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Recent and Pending Legislative Changes to Employment Law in Ireland

PRACTICE AREA GROUP: Employment, Pensions and Benefits
DATE: 03.03.2011

Regulatory restrictions on bonus payments for credit institutions

The amendments to the EU Capital Requirements Directive, commonly known as CRD III, which requires credit institutions to adopt changed remuneration policies and practices came into effect on 1 January 2011. This is part of a coordinated approach to impose controls on remuneration across the financial sector. The CRD III remuneration requirements apply to all credit institutions and investment firms in markets in financial instruments (MiFID) to which the MiFID Regulations apply, with respect to any legal person whose regular occupation or business is the provision of one or more investment services to third parties.

On 10 December 2010, after a brief consultation phase, the Committee of European Banking Supervisors (CEBS), which since January 2011 is known as the European Banking Authority, published its guidelines on remuneration policies and practices in line with CRD III. Irish regulation is based on the text of the Directive and the CEBS Guidelines. There are currently no plans to impose a further statutory code for remuneration. However, this position will be reviewed by the Central Bank later in the year.

For in-depth details of the new regulatory measures effecting remuneration for credit institutions click here to access our December 2010 Update: Major new restrictions on remuneration policies and practices in the EU Financial Sector.

Reduction in Minimum Wage

The new national minimum wage came into effect on 1 February 2011. The new rate is €7.65 per hour. This is a reduction of €1 from €8.65 per hour. Even after the reduction, the new rate will remain in the top tier of minimum wage rates set by European Union Member States. It is also approximately 12% higher than the equivalent minimum hourly rate in the United Kingdom. It should be noted that contained in the new Fine Gael/Labour programme for government is the proposal to reverse this reduction.

Budgetary Changes to Severance Payments

With effect from 1 February 2011 the tax free element of ex-gratia termination payments is restricted to €200,000. Therefore any payments above this amount will be subject to tax at the marginal rate. Under section 123 of the Taxes Consolidation Act 1997 employees are charged tax in respect of compensation payments for loss of office and certain other payments received on the termination of an office or employment. An employer who makes such a payment is required to disclose particulars of it to the Revenue no later than 14 days after the end of the tax year in which the payment was made. Failure to disclose may give rise to a penalty of €3,000.

Civil Partnership and Certain Rights & Obligations of Co-Habitants Act 2010

The Civil Partnership and Certain Rights & Obligations of Co-Habitants Act 2010 (“the Act”) was signed into law on 19 July 2010. The Act came into operation on 1 January 2011 by way of Commencement Order (S.I. 648/2010). Certain provisions of the Act are also dependent on necessary changes to the tax codes and social welfare legislation. The Act contains a number of changes to certain matters in the employment and pensions law area.

The Act amends the Employment Equality Act 1998. One of the nine grounds for discrimination cited in the Employment Equality Act 1998 is “marital status”. This term has now been replaced by the term “civil status”. Civil status means “being single, married, separated, divorced, widowed, in a civil partnership within the meaning of the Civil Partnership Act and Certain Rights of Co-Habitants Act 2010 or being a former civil partner in a civil relationship that has ended by death or been dissolved”.

The Act also has implications on pension adjustment orders and pension payments which were dealt with in the Pensions Update and Recent Development Section in our November 2010 Ezine.We will keep you informed of further updates as they arise.

Agency Workers Directive

The consultation process with social partners (employer and trade unions) and other relevant parties on its transposition into Irish Law of the EU Temporary Workers Directive closed on 30 November 2010. The Directive should be transposed into Irish Law by 5 December 2011. We are currently awaiting the publication of feedback from consultation. In the UK, Ireland’s closest market, agreement has been reached between the unions and employers for a 12 week qualifying period before equal treatment in terms of basic working conditions (including pay) will apply to agency workers. For more details on the Directive click here for our June 2008 Newsletter.

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