Profitable companies should have the option of sharing profits with employees as an alternative to pay rises under any new pay deal, Fine Gael Enterprise Spokesman Leo Varadkar TD told a meeting of Young Fine Gael delegates at the Fine Gael Ard Fheis today (Saturday).
“Last September, IBEC and the unions negotiated an 18 month pay agreement for the private sector. Since then, the economy has slid into a deep recession, unemployment has soared, businesses are closing down and we have moved from inflation to deflation for the first time in a generation. This means the National Pay Deal was dead on arrival. IBEC’s weekend olive branch and the decision of the unions to call off Monday’s strike action presents the opportunity to agree a new pay deal. This opportunity must not be lost.
“To bring about recovery, the Government must stabilise the public finances by reducing borrowing, and restore competitiveness by bringing costs back into line with our competitors. Any new pay deal agreed by the social partners must honour these objectives and not avoid them.
“Last week, Forfás and the European Central Bank confirmed that labour costs in Ireland have risen much faster than in other countries. Rising costs have contributed to the recession and must fall if we want to benefit from the global upturn when it comes. It is clear that across-the-board pay increases in the private sector cannot form part of any new pay deal.
“However, unions are right to argue that companies making large profits must make a contribution. This could be done through a profit-sharing system in the private sector in which employees of profitable companies would receive an ‘employee dividend’ at the end of the year. The ‘employee dividend’ could be linked to a percentage of total pay.
“This measure would ensure fairness in the private sector. It would boost competitiveness by linking pay to productivity and profitability, and providing a mechanism by which costs would automatically fall when a company gets into trouble. The Exchequer would also benefit as the income tax paid on the employee dividend would be almost three times more than would be recouped from Corporation Profit Tax.”