Industrial Relations in Europe 2012 - European Commission - Europa

Nevertheless, it should be remembered that this was preceed by a three-year pay freeze from 2005-
2007 and a low increase in 2011.
A number of other themes can be discerned. First, there have been attempts to target pay reductions
on the higher paid. In certain cases, the lowest paid have been fully or partially exempted from pay
freezes or wage cuts. For example, in the UK the two-year pay freeze excluded workers earning less
than £21,000 (around €26,000) a year except in the case of local government workers covered by a
separate agreement. In Ireland, during 2008-2009 a series of measures reduced public sector pay,
but when further reductions were announced in December 2009 to take effect on January 1 st 2010
these were on a sliding scale with a 5% cut on salaries of EUR 30,000 increasing to a 15%
reduction for those earning above EUR 200,000 (Stewart 2011: 223). Similarly in Greece, Italy,
Portugal and Spain higher earners have been targeted for larger reductions in pay.
Second, in contrast to the private sector, where pay is usually decided at company or sectoral level,
these exceptional wage measures often require parliamentary approval. Consequently it is not the
direct employer or an employer’s association making pay decisions but rather national politicians
with a variety of incentives and answerable to a broader range of stakeholders. Governments
therefore have sometimes amended plans to curtail public sector pay and have been reluctant to
provoke the public sector workforce, especially in election years; planned measures do not always
equate with outcomes. In Slovenia, plans to cut basic pay by 4% at the end of 2011 were rejected
(although in 2012 the Public Finance Balance Act decreased wages in the public sector by 8% on
average) whilst in Portugal an amendment to the 2012 budget law raised the monthly salary
threshold for suspension of the 13 th and 14 th month salary payments from EUR 1,000 to EUR 1,100
(EC 2011). In Denmark more contentious aspects of pay reforms such as the individualisation of
pay negotiations were not pursued during 2011, an election year. Nevertheless, despite some
concessions, the unpopularity of austerity programmes has not prevented the collapse of
governments.
Third, as Table 4.5 indicates, the crisis has led to a slowdown in the rate of increase in
compensation and in some countries the effects of wage freezes and pay cuts are starting to become
evident. These measures, however, represent short-medium term responses that have a finite time
limit. As economic growth returns, restricting public sector pay may lead to staff shortages,
emigration and difficulties in attracting talented individuals into public service. Many governments
have sought to use the crisis to bring about structural reforms of pay determination and wider labour
market reforms that will have significant long term consequences for public sector employment
relations. In the UK, the government proposed changes in public sector pay determination to take
more account of regional variations in pay rates. In Bulgaria, a new pay system in public
administration has replaced traditional seniority-based pay with a system that takes more account of
performance and in Luxembourg performance management and progression of civil servants have
been reformed.
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