Ibec congratulates Leo Varadkar on his election as Taoiseach. We in the business community look forward to engaging productively with him and his cabinet colleagues, in support of job creation in a thriving economy, and ensuring a prosperous society.
While Government focus has, perhaps understandably, been diverted in recent days by leadership changes, it is important now to focus on developments for the Irish labour market and the impact on business.
The Government is currently drafting a Bill proposing to introduce legislation on zero and low hours work contracts. Ibec believes this will be a crude piece of legislation, imposing significant cost and regulatory burdens on all employers to address a problem that is very small in the overall scale of the labour market.
Ibec continues to press for a full and robust regulatory impact assessment because we believe this response is disproportionate; it will, undermine competitiveness, could have significant adverse consequences for employees along with deterring investment and employment growth.
Brexit will inevitably have an impact on the movement of labour between Ireland and the UK so it is important to minimise any effects. Irish firms have invested heavily in the UK, generating an annual turnover there of around €37.6 billion. Irish companies in Britain employ 86,000 people, while UK companies in Ireland employ 73,000. Any change to the ability of companies to move employees freely between both jurisdictions will have a significant impact on Irish business.
We were happy to note last month’s inaugural meeting of the National Skills Council (NSC), marking the final stage in the establishment of a new structure to encourage deeper business engagement with the education and training system.
Finally, a note of congratulations and thanks to Enda Kenny who stepped down this week after six years as Taoiseach. He represented our country with great energy and dignity.
Engaging employers in skills development
Business engagement with the education and training system is enhanced as National Skills Council meets for first time.
Last month’s inaugural meeting of the National Skills Council (NSC), under the chairmanship of the Minister for Education and Skills, marks the final stage in the establishment of a new structure to encourage deeper business engagement with the education and training system. The Council will advise on which skills needs should be prioritised and how they will be delivered, and report on the response of providers to these priorities. The members of the Council are drawn from senior levels in the public and private sector.
Active employer participation in the development and utilisation of skills is one of the main objectives of the National Skills Strategy 2025. This can happen through a number of channels such as influencing the skills development of graduates by means of work placements and curriculum review, upskilling existing staff and supporting knowledge transfer between education institutions and enterprises. While there are pockets of good practice, this engagement is not sufficiently widespread and systematic.
The Department of Education and Skills has also established a network of nine Regional Skills Fora which are designed to provide a cohesive structure for employers and the education system to work together in building the skills needs of their regions. They should help employers better understand the full range of services available across the system, and enhance links between providers in delivering programmes, reduce duplication and inform national funding decisions.
Some degree of misalignment between the supply and demand for skills is inevitable, particularly in the short run. However, the costs of persistent mismatches and shortages are substantial. For individuals, skills mismatch has a negative impact on job satisfaction and wages. For firms, it reduces productivity and increases on-the-job search and turnover, while shortages increase the cost of hiring and hinder the adoption of new technologies.
Training interventions can only be as good as the information about skills needs that underpins them. Therefore the new structure builds on the strengths of the existing arrangements for identification of skills needs. Under a revised mandate, the Expert Group on Future Skills Needs (EGFSN) will continue to carry out research, analysis and horizon scanning in relation to emerging skills requirements at thematic and sector levels. It will report to the NSC. The Skills and Labour Market Research Unit in Solas will provide statistical input and analysis.
Ireland has a well-developed skills forecasting architecture. The main challenges have centred on linking this analysis to effective policy interventions. The recent establishment of the National Skills Council and the Regional Skills Fora are a welcome first-step in seeking to address this deficit.
The gender pay gap – it’s not that simple!
Female and male earning differences should not be seen as merely unequal pay for equal work.
The gender pay gap in Ireland is 13.9% according to Eurostat, less than the EU average of 16.7% but still a significant gap. Reporting this gap can lead to concerns that women are “working for free” one month of every year or that women are earning less simply by virtue of being born female. The reality is it’s not that simple.
The gender pay gap refers to the difference between what is earned on average by women and men, based on average gross hourly earnings of all paid employees. It compares the pay received by all working women and by all working men; not only the pay of women and men in same or similar jobs, with the same working pattern or with similar competencies, qualifications or experience, but all the men and all the women working in an organisation. It does not indicate or mean discrimination, or an absence of equal pay for equal value work.
The reasons for a gender pay gap can be multifaceted and tend to cover four key, interrelated areas.
1) Gender segregated labour market
By and large the gap is a reflection of the persistent gender segregation of our labour markets. A number of sectors and jobs continue to be dominated by men or women, which is first and foremost due to traditional gender roles in society and the different educational and career choices of men and women. For example, according to the OECD, the low proportion of women in science, technology, engineering and maths (STEM) fields of study and employment makes a significant impact because graduates of these fields are in high demand and as a result the related jobs tend to be highly paid. This occupational segregation thus lends itself to a gender pay gap.
2) Balancing work and family life
Women’s ability to participate in the labour market is constrained by the fact that they spend more time on unpaid work, four times as much on care work (time spent to care for a child or another adult) and twice as much on household work, than men, regardless of the employment status of partners making them less available for participation. Career gaps can result in a “motherhood penalty” occurring due to interrupted employment, detachment from the labour market, possible deterioration of skills and networks, and loss of opportunities for training, promotion and salary increments that would be gained while in employment. These can contribute to a gender pay gap and a lack of gender balance in decision-making roles.
3) Availability of quality, affordable childcare facilities and out-of-school hours care
The cost of early childhood care and education in Ireland for parents is among the highest in Europe; is a barrier for families across a range of salary levels not just those on lower incomes and represents the largest additional household cost associated with taking up employment.
In addition to affordability, the availability and quality of childcare may collectively feature in a parent’s decision to work or return to work. Currently in Ireland, despite an increase in investment in this area, the service provided in early childcare and education is not consistently appropriate for the children or parents looking to avail of it. It occurs at pre-school age and throughout school going years including logistical arrangements for getting children to out-of school hours care. Again research tells us that many decisions to come out of the labour market to deal with such challenges for a period of time often fall to the mother.
4) Over-representation of women in part-time roles
While working part-time can reflect personal choices, the high share of female part-time employment may also stem from multiple constraints, including family and care-related reasons. Research on gender pay gaps reports that one of the main reasons for the gap is due to the issue of women having a lower level of human capital and working fewer hours. While educational attainment is often higher amongst females, it does not offset the loss of work experience. Where females are working reduced hours this ultimately equates to less experience, reduced benefits value (pensions/bonuses which are usually linked as a percentage of basic salary) and therefore can generate an earnings gap that is greater that their male counterparts.
So how do we tackle the gender pay gap?
The proposed transparency measure of published wage surveys is not a useful mechanism for tackling gender pay gaps as it oversimplifies a complex issue. It not only puts an administrative burden on employers but may report a gap where justifiable reasons are at play rather than discriminatory behaviour. It may be a useful diagnostic tool to start conversations in the organisation but it will not address or solve the fundamental issues causing the gender pay gap.
The debate needs to be focused on the real issues and the structural and cultural changes we need to make as a country if we are serious about tapping into the full potential of our male and female talent. Some of those changes include:
- Addressing the gender norms and stereotypes that remain regarding educational subject choices and career decisions of men and women. To see real progress, we need to challenge occupational stereotypes by encouraging more women into male dominated industries and investing in careers advice that provides real information and options to students. This requires interventions in teacher training, career guidance and raising awareness in parents and students alike.
- Changing the socialisation of men and women, boys and girls regarding what a successful male or female looks like. The current model, which even in dual career couples sees women as the primary caregivers, fails to enable either gender to act outside gender norms without a backlash. In reality the backlash towards men is even more severe as a female temporarily stepping back from her career progression for a caring role is still seen as an acceptable or good female, whereas men report greater pressure and a narrower definition of masculinity, and if they step back believe often they are viewed negatively by other men, a “lesser man”. This needs to begin by addressing gender stereotyped norms with children and young people.
- Addressing the provision of high-quality, available, affordable childcare facilities, out of hours care arrangements and other public services should be strengthened by government and public authorities. There are a number of specific interventions required to tackle costs, availability and quality within the early education and childcare sector.
- Challenging the experiences of career returners and ensuring that the period of time they have stepped away from their career does not relegate them to a position much lower than they left or find them unable to recover from such a break. Career returner programmes may bridge the gap for individuals and organisations to address this challenge.
 Employers have a key role to play in eliminating unjustified pay inequalities and a responsibility to comply with the legislation on the subject where there is ample redress if discrimination has occurred.
 For further details Ibec (2016) Labour Market Participation of Women.
 Employment and Social Developments in Europe Report 2013 — ESDE 2013: pp 185
 The Economist (June/July 2017), The Man Trap. Pp 90-95.
 Ibec (2016) Labour Market Participation of Women.
Zero and low hours; proposed legislation is disproportionate
Government proposals to introduce bands of working hours will deter investment and employment growth.
The government is proposing to introduce legislation in response to a University of Limerick report on zero and low hours working. Ibec believes this proposed legislation is disproportionate in its impact and cost on Irish businesses.
The University of Limerick report acknowledged that there is little evidence of zero hours contracts being used in this jurisdiction and in fact, only about 2.6% of the total labour market is actually working on a constantly variable part-time basis. The report provides no breakdown indicating what percentage of these workers are happy with their current arrangements and those who would elect to work more hours/regular hours if they were available.
