PAY TALKS between the Government, unions and employers resume today with the emphasis switching to the public service. While the overall terms of the agreement are expected to be similar to those on private pay, the Government will be trying to contain any potential surge in public sector pay next year.
Public sector pay is already due to rise by nearly 5 per cent as a result of carry over restructuring under the Programme for Competitiveness and Work. The Government wants to defer any further increases until the end of 1997.
Public service managers are wary of local bargaining clauses and will want any new clause for the public service to contain provision for measuring the real value of any productivity conceded by unions.
Although successful agreements were made with unions representing higher grades in the Civil Service, local authorities, health boards and some semi state companies, there are many areas where differences remain and potentially damaging strike action is pending. The most notable are the disputes involving 40,000 teachers, 26,000 nurses and 2,000 employees of FAS, the State training agency.
Public service negotiators will also be arguing that the more that is conceded in this area, the less will be available for tax cuts.
However, the chairman of the talks, Mr Paddy Teahon, has already said that after tax cuts, the increase in real take home pay for most PAYE earners will be around 12 to 14 per cent. This suggests that even if a comparatively generous deal is done in the public service, cuts adding at least 4 per cent to net income should be achievable.
The parameters of the private sector deal, on which the public service arrangements will be based, were concluded at 7 a.m. on Saturday, after 20 hours of talks.
The terms agreed saw a slight improvement in the terms of the package for PAYE earners. The unions have secured a cumulative increase of 9.25 per cent, close to their 10 per cent target. The local bargaining element - the terms of which have still to be finalised - was kept at 2 per cent.
The PCW increases were worth 8 per cent over three years but contained no local bargaining clause. However, some workers received increases from local bargaining negotiators that were "hung over" from the previous national agreement.
The new local bargaining clause is expected to be more flexible than that in the Programme for Economic and Social Progress. It will reflect improvements in a company's profitability and competitiveness. It could result in some workers receiving considerably more in real terms than 2 per cent but others might get less.
Employers can look forward to the prospect of securing industrial peace into the start of the next century in return for increases that will only cost 0.5 per cent extra in terms of straight increases to the PCW.
In cumulative terms, the new agreement will add 1.4 per cent to pay. Employers who do not have to concede local bargaining increases because of inability to pay will only have to give increases of 7.25 per cent under the new agreement.
Given continued high growth rates, the competitiveness of the Irish economy should not be undermined by the deal. During 1997, pay rates in the Republic will rise by only 2.5 per cent, compared with an estimated 3.5 per cent in Britain.
The real test of the new agreement will probably be in how much employers are prepared to concede in real terms to the unions in areas such as partnership and ensuring employees benefit in tangible terms from increased profitability.
The private sector pay deal is underpinned by the Government strategy of making at least £900 million available in tax cuts. That is why today's talks are so crucial. If an agreement is not reached on public service pay, or is reached on terms that reduce the value of the cuts below 4 per cent or 5 per cent in the life of the new agreement, then the private sector agreement will also be undermined.
Originally the Irish Business and Employers Confederation sought a 39 month agreement, with the first of a series of national pay increases deferred until April 1997. It falls due to most private sector workers in January. As compensation, workers were to receive a £100 lump sum, a measure weighted towards the lower paid.
Ironically, this created huge potential anomalies when it came to applying the terms to the growing numbers of atypical employees in the workforce. Instead, both sides eventually agreed to bring forward the first 2.5 per cent rise to January.
As a trade off the Irish Congress of Trade Unions agreed that the final 2.5 per cent increase due at the beginning of 1999 be broken down into a 1.5 per cent increase in early 1999, and a 1 per cent increase after nine months.
The terms of the second year of the agreement, providing for a 2.25 per cent increase at the beginning of 1998, and up to 2 per cent through local bargaining in the second half of the year, remained unchanged.
The phases provide for increases totalling 9.25 per cent (including local bargaining), worth 9.65 per cent in cumulative terms over 39 months. The PCW increases totalled 8 per cent, worth 8.25 per cent in cumulative terms over 36 months. Some workers also received up to 3 per cent in local bargaining deals which were not concluded under the Programme for Economic and Social Progress.