Ireland: Benchmarking report to solve public service pay problems?
July 2002 saw the publication of the report of the public service benchmarking body, established to draw up fair comparisons between the pay of public service workers and similar groups in the private sector. The report recommended public sector pay increases averaging 8.9%. Payment of the awards will be a central element in the negotiation of a new centralised pay agreement after the expiry of the current deal, which is part of the three-year Programme for Prosperity and Fairness.
The central aim of the public service benchmarking body (PSBB), established two years ago under Ireland's current national-level social partner agreement, the Programme for Prosperity and Fairness (PPF), was to establish fair comparisons between the pay of public service workers and their counterparts in the private sector.
Issued on 1 July 2002 (Ireland: Public sector pay benchmarking body issues report), the PSBB's report recommended a wide range of pay increases - from 2.5% to as high as 25% - averaging out at 8.9%. The increases come on top of cumulative "cost of living" pay rises for all unionised workers, public and private, worth between 18% and 21.5% under the pay agreements contained in the PPF.
A quarter of each of the PSBB's pay recommendations is to be backdated to 1 December 2001. However, actual payment of this 25% element is contingent on a negotiated agreement on the phasing-in of the remaining 75% of the awards. When fully implemented, the pay rises are expected to add €1.1 billion to the government's annual public sector wage bill.
Once the report was published, the PSBB formally ceased to exist. In effect, however, the PSBB has been placed in "cold storage" and may resume its work if the social partners decide that benchmarking represents the best way forward in relation to public service pay determination in the future. It is noteworthy that the extensive research material commissioned by the PSBB will not be made public on the grounds that the information required for the research was given voluntarily and confidentially by private sector employers.
The basis of the awards is that they are intended to compensate public servants for additional pay movements in the private sector that have been outside of the general increases agreed under the current series of three-year national agreements. In particular, pay in the private sector was perceived to have moved ahead of the basic increases included in the two most recent agreements, Partnership 2000, which ran from 1997 to 2000, and the current PPF.
The levels of the awards themselves are not negotiable and therefore the only elements of the PSBB report that are negotiable are precisely when the recommended increases will be paid and whether trade unions will have to concede productivity improvements. Negotiations between the public service unions and the government on the phasing of the awards are already under way. These talks, which are expected to take some time to conclude, are likely to run parallel to wider talks between the social partners on a new national programme to replace the PPF, which expires at the end of this year. On 17 September, the Irish Congress of Trade Unions (ICTU) formally endorsed talks on a new national agreement with the government and employers - this issue p.8.
The immediate response of the Public Services Committee (PSC) of the ICTU - the umbrella body for all public service unions - was to seek the earliest possible "implementation" of the various pay recommendations. Peter McLoone, chair of the PSC and general secretary of the key public sector union, the Irish Municipal Professional and Civil Trade Union (IMPACT), said that the main challenge facing the public service trade unions is to have the report's recommendations implemented as quickly as possible. Meanwhile, Des Geraghty, general secretary of Ireland's largest trade union, the Services Industrial Professional and Technical Union (SIPTU), which also has the largest number of public service union members, broadly welcomed the report.
However, there has also been some negative reaction to the report. The main nursing union, the Irish Nurses Organisation (INO), expressed its disappointment at the findings. Importantly, however, the INO has not rejected the report. Meanwhile, one of the three teachers' unions, the Association of Secondary School Teachers in Ireland (ASTI), rejected the benchmarking process entirely before it even started and disaffiliated from the ICTU. However, despite a series of industrial actions in 2001 (which were largely ineffective) ASTI has made little headway by adopting this "go it alone" stance.
Prime minister Bertie Ahern noted the "horrendous" cost of implementing the report's findings, warning that if any one group thought that they could do better outside the benchmarking process, "the best of luck to them, they won't be getting it from this government". A key aim of the government will be to negotiate a phasing-in arrangement that minimises the impact on the public finances.
