Presentation of National Minimum Wage (Low Pay Commission) Bill 2015
to Joint Oireachtas Committee on Jobs, Enterprise and Innovation
24 March 2015
Minister for Business and Employment Ged Nash TD
I would like to thank the Committee for affording me the opportunity to present
the General Scheme of the National Minimum Wage (Low Pay Commission)
Bill 2015 this afternoon for the purposes of pre-legislative scrutiny.
The General Scheme of the Bill was approved by Government in January. The
General Scheme, together with a Regulatory Impact Assessment, has been
published on my Department’s website and forwarded to the Committee.
I think it’s fair to say that we have seen a paradigm shift in the economy over
the past few months.
 Unemployment has dropped by a third since 2012, is at its lowest level in
six years and it may dip below 9% over the next twelve months,
 The number of jobs has increased cumulatively by nearly 100,000 since
the low-point of the crisis – 29,100 net new jobs were created last year
alone – and these are mostly full-time,
 The Exchequer deficit at end-February stood at €205 million compared
with €1.7 billion at the same time last year,
 Tax revenue has increased by €925 million – primarily as a result of the
improving economy while the Social Protection bill has fallen by €240
million in line with falling unemployment levels, and
 Our debt servicing costs have fallen by 17.8% over the year.
What these figures illustrate is the success of the Government’s twin track
approach of creating the conditions for job growth and helping people back to
work. The Action Plan for Jobs is accelerating Ireland’s transition to a
sustainable jobs-rich economy while the Pathways to Work programme is
ensuring that as many people as possible taking up work are from the Live
Register.
However, there are too many people still jobless and we are working to build on
the success to date and create full employment within the next three years.
One consequence of the recovery that is beginning to be seen is that workers
feel that this recovery should be reflected in wage packets as well. A return to
wage bargaining is already visible in certain sectors of the economy. In this
regard, IBEC’s recent pay survey found that 57% of companies plan to increase
basic pay in 2015. According to that survey the median pay increase is set to be
2%. Other surveys suggest that this figure might be higher.
Making work pay is a cornerstone of this Government’s agenda and the setting
up of a Low Pay Commission was one of the key commitments in the Statement
of Government Priorities agreed in July last.
Under the provisions of the National Minimum Wage Act 2000 the national
minimum wage can be adjusted currently by Ministerial Order: following a recommendation in a national agreement (Section 12);
 in the absence of such a recommendation, following an
examination and recommendation by the Labour Court on foot of a
request by a substantially representative organisation of employees
or employers (Section 13), or
 unilaterally by the Minister (Section 11), whether or not a
recommendation under section 12 or 13 has been made,
taking into account a number of criteria specified in the legislation.
The ESRI, in its 2006 analysis of the last Labour Court recommendation
proposing an increase to the NMW, concluded that adjusting the minimum
wage by a substantial amount on an irregular basis, with lengthy gaps between
increases as happened in the past, is more likely to have a detrimental impact on
employment and to contribute to uncertainty for employers and (actual and
potential) employees than regular, smaller and fairly predictable rises.
The most recent figures from the Central Statistics Office’s quarterly Earnings
Hours and Employment Costs Survey show that 4.7% of all employees, or just
over 73,000 workers, were being paid the adult experienced national minimum
wage of €8.65 per hour, or less, in Q2 2014.
Throughout the crisis the Government has been committed to maintaining
employment rights and particularly those protecting the most vulnerable
workers in our society. If anything, where changes have been made or new
legislation introduced, they have improved them. On low pay alone, one of the
first actions of this Government was to restore the minimum wage to the level
existing before the last Government cut it by €1 shortly before it left Office.
The Commission, which will be chaired by Dr Donal de Buitléir, was officially
launched on 26th February by the Taoiseach, Tánaiste, Minister Bruton and
myself to operate on an interim administrative basis, and the Commission held
its first meeting the same day.
The principal function of the Low Pay Commission will be, on an annual basis,
to examine and make recommendations to the Minister of the day on the
national minimum wage, with a view to securing that the national minimum
wage, where adjusted, is adjusted incrementally over time having had regard to
changes in earnings, productivity, overall competitiveness and the likely impact
any adjustment will have on employment and unemployment levels.
Alongside examining the National Minimum Wage, the Low Pay Commission
will also be tasked with examining matters related generally to the functions of
the Commission under the Act. This work programme will be agreed by
Government and presented to the Commission in February of each year.
In addition, in the discharging of its function, the Commission will be required
to make recommendations that are evidence-based using a suite of agreed data
sets or, where required, based on bespoke research undertaken at the behest of
the Commission.
This approach draws on that adopted in the UK where, since 1997, the
recommendations of the UK Low Pay Commission have brought about a
progressive increase of the minimum wage that has little detrimental effect on
the functioning of the economy or labour market.
In this context, I would like to express my thanks to the Chairman of the UK
Low Pay Commission, David Norgrove, and his colleagues in the UK working
in this area who, in recent months, have so freely given of their own experience
during the preparatory work undertaken in establishing our own Commission.
The Commission will be statutorily independent in the performance of its
functions. While not provided for in the General Scheme of the Bill, it is
intended that the LPC will adopt a consensus-based approach to its reports and
recommendations.
Work should always pay. But I am also conscious of the need to balance a
basic statutory minimum pay rate that is fair, with one that is sustainable and
which allows employers to continue to create quality jobs.
In this context, a particular function of the Commission will be to ensure that
any advice or recommendations it makes to Government is evidence-based;
utilising agreed data, carrying out research and consultations with employers,
workers and their representatives and taking written and oral evidence from a
wide range of organisations. This is to ensure that any suggested changes to the
National Minimum Wage have minimum adverse impact on employment and
competitiveness.
Alongside this ‘hard data’, the Commission will consult with people – workers
and employers - who are directly affected by the National Minimum Wage.
This real-lived experience will be vital for the Commissioners when deciding on
what the minimum wage rate should be.
The Commission has already commenced its work: submissions were sought
recently and I expect that the Commission will submit its first report by the
middle of July.
The changes proposed in establishing the Low Pay Commission on a statutory
basis are essentially taking the politics out of setting the National Minimum
Wage. It is very much in keeping with the dignity of work agenda I am
pursuing, and complements work such as the Study on Zero Hours and Low
Hours Contracts by the University of Limerick which has just commenced.
The Heads of the Bill are largely self-explanatory and given the limited time we
have today, I do not intend to go through them individually. However, I am
happy to clarify any particular issues which you may wish to raise now – or if
any issues arise today or in the future feel free to contact me or my officials.
Once again, I would like to thank the Committee for undertaking the prelegislative scrutiny on the important Bill and I look forward to hearing the
views of this Committee on the General Scheme which will further inform the
drafting of the Bill itself.
ENDS