A confidential review of legally binding wage-setting mechanisms has said the system should be maintained to protect reasonable employment standards for vulnerable workers.
However, the review of Joint Labour Committees and Registered Employment Agreements, carried out by Labour Court Chairman Kevin Duffy and UCD Professor of Economics Frank Walsh, says the system needs a radical overhaul to make it fairer and more responsive to changing economic circumstances.
Employers have argued that the system of sectoral agreements hampers competitiveness and job creation, and is unaffordable in the current economic crisis.
Joint Labour Committees and Registered Employment Agreements govern pay and conditions for around 200,000 workers across a range of sectors. They were identified by the IMF/EU/ECB delegations as a key competitiveness issue.
But this review says abolition would not lead to an increase in employment, and could worsen the pay and employment conditions for low paid vulnerable workers.
The review also finds that existing employment rights legislation would not adequately cover matters dealt with by JLCs and REAs.
Instead the authors advocate reform. They say that overtime and Sunday premium payments should be streamlined across the various sectors.
Employers opposing JLCs had argued that the agreements make it prohibitive to employ people on Sundays because of excessive overtime and premium entitlements under the sectoral agreements
If the national minimum wage is cut in future, JLCs should consider revising their rates.
The review finds no justification for separate JLCs based on geography - for example in the catering, hotels and hairdressing sectors. But it would abolish some JLCs - in the sectors of aerated water and wholesale bottling, provender milling, and clothing.
Crucially for unions, it says the JLC system should only operate where - for whatever reason - collective bargaining does not take place.
And crucially for employers, it says there is a case for allowing employers under pressure to derogate from a JLC - provided it would not distort competition in the sector, or lead to displacement of workers elsewhere.
The Government is due to issue its own proposals shortly.
The report also finds that lowering the basic JLC rates to the level of the national minimum wage was unlikely to have a substantial effect on employment.
The authors say cutting minimum wages lowers total earnings of low paid workers and has potentially important distributional consequences.
They say potentially substantive competitive gains could be realised in some affected sectors by reforming the structure of decision making in JLCs to make them more flexible and responsive to the needs of particular sectors.
It says most of the drift upwards from the minimum wage in the larger JLCs was due to the compounding effect of applying national wage agreement increases together with increases in the minimum wage, and to the timing of those increases.
It favours retaining the Registered Employment Agreement system, but says it needs significant reform.
It recommends that the Labour Court should commission or undertake a report every five years into the scope of all remaining JLCs to make sure they are still appropriate.
'On balance there is a convincing case for allowing an employer to derogate from the terms of an ERO/REA where it is established that the effect of strict compliance would result in a substantial loss of employment in the enterprise concerned,' the authors say.
Such an inability to pay provision does not currently exist. However, it cautions that a derogation cannot be granted if it would distort competition in the sector, or lead to displacement of workers elsewhere.
It also says enforcement procedures should be simplified.