There are five core legislative proposals as follows:
- A requirement to give five core terms of employment on or by the fifth day of employment
- Potential criminal conviction for failure to provide the core terms
- Proposal to create a minimum floor payment and to limit the use of zero hours contracts in certain circumstances
- Create a new provision legislating for bands of hours
- Expands the prohibition on penalisation clause in the Working Time Act, 1997
Normal length of working day and week
The proposed legislation requires that the employee must be notified by the fifth day, of what the employer reasonably expects will be the length of the normal working day and the normal working week. This will prove extremely difficult if not impossible for many employers. In education, for example, while efforts are made to finalise timetables well in advance of the academic year, late CAO offers in September often present a practical challenge in setting hours with any degree of certainty. Likewise, in retail, hospitality and healthcare, given the nature of the work and the unpredictability of consumer and service user demand, employers will often not be in a position to know the length of an employee’s ‘normal’ working day and week.
Compounding the very real issues that can arise in giving that information, is the proposal to make it a criminal offence for an employer, without reasonable cause, to fail to provide the core terms, or deliberately misrepresent the information required, within one month of commencement of employment.
It is also proposed to introduce a number of ‘bands of hours’ into which all employees may be placed reflecting their average weekly working hours. These bands may apply to every employee whether full or part time, hourly paid or salaried workers. Every employer in the State may be under an obligation to determine into which band of hours an employee should be assigned and thereafter to monitor their working hours to ensure accurate records are kept for each relevant period.
An employee whose contract does not reflect the number of hours normally worked in a week, shall after the reference period of 18 months be entitled to be moved to the next higher band of hours. There are grounds for an employer to refuse a request to move to a higher band but they are limited and ultimately depend on the ability to accurately demonstrate hours worked. As any employee is entitled to request a review of their band of hours within each reference period and the employer must respond within 2 months, it is clear that the administration cost alone will be extremely burdensome for many businesses.
The proposed legislation provides for an increased minimum floor payment for each occasion a worker is called into work and then sent home. That payment will be at three times the national minimum wage - €27.75. It is further proposed to prohibit zero hours contracts, except in cases of genuine casual work or emergency cover or short-term relief for that employer. This will have serious adverse implications not just for employers in the most vulnerable sectors of society but service users, including the intellectual disability and care in the community sectors.
Overall, this is a crude piece of legislation, imposing significant cost and regulatory burden on all employers to address a problem that while very real, is also very small in the overall scale of the labour market. Ibec continues to press for a full and robust regulatory impact assessment as we believe this response is disproportionate, will undermine competitiveness, will have significant adverse consequences for employees and will deter investment and employment growth. We need to rethink an approach that penalises every employer for the poor practice of a small minority.
Brexit, the Common Travel Area and the Labour Market
The UK and Ireland’s special arrangement is important to the economic prospects of both nations.
The United Kingdom and Ireland have shared special arrangements in relation to travel since the Irish Free State was established in 1922. Although usually referred to as a single entity, the Common Travel Area (CTA) is in fact a collection of legislative measures dealing with immigration, residence and citizenship. It is a product of the unique cultural, social, economic and political history of both countries. These measures must be reaffirmed by both the Irish and UK Governments post-Brexit.
On a wider scale, neither Ireland nor the UK are members of the Schengen travel area and both countries currently operate border checks on people travelling from other EU Member States. Both countries also operate reciprocal arrangements in relation to restrictions on travel and entry to persons who do not have an appropriate visa or other permission to enter the other’s territory. There is no clear reason why such arrangements could not continue to apply post-Brexit.
The CTA arrangement is recognised in Protocol 20 of the Treaty on the Functioning of the European Union, which provides that Ireland and the United Kingdom may make arrangements between themselves as to travel arrangements within the CTA. The 26 other Member States must also reaffirm that recognition in any redrawing of the EU Treaties post Brexit.
A number of Irish and UK companies have offices or subsidiaries in the other jurisdiction. The annual turnover of Irish owned foreign affiliates in the UK in 2014 was €37.6 billion, some 37.9% of the total turnover of all Irish owned foreign affiliates. Direct investment in Ireland from the UK in 2014 totalled €36.9 billion. Irish companies in Britain employ 86,000 people, while UK companies in Ireland employ 73,000. Therefore, any change to the ability of companies, particularly multinationals, to freely move employees between both jurisdictions – even on a day to day basis to attend meetings – may have a significant impact.
Of further concern is the possibility that the United Kingdom may engage in a realignment of employment regulations following its separation from the European Union. Such changes are contemplated by the UK Government’s White Paper on Brexit and may make that jurisdiction a more attractive one for multinational companies to invest in and grow their businesses if they are precluded from travelling freely between both.
In light of these potential risks, it is vital that Ireland maintains its competitiveness and resists the urge to over-regulate the workplace – a trend currently on display in the multitude of Private Members Bills on employment related issues being put before the Oireachtas. The Irish Government must continue to advocate Ireland’s unique position in a post-Brexit Europe, in particular in relation to the travel and residency benefits that Irish and UK citizens currently enjoy because of both nations’ shared history. To ignore that special arrangement’s importance to the UK and Ireland will succeed only in damaging the economic prospects of both nations.