Stop Press Jan 31st; Since originally posting this Fine Gael has announced it will reverse this decision in Government!
NERA has taken advertisements in the weekend papers outlining the change in the National Minimum Wage which will take effect on February 1st. You can get to the NERA information by clicking here.
Can an employer reduce an existing employee’s pay to the new minimum wage level level?
Contrary to press reports (even in the Irish Times!) this will not lead to a reduction in the wages of ’50,000’ workers as was suggested. For the most part this will apply to new recruits who may be employed on the basis of the new adult rate of €7.65.
An employee’s rate of pay is a term/condition of their contract of employment. Employees have a contract of employment whether expressed in writing or not. Even among people who should know better the terms ‘Contract of Employment’ and ‘Statement of Terms of Employment’ under the relevant statute are used interchangeably, even though they are not necessarily the same thing.
And as we stated on this site and in our other social media last week (Twitter, follow by clicking here) the only circumstances (that we can think of) where wage reductions might be permitted is in the unlikely event of an employee contract stating that the pay rates shall be ‘whatever the national minimum wage is ‘for the time being’ or some such phrase,
Where this is the case then an employer may legally reduce the employee’s pay in line with the NMW rates or if there if there is a specific provision in the contract that provides for a reduction in pay.
Where this is not the case any change would have to be by agreement between the parties, and even where it is consultation is recommended. It is its own reward.
NERA notes in its statement that ‘any such agreement can be expressed or implied, tacit or by acquiescence (i.e. it can be formally agreed, informally or verbally agreed or accepted by the employee). But the point is; it must be agreed.
Our advice is that subsequent to agreement it should be recorded in writing, ideally in a revised statement of the Terms of Employment or a revised contract. (Click to go to the ‘The Advice Page’ on this site.)
An interesting question is what impact this will have on the JLC pay rates? There is now a glaring anomaly that the newly recruited worker in a butcher’s shop, for example may be employed on €7.65 an hour and the counterhand in the Spar next door is on €9.59.
I know ‘every little helps’ but when a saving of one euro an hour climbs to almost two euros, you’re getting into more serious money; for every three staff it’s nearly €10,500 a year of a difference over the new NMW! This is giving retail businesses outside the JLC system a serious competitive advantage.
Taking a (very) hypothetical example of a retail unit with 10 staff all on the NMW or the JLC rate, the extra wage burden on the JLC employer is a significant €35,ooo per annum higher (taking a 35 hour week).
I’m not an advocate of low pay, but I’m even less fond of unemployment and these facts give pause for thought.