The proposed increase to the minimum wage next year could add up to 2.5 per cent to grocery bills, according to ISME.
The group represents more than 10,000 small and medium enterprises in Ireland, either directly or through 32 affiliated associations and trade bodies.
ISME chairman Marc O’Dwyer wrote to Taoiseach Leo Varadkar on Monday, in which he said the proposed 12.4 per cent increase to the minimum wage will create a financially unsustainable situation for many SMEs across the country.
He said that while very few of ISME’s members pay staff at minimum wage, the rate serves as an important benchmark for most incomes up to about €30,000 per annum.
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“In the absence of the opportunity to adequately represent these views in the Labour Employer Economic Forum, we fear your Government might press ahead with an unaffordable and unsustainable increase in payroll costs in January,” he said.
“The retail members of ISME estimate that the 12.4 per cent wage impact of the minimum wage will add between 1 per cent and 2.5 per cent to grocery bills, depending on store size.”
He said current earnings in small businesses average €720.33 per week, or €37,457 per annum.
“We genuinely feel the hard work done by the Low Pay Commission lacks context around the fact that the majority of Irish workers are employed by SMEs, with earnings that are reflective of this, and not the exceptional premiums earned in FDI businesses and the public service,” he said.
“Many of our affiliated groups, in areas such as childcare, nursing homes and animal collection, operate in sectors where the overseeing department regulates the pricing in the sector, or caps commercial charges within it. Whilst trying to negotiate rate increases already in a difficult climate, with their parent department, these services will enjoy no scope to negotiate payment of the minimum wage.”
Mr O’Dwyer said suggestions that businesses may be supported by Government in delivering the increase in January were “unwise”.
“If proposed increases in the minimum wage are so large that businesses require state support, they clearly should not go ahead,” he said.
“In our view, the social wage and social welfare supports should be used to bridge identified gaps, not an increase in the minimum wage. Research the Government has already seen suggests that where businesses cannot afford to pay minimum wage increases, they simply reduce employee hours worked, negating the justification for the increase in the first place.”
