quarter (24 per cent) of companies expect their total pay bill to decrease by a median -7 per cent.
Job protection and creation remains the priority for most businesses. This means pay restraint nationally and an unwavering focus by government on restoring competitiveness. Companies are focused on getting costs back in line with our trading partners. This is vital if we are to restore our economic fortunes.
Recent EU data shows that Ireland was the only country to register a drop in hourly labour costs of 1.1 per cent last year and our inflation rate at only 1.7 per cent is the second lowest in the eurozone, but much more needs to be done.
Wage levels remain about 15 per cent higher than the EU 15 in 2011. Inflation is set to increase next year following Budget 2012 decisions to reduce the redundancy rebate and abolish employers PRSI relief on pensions. These decisions will increase labour costs and undermine our efforts to regain competitiveness.
Many companies operating in the domestic economy are still struggling to survive. Alongside the current plan for austerity, we need a clear strategy to grow the economy and to sustain jobs. Ireland has lost 300,000 jobs over the past four years and we have a shockingly high unemployment rate. This is where our efforts must focus.
