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Status of employment contract if Ireland left the Euro

  • 04-03-2012 11:49pm
    #1
    shayser
    Closed Accounts Posts: 1,650 ✭✭✭


    I'm not saying that Ireland will, will not, or might leave the Euro.

    But... If Ireland were to return to the punt, what would happen where an employee's contract states that their salary is to be paid in Euro? I suppose the contract is legally binding and that nothing could change without the agreement of the employee.

    I suppose, too, that if the employee insisted on this, that the employer would try to make them redundant. A lot of employees in Ireland would have contracts like this.


Comments

  • #2
    3DataModem
    Registered Users Posts: 3,939 ✭✭✭3DataModem


    It would depend on what country's law applied to the contract. If Ireland, than the terms of a standard employment contract would be changed by statute when the currency changed, as it was when the punt was converted to Euro.

    However if you were a fixed term contractor then it could be different.


  • #3
    Victor
    Registered Users Posts: 78,234 ✭✭✭✭Victor


    The rule of law would kick in. The law would change such that any contract would change from euro to whatever currency is adopted. Just the same as when we changed from pound to euro - people with pound contracts weren't able to insist on being paid in pounds.

    It becomes potentially difficult where, for example, an employee is transferred within a multi-national organisation, e.g. from the Paris office to the Dublin office. In such cases, I imagine it would be down to what the contract says and where the person signed up and what the parties intentions were.


  • #4
    shayser
    Closed Accounts Posts: 1,650 ✭✭✭shayser


    What about other types of contracts, such as an insurance policy, or a bank loan. How would the premium or sum assured in the case of an insurance policy, or repayment/principal in the case of a bank loan, be affected?


  • #5
    Marcusm
    Registered Users Posts: 10,179 ✭✭✭✭Marcusm


    Victor wrote: »
    The rule of law would kick in. The law would change such that any contract would change from euro to whatever currency is adopted. Just the same as when we changed from pound to euro - people with pound contracts weren't able to insist on being paid in pounds.

    It becomes potentially difficult where, for example, an employee is transferred within a multi-national organisation, e.g. from the Paris office to the Dublin office. In such cases, I imagine it would be down to what the contract says and where the person signed up and what the parties intentions were.

    The difference with the original changeover is that the pound ceased to exist. The truly interesting scenario here is Ireland leaving the euro but the euro continuing in existence. IN such circumstances, it's likely that legislation would be brought in to force contracts to recognise the newly established currency at a fixed ratio. For contracts governed by foreign law, this would not necessarily be the case!!


  • #6
    coylemj
    Registered Users Posts: 25,313 ✭✭✭✭coylemj


    Marcusm wrote: »
    IN such circumstances, it's likely that legislation would be brought in to force contracts to recognise the newly established currency at a fixed ratio.

    And just watch the exodus of foreign firms and the list of Irish firms going bust!

    If we left the euro, the punt would have to float against the euro because we wouldn't be able to maintain a fixed exchange rate - if we could we wouldn't be leaving the Euro. In that case, the cost of imported goods such as raw materials but especially energy would skyrocket.

    There is no way that Irish employers could afford to simply ignore reality and continue to pay previous rates of pay. There would be an instant and very painful decrease in living standards and you could forget about foreign holidays for a few years as your spending power when you stepped out of the country would be significantly diminished. Dundalk would be a boom town with shoppers from Newry coming over in droves to buy south of the border, especially locally produced food products which would suddenly be very cheap for UK shoppers, the exact opposite of what would happen to the cost of imported food like tea, coffee, bananas etc. in the south.

    When we joined the Euro, the exchange rate was set at 0.787564 punts to one Euro so all amounts in contracts were converted at a fixed rate meaning there was no issue in terms of the value of wages & salaries, that would not be the case if we left and floated the new currency.


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