Firms would need ‘supports’ before implementing minimum wage rise, says Ibec

Businesses would need “competitiveness and transition supports” if they are to be able to implement the €1.40 increase to the minimum wage next year, employers’ group Ibec has said.

Reacting to a report in The Irish Times that the Low Pay Commission is to recommend an increase of more than 12 per cent to the current minimum wage of €11.30, Ibec said it accepted the Government’s intention to move towards a “living wage” by 2026 but said “the incremental changes” during the transition period “will be substantial”.

The organisation said the scale of the impact would vary across the economy but that sectors like the experience economy and retail would be among those particularly hard hit.

Proposed changes

“With the reported increase in the National Minimum Wage being four times the Government’s forecast for inflation in 2024, the changes also increase the risk of a more embedded inflationary dynamic in the economy,” it said.

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Reacting to the proposed changes, which were delivered by the commission to Minister for Enterprise Simon Coveney on Tuesday, executive director of employer relations Maeve McElwee said:

“The Government must deliver a comprehensive support programme for companies that will struggle with the introduction of the living wage …these supports should include increasing the top-rate employer PRSI threshold above the new living wage annually and the introduction of a temporary PRSI employer credit applying to lower-earning workers, relative to the increases in weekly labour costs which will occur in 2024, 2025 and 2026.”

She said the organisation has “engaged with Ministers, with the Low Pay Commission, with the Civil Service and across the political spectrum in recent months to raise the cost implications of these changes and to ensure the recommended cost supports are put in place in Budget 2024”.

The Irish Congress of Trade Unions welcomed the adoption of the €1.40 figure saying if that is the recommendation then Government should implement it in full.

“We sought €2 per hour in our submission to the commission but we would see an increase of €1.40 an hour as a positive step,” said congress general secretary Owen Reidy.

“We are talking here about the lowest of low-paid workers, people who have been disproportionately affected by the cost-of-living crisis, 54 per cent of them under 24, people who have been shut out of so many things.

“I hear a lot of hullabaloo this morning about the scale of the reported recommendation, about how far above inflation it is but I think we have to look at this in the round.

“Over the past few years, the increases implemented had fallen behind inflation and so workers were around 4 per cent worse off. In the scheme of things this would be a 3 per cent increase over the time and I think as we look to start addressing the imbalance that exists in the economy, this is a start.”

He said he would like to see the introduction of the living wage accelerated so that it is in place at the start of 2025. “There is no excuse for waiting.”

Pension enrolment

The Irish Small and Medium Enterprises Association echoed the call for Government supports but described the size of the proposed increase as involving a “decoupling of the minimum wage from economic reality”.

The organisation’s chief executive, Neil McDonnell, said the cost of employing somebody on the minimum wage would increase by more than €3,500 next year when other factors including auto pension enrolment were taken into account but that the ramifications would also be felt by businesses who actually did not employ anybody at that level of pay.

“I’ve spoken to retailers who pay everyone above minimum wage but have everybody, including managers, benchmarked against that rate and so they are looking at this costing them 12 per cent of their entire wage bill. It’s economic nonsense,” he said, adding that he believes it will feed into prices where businesses are able to pass the cost on or jobs as employers seek “economies” to mitigate the scale of the increases.

Eoghan O’Meara Walsh of the Irish Tourism Industry Confederation said businesses in the sector are keen to see their workers earn a decent living but “the vast majority those businesses are SMEs, the vast majority have very modest profit margins. They’re labour-intensive. They’re already wrestling with significant costs. The VAT increase due in September is already going to be really challenging for tourism and hospitality businesses.

“So, it’s kind of feeling that Government is doing this to make allowance for rental increases and cost of living increases and other things that people are having to deal with. But I think it would be preferable if they would sort out those issues, get properly on top of inflation properly, address rental prices and the housing crisis, rather than just pushing wage inflation on top of already stressed business sectors.”