Work

Business wants more supports to ease hit of Government-backed pay hikes

New report shows small restaurants and retailers face 19% increase in costs by 2026

Minister for Enterprise Simon Coveney and the department have signalled the intention to provide supports, including €3,000 increases to grants intended to help with energy costs. Photograph: Tom Honan

Emmet Malone
Tue Mar 5 2024 - 17:46

Business groups want big supports provided to the sectors worst hit by cost increases fuelled by measures like the increased minimum wage after a Government commissioned report estimated small restaurants and retailers could see their related outgoings increase by almost a fifth over the next three years.

The report found that sectors like construction, professional services and information technology would be largely unaffected by increases related to Government-backed changes to the national minimum wage (NMW), increased entitlement to sick leave and pension auto-enrolment due to prevailing pay and conditions. Yet small firms in hospitality and retail are likely to experience substantial jumps in their costs.

An Assessment of the Cumulative Impact of Proposed Measures to Improve Working Conditions in Ireland, published by the Department of Enterprise and Employment, suggested the cost of the changes, which also include parental leave, an additional bank holiday and the right to request remote working, would add between 1.8 per cent and 2.2 per cent to wages across the economy.

It said a small hospitality business might expect a costs increase of 7 per cent this year and a cumulative 19 per cent by 2026.

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The ongoing transition from the minimum wage to a Living Wage based on 60 per cent of the median hourly earnings across the economy was found to be the biggest factor behind the change. That process prompted a 12.4 per cent increase to the national minimum wage at the start of this year. The report suggests “more aggressive increases in the NMW are required over 2024 to 2026 to ensure that the targeted 60 per cent will be reached”.

The Minister for Enterprise, Simon Coveney, and the department have signalled the intention to provide some supports, including €3,000 increases to grants intended to help with energy costs. They have also suggested there will be a review of the level at which the higher rate of employer PRSI kicks in, currently €441, more than €50 below what someone working full-time on the national minimum wage would earn.

Responding to the report, Ibec’s Danny McCoy said the lower 8.8 per cent should be extended to above the national minimum weekly wage of €495, but also said “the Government must introduce a PRSI rebate for the most exposed companies in line with their exposure to rising costs”.

Neil McDonnell of Isme said the 60 per cent of median formula was fundamentally flawed because 48 per cent of people employed in the economy were either working for the public service or multinationals.

He added that any claim that highly paid workers weren’t skewing the figures is “statistical nonsense”, and that pushing on to the full Living Wage as currently envisaged would “kill the service industry”.

“This level of adjustment just isn’t achievable. And if they’re talking about an aggregate 9 per cent next year and the year after, you are going to see that in the unemployment stats.”

Adrian Cummins of Restaurants Association of Ireland said the finding put the idea of cutting the 13.5 per cent VAT rate for his industry “firmly back into play”.

“We are looking here at a business experiencing huge cost increases this year due to Government policy, so we will be going to Government and asking what are they going to do about it because the sector’s margins are gone and we are in real trouble.”

Laura Bambrick at the Irish Congress of Trade Unions welcomed the report, and said it backed the unions’ position that many employers would not be impacted.

“The Irish Congress of Trade Unions has never denied that there will be some businesses, such as small hospitality and retail ones, who will have further to travel when we’re lifting minimum standards for workers because of their over-reliance on paying the minimum wage. Now we have improved those minimum standards they will need help so it’s good we have this evidence-based report to help shape the Government’s response. But that doesn’t mean using a sledgehammer to crack a nut, like the 9 per cent VAT rate, because it is not all of hospitality that is suffering.”

Emmet Malone

Emmet Malone

Emmet Malone is Work Correspondent at The Irish Times

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