Introduction

Pat Breen TD, the Minister of State with special responsibility for Trade, Employment, Business, EU Digital Single Market and Data Protection, formally accepted two recommendations from the Labour Court regarding new minimum pay rates for the construction and electrical contracting sectors respectively on 10 May 2019 (the Recommendations). The Recommendations also provide for unsocial hours payments, terms for pension and sick pay schemes together with an amendment to the normal working hours of construction sector workers.

These pay rate increases will be implemented by means of Sectoral Employment Orders (SEO). A draft of the construction sector SEO was considered by both Houses of the Oireachtas and is currently awaiting signing with pay increases, if approved, applying from Autumn 2019. The electrical contracting sector draft SEO progress is delayed following legal action.

Increased Rate of Pay

These Recommendations, and the potential new SEOs implementing these Recommendations, follow the lodging of a claim by construction workers' and electrical workers' unions respectively earlier this year, which was opposed by industry representative bodies, and a Labour Court hearing on these claims in March 2019.

Although the unions had sought a 12% pay increase for construction workers to be implemented over the next three years, the Recommendations include a 2.7% pay rate increase for construction employees from 1 October 2019 and again from 1 October 2020 (i.e. 5.4% increase over two years) and a 2.7% pay rate increase for electrical contracting employees from 1 September 2019.

The Recommendations include minimum pay rates for various categories of employees in both sectors which can be viewed in the Workplace Relations Commission Notice on the topic.

Working Hours

The draft construction sector SEO provides for 39 hours per week as normal working hours. This is a significant change for the industry and something which was not part of previous construction industry SEOs.

Legal Challenge

National Electrical Contractors Ireland, an electrical contractors trade representative body, sought an injunction against implementation of the Recommendations for an electrical contracting sector SEO which was granted on 13 May and subsequently lifted by the High Court on 16 May. The substantive judicial review case against the Recommendations remains. This action has delayed the approval process of this SEO.

Commentary

As we discussed previously, any pay increase has the potential to have an impact on the cost of a development. Depending on how the risk has been allocated in a development's building contract this cost increase may be borne by either the contractor or the developer. The staggered approach of the Recommendations may help contractors and developers manage this issue, but the full impact remains to be seen in the coming years.