Mr. Stephen McNally:

I thank the members for inviting the Irish Hotels Federation to address the Joint Committee on Jobs, Enterprise and Innovation on the national minimum wage. The Irish Hotels Federation, founded in 1937, is the national representative organisation of the hotel and guesthouse sector in Ireland. We are a key stakeholder in Irish tourism and the SME sector.

Tourism is one of Ireland’s largest industries and provides almost 205,000 jobs, equivalent to 11% of total employment in the country and a figure that has grown by more than 30,000 since 2011. It accounts for almost 4% of gross national product. Fáilte Ireland estimates total tourism revenue in 2014 at €6.45 billion. With more than 54,000 people directly employed by hotels and guesthouses across every county and town, the hotels sector is playing a critical role in contributing to recovery in the tourism industry and the wider economy. The international tourism market is exceptionally competitive and every tourism euro spent in Ireland is hard won. Value for money is an important factor in achieving growth in overall visitors as reflected in research published by Fáilte Ireland.

Hotels are very labour-intensive business activities operating in a very competitive international market. In 2014 payroll costs were approximately 40% of turnover compared with 8% in manufacturing. Because of the service nature of hotels labour productivity is low compared with other sectors in the economy.

The hotel sector provides many high-quality jobs both directly and indirectly. These include managers, accountants, chefs, IT specialists, marketing executives and HR executives. However, the nature of the business as a service industry is that many lower-skilled occupations are also required to provide the quality of service demanded by customers. These include cleaners, waiting staff, accommodation staff and kitchen assistants. In line with the hotels sector internationally, Ireland’s hotel product requires a high proportion of the lower-skill occupations, and consequently wage costs, particularly at the lower level, are a major part of hotel competitiveness.

The reality of labour costs in the hotel sector, with payroll and related expenses amounting to approximately 40% of total revenue, is that it is affected greatly by the minimum wage. We in the Irish Hotels Federation support a national minimum wage rate for all workers. However, we are concerned that unjustified increases in the minimum wage will have a strong negative effect on many small and medium-sized hotels particularly outside the main urban areas.

We recommend that the national minimum wage should not be increased in the immediate future. The domestic economy is still at a fragile stage in its recovery, particularly outside the main urban areas. An increase at this time would jeopardise the hard-won competitiveness gains achieved in the economy and would risk excluding younger and low-skilled workers from employment.

Our comments on the heads of the national minimum wage (low pay commission) Bill are as follows. Under the heading, National Competitiveness, the regulatory impact analysis identifies:

The particular role of the Commission is to ensure that any advice or recommendations it makes to Government is evidence-based; utilising agreed data, carrying out research and consultations with employers, workers and their representatives and taking written and oral evidence from a wide range of organisations.

This is to ensure that any suggested changes to the National Minimum Wage have minimum adverse impact on employment and competitiveness.

However, the Bill provides that in discharging the functions assigned to it by section 12(1), it is proposed that the commission shall make such recommendations to the Minister that are designed to set a minimum wage that is fair and sustainable, and when appropriate, is adjusted incrementally, and that over time is progressively increased to assist as many low-paid workers as is reasonably practicable. It is important that it is fair and reasonable for all parties.

However, it must not create significant adverse consequences for employment or competitiveness. It is not clear to us how the objectives set out in the regulatory impact assessment are to be achieved. The Bill redefines "minimum adverse impact" referred to in the RIA as "without creating significant adverse consequences for employment or competitiveness". These are entirely different objectives and we suggest an amendment should be included to rectify it. We recommend the deletion of the word "significant" in section 11(2).

The Bill does not identify how the commission has to ensure that its recommendations to Government are evidence-based, such as by utilising agreed data, carrying out research and consultations with employers, workers and their representatives and taking written and oral evidence from a wide range of organisations. We recommend the insertion of a clause to stipulate this with particular reference to engagement with the sectors that are most affected. For a national minimum wage to be fair and sustainable, it must not create a barrier to employment at entry level. The most unfair situation that can arise is the exclusion from the workforce of those who wish to enter employment and are prevented from doing so because of uneconomic and inflexible minimum rates of pay. We recommend the insertion of a clause that requires the commission to have regard for such an impact.

In the interests of balance and fairness, any recommendations made by the low pay commission should not be prejudiced by the absence of commissioners. At all times when increases in the national minimum wage are being decided on, all commissioners must be present to vote or be provided with facilities to do so through remote access.