A 10 percent pay rise over 27 months was part of the recent “Towards 2016” deal thrashed out after tortuous negotiations between Irish Government, union and business leaders. The Irish government favors a “partnership” approach agreeing pay rises with unions and businesses as a way to minimize strikes and high pay demands, as well as to aid economic stability.
“Ten percent a over 27 months is a generous pay agreement and is at the limit of what Ireland can afford,” said American Chamber of Commerce Ireland chief executive Joanne Richardson, warning that some U.S. companies might not be able to afford — or be willing to pay — the national pay agreement.
“U.S. companies employ 100,000 people here but Ireland is a high-cost economy, and after Denmark, the second most expensive country in Europe. We have suffered here a loss in competitiveness of 20 percent over the past three years. We did a survey of U.S. companies here in January, and 80 percent of them said that increased labor costs are the biggest cost item they face,” she said.
“If our cost base is out of line with other countries where tax incentives may be as good or even better then there is a risk to long term foreign investment in this country,” she warned.
She claimed that U.S. companies offered some of the best working conditions in Ireland.
“U.S. companies have been here for quite a number of years and have been to the forefront of industrial relations. Their presence has led to improved pay and conditions right across the workforce and they continue to be recognized as excellent employers. But it is about global competitiveness and company performance. Most U.S. companies are not bound by national pay agreements, and pay increases are based on merit and company performance,” she said.
Richardson argued that that a demand for 10 percent over 27 months could be too much for some companies.
“Irish management will find it difficult to justify that to management in the U.S.,” Richardson warned.
The Chamber has made a submission to the Irish Government warning about the scheme.
Richardson said that Irish Government policy influenced taxes and wages, and that its submission was made as “controlling cost is a major business issue.”
U.S. high-tech companies like Microsoft and Intel have significant operations in Ireland and tend to offer good working conditions to staff through modern campuses and employee incentive schemes such as share options. However, workers in the manufacturing sector could seek to press home a demand for the national pay agreement to be honored.