The Central Bank could be forced to abandon one of the main recommendations of a €3 million review as it would not comply with emergency legislation on public sector pay.
The Bank hired PwC and Towers Watson, the UK consultancy, to conduct the review with the aim of improving staff retention and creating efficiency.
The review recommended that the bank should move towards a flexible, incentive-based pay model. However, the Central Bank is covered by the Financial Emergency Measures in the Public Interest Act (Fempi), which puts a strict cap on the pay and conditions of public sector employees.
According to a source the review has been completed and the intention is that its recommendations will be implemented before the Bank moves to its new headquarters on North Wall Quay in Dublin early next year.
Paschal Donohoe, minister for public expenditure and reform, renewed Fempi last month saying: “Now is not the time to jeopardise our economic progress with the premature and unaffordable repeal of the Fempi legislation.”
A spokeswoman for Mr Donohoe’s department declined to say whether exemptions from the legislation would be made for the Central Bank. “The department has no comment to make in relation to a review, which is not yet complete and which we have not yet had sight of,” she said.
It is understood, however, that the department is holding discussions with the Bank over its remuneration policies.
A spokeswoman for the Bank said the review was intended to implement improvements in its organisational structure and work practices. “It is expected that the full details on the structural redesign process will be provided to staff in the coming weeks,” she said.
She added that the objectives of the review included developing “more visible career paths that will enable purposeful mobility of staff across the organisation” and “a reward framework that is more market-informed and enables performance-related progression”.
“The development of a more flexible reward model, subject to detailed design and costing, agreement with stakeholders and the Bank’s obligations under Fempi legislation, is being examined,” she said.
Over the past few years, the Central Bank has had a problem retaining key staff, particularly in the regulatory and supervision division. It emerged in November that it had not consulted the Department of Public Expenditure & Reform about payments of up to €20,000 that it had made to 30 managers.
Colm Quinlan of Unite made a complaint about the payments, saying that they violated Fempi legislation.
Robert Watt, secretary general of the department, conducted an inquiry into what the Bank described as retention payments. Ultimately it was decided that they did not breach Fempi guidelines.
It is understood that the cost of hiring PwC and Towers Watson will come to between 1 and 2 per cent of payroll costs, or €1.5 million to €3 million based on figures for 2015.
The Central Bank came in for considerable criticism after the financial crisis. The final report of the Oireachtas banking inquiry, published last January, found that it had failed to prevent the aggressive lending that ultimately caused the property bubble. It has been stripped of some of its powers, which has also caused problems for retaining staff. The single supervisory mechanism, set up at the end of 2014 as part of the EU banking union, is now responsible for supervising AIB and Bank of Ireland.