Background - the Priestly report
The benchmarking process was unique in its scope in that it covered all public servants at the same time, with the exception of senior civil servants, members of the judiciary, chief executives of state companies and elected politicians. The latter group of "top people" are covered by a separate independent process, known as the Buckley review.
For decades, the method of public service pay determination in Ireland was based on the report of the British Royal Commission into civil service pay in 1955, known as the Priestly Commission. The thrust of this approach had been that public servants' pay should be set primarily by reference to the pay of private sector workers performing broadly similar work. Where this was not possible, it was established that pay should be based on internal relativities with other workers in the same employment.
This approach to public service pay had operated under the umbrella of what was known as the conciliation and arbitration system. In the mid-1990s, however, the national agreement known as the Programme for Competitiveness and Work (PCW), which ran from 1994 to 1997, introduced a new element by making additional increases available on a grade-by-grade basis in exchange for specific new flexibilities or productivity improvements. This development, which became known as "PCW restructuring", was regarded by all sides as a failure as it produced widely different outcomes and led to a degree of industrial unrest not witnessed since Ireland embraced social partnership in 1987, in the form of the first such national accord, the three-year Programme for National Recovery (PNR).
The PSBB report
In order to return to a more orderly and scientific system of public service determination, it was agreed under the current PPF agreement to establish the PSBB. Uniquely, the PSBB was to make an overall assessment of the rates of pay of almost all public servants at the same time and against the background of the same information and criteria.
Chaired by a high court judge, Justice Quirke, the PSBB included six individuals with wide industrial relations experience either with trade union or employer bodies, as well as two independent members: Billy Attley, former general secretary of Ireland's largest trade union, SIPTU; Phil Flynn, former president of the ICTU; John Dunne, former director-general of the main employer's body, IBEC; Paddy Mullarkey, former secretary general of the department of finance; Jim O'Leary, chief economist with Davy Stockbrokers; and Maureen Lynch, management consultant. (Jim O'Leary resigned from the Body before it issued its final report, citing personal reasons. However, subsequent articles published by Mr O'Leary in the Irish Times gave credence to some media speculation that he would have found it difficult to justify backing the final report.)
The final report was issued on 1 July 2002 - for details of the PSBB's brief and its key recommendations, see the box below.
"Coherent" comparison
According to the PSBB, the traditional method of setting the pay of the majority of public service grades by means of relativity with a few pivotal grades, had "stretched the underlying principles of pay determination well beyond what was envisaged, and created ongoing problems in the determination of public service pay". It was in this context that, as the PSBB observed, the public service employers and trade unions committed themselves "to an alternative approach (ie benchmarking), which will be grounded on a coherent and broadly based comparison with jobs and pay rates across the economy."
"Culture" characteristics
In its report, the PSBB observed that the public and private sectors have different cultural and employment characteristics, including pay determination systems, non-pay benefits, career structures and pay progression. Other differences include:
In addition, the PSBB noted that a number of recruitment and retention problems "point to deficiencies in personnel analysis and planning, rather than simply issues of pay." Further, there is "excessive reliance" on overtime and on-call working.
Under the requirement to have regard to "national competitiveness", the PSBB said that it has been "an overall concern of the PSBB that the public service should not lead the private sector in matters of reward." At the same time, however, a central objective of the benchmarking process, as required in the terms of reference, is the "need to ensure equity between employees in the public service and those in the private sector".
Crucially, the PSBB said that these principles have been "a major element in the formulation, within the overall context of the PPF, of a cohesive overall set of recommendations on public service pay which has regard to the full range of considerations referred to in the PSBB's terms of reference." In light of this, "There is no basis for any follow-on claims from private sector employees arising out of the PSBB's recommendations."
Modernisation and change
Noting a reference in the PPF to the desirability of linking public service pay awards and the delivery of public service modernisation, the PSBB strongly recommended that implementation of the pay awards "should be made conditional (apart from one-quarter of any award to be implemented with effect from 1 December 2001 as agreed between the parties) upon agreement on relevant modernisation and change issues at the appropriate local bargaining levels."
The PSBB also observed that its recommendations have the effect of "severing all previous pay links and establishing new absolute levels of pay for each of those grades." No benchmarked grade may receive a further pay increase as a consequence of the PSBB recommendations as they affect any other grades, "whether benchmarked or not".
Bowing to pragmatism
The PSBB's decision, in general, to award more generous increases to senior/supervisory and managerial jobs was in keeping with the approach adopted by the Buckley report on the pay of senior civil servants, members of the judiciary, politicians and the heads of state-owned companies. In adopting this approach, the report has moved some distance from long-established internal and cross-sectoral relativities that have dominated the public service for many decades.
However, the PSBB also had to balance the compelling pressure on the government to contain increases in the public service paybill against the realities of industrial relations tradition in the public sector. Given the depth and range of experience within the PSBB, it was no surprise that this partly "political" approach was adopted in the final report. In general, the groups awarded the highest pay rises under benchmarking are the same groups that did less well under "PCW restructuring", which was provided for by the PCW national agreement.
One of the reasons behind the establishment of the PSBB was to ensure that the inequitable spread of pay increases that occurred under "PCW restructuring", and which had caused considerable industrial unrest, would not be repeated. To achieve this wider political goal, the PSBB was under pressure to adopt a pragmatic approach - namely, to rectify the perceived inequities of the PCW period. In other words, the PSBB had to "square the circle" of mixing scientific objectivity with a large dose of pragmatism. To do otherwise might have allowed the problems raised under "PCW restructuring" to remain in the system while, at the same time, upsetting plans for a follow-on deal to replace the PPF.
Balancing act
While implementation of 75% of the total award is supposed to be conditional on agreement on issues such as adaptability, change, flexibility and modernisation, many observers believe that such goals may prove to be elusive. Although the report expects "real outcomes" to be delivered, and recommended that a "validation process" be established to ensure that agreed changes are implemented, there is considerable scepticism that any substantive progress will be made in this regard.
The wording used in the report in relation to modernisation is almost precisely the same as a reference used in respect of the same issue under the PPF. Under the PPF, payment of the final 4% cost-of-living increase for public servants is also formally linked to agreement on modernisation-related issues. However, little of substance is expected to be achieved in this regard. There is no compelling reason to believe that the same stipulations, essentially repeated in the PSBB's report, will have more "teeth" on this occasion.
Wider considerations
Private sector employers are fearful that the benchmarking awards could spark a series of "reverse" catch-up claims from trade unions. The majority of private sector workers have been paid the final pay increases due to them under the terms of the PPF agreement. Theoretically, while the benchmarking awards involve the public service catching up with the private sector, such a perspective is unlikely to be a popular one from the point of view of the private sector worker. This is despite the clear warning in the report that the awards "may not under any circumstances provide a basis for any follow-on claims from employees within either the public service or the private sector".
Fears had been privately expressed by employers that, if published, the data on which the PSBB based its findings would reveal wage gaps within the private sector, particularly in smaller to medium-sized enterprises. However, this information remains outside the scope of freedom of information legislation, a fact that may allay the fears of private sector employers. Nonetheless, IBEC and ICTU-affiliated trade unions may have difficulty in persuading private sector workers to sign up to any new national agreement later this year.
Despite the prime minister's reference to the "horrendous" cost of the implementation of the report's findings, the net cost of the backdated element of the award (25%) is close to the €150 million for the additional public service pay that has already been budgeted for this year by the Department of Finance.
The key issue for the government, therefore, will be how it can spread payment of the balance of the awards (75%). The aim will be to do so in a way that minimises the impact on the Exchequer, while at the same time ensuring public service trade union support for a follow-on national agreement to replace the current PPF. Such an agreement could also help to "bed in" the benchmarking system of pay determination for public servants indefinitely.
This feature is based on research and material prepared by Brian Sheehan, editor, Industrial Relations News, Dublin.
