Ireland Update: Sectoral Employment Order (SEO) Update for the Construction Industry

Background

On 7 November 2024, Ireland’s construction sector received a notable regulatory update with the approval of a new Sectoral Employment Order (SEO) by the Minister of State for Business, Employment, and Retail. This new SEO, which supersedes the previous SEO of 2023, will take effect on 1 August 2025, which sets updated minimum pay rates, pension contributions, and sick pay entitlements for approximately 46,600 qualifying construction workers. 

The SEO will achieve this objective by introducing scheduled pay increases over the next two years and aims to enhance the industry’s appeal as Ireland ramps up its housing and infrastructure projects. Construction firms are encouraged to act now to align their own employment practices with these changes by updating employment contracts, adjusting project budgets, and preparing for enhanced compliance requirements.

The new 2024 SEO is available here: SI No 620 of 2024 Sectoral Employment Order (Construction Sector) 2024.

Summary of the SEO Changes

The newly approved SEO for Ireland’s construction industry brings important updates for employee pay, pensions, and sick leave, which will be legally binding on employers, including:

• Minimum Pay Increase: Qualifying construction workers under the SEO will receive a 3.4% increase in minimum pay from August 2025, with an additional 3.2% increase from August 2026.

• Enhanced Pension and Sick Pay Benefits: Updates include improved pension contributions and sick pay entitlements, offering greater support for craft persons, construction operatives and apprentices across the sector.

These updates are designed to make construction a more attractive and sustainable career option, helping to address Ireland’s need for skilled labour in housing and infrastructure projects.

Legal and Commercial Implications for Construction Contracts

SEOs are legislative instruments that establish legally binding rates of pay and working conditions in the construction sector. They are intended to boost recruitment and retention by providing fair compensation and benefits for employees. However, these updates also carry commercial implications for developers and contractors, particularly when drafting and administering construction contracts and balancing their budgets.

Both developers and contractors should consider the potential effects of this fifth SEO and future SEOs on their contract terms, especially regarding cost adjustments. For instance, under various standard forms of construction contracts (including clause 4 of the RIAI Conditions and the JCT contract suite, etc.), default provisions such as “fluctuations options,” notably “Option B,” may apply to effectively adjust the contract sum in response to legislative changes like the new SEO.

With recent years seeing unprecedented highs in the costs of construction materials, energy, and wages, it is important to understand where the risk of cost increases lie under contracts. Addressing these risks through clear contract provisions can help prevent disputes, manage financial exposure, and ensure contract compliance.

Impact of the New SEO on Pay, Rententions and Industrial Relations 

The SEO’s staged pay and pension increases will directly impact labour costs, requiring updates to budgets and employment contracts. Improved benefits aim to boost workforce stability and attract new entrants, while industry-wide increases support recruitment and retention throughout the sector. Built on collective bargaining, the SEO also promotes industrial harmony. Proactive communication with employees will help ensure a smooth transition and maintain positive workplace relations.

Strategic Planning for ByrneWallace Clients

With the SEO taking effect in August 2025, it is essential to implement necessary adjustments. ByrneWallace clients should assess the financial implications of the SEO, review all relevant employment contracts, and factor these costs into planning for upcoming projects. Our Infrastructure, Construction and Energy Group is available to provide legal guidance; ensuring clients remain compliant with the SEO and aligned with best practices as the industry evolves.

Key Takeaways

The new SEO gives rise to:

• Enhanced Employee Benefits: Qualifying construction employees will receive a 3.4% minimum pay increase in August 2025, followed by a further 3.2% increase in 2026, alongside improved pension contributions and sick pay entitlements.

• Sector Attractiveness: The SEO aims to make construction a more attractive career option, especially for apprentices, aligning with Ireland’s demand for skilled workers in burgeoning housing and infrastructure projects.

• Commercial and Legal Risk Management: The SEO mandates wage increases that may impact contract value. Contractors should review terms carefully, particularly under standard contracts where fluctuation or legislative enactment variation clauses may operate. Clients should understand where financial risk might arise, especially with rising costs in materials, energy and labour. 

• Financial and Compliance Planning: Construction firms should adjust budgets, update employment contracts, and review project bids to account for the new SEO standards, ensuring compliance and mitigating financial risks.

TALI is ready to assist clients with implementing these changes effectively, supporting both compliance and alignment with long-term business objectives as Ireland’s construction sector continues to expand.

By ByrneWallace, Ireland, a Transatlantic Law International affiliated firm. 

For further information or for any assistance please contact ireland@transatlanticlaw.com.

Disclaimer: Transatlantic Law International Limited is a UK registered limited liability company providing international business and legal solutions through its own resources and the expertise of over 105 affiliated independent law firms in over 95 countries worldwide. This article is for background information only and provided in the context of the applicable law when published and does not constitute legal advice and cannot be relied on as such for any matter. Legal advice may be provided subject to the retention of Transatlantic Law International Limited’s services and its governing terms and conditions of service. Transatlantic Law International Limited, based at 84 Brook Street, London W1K 5EH, United Kingdom, is registered with Companies House, Reg Nr. 361484, with its registered address at 83 Cambridge Street, London SW1V 4PS, United Kingdom.