Small employers fear the introduction of mandatory sick pay in the new year alongside the biggest increase in the minimum wage to date will tip a growing number into crisis.
The Sick Leave Act, which comes into force on January 1st, will introduce a new statutory right to sick leave paid for by the employer, initially for the three days before workers become eligible for the State’s illness benefit. It will be paid at 70 per cent of a person’s weekly wage, up to a maximum payment of €110 a week.
That is below the average weekly wage – of which 70 per cent would be €122, according to Excel. However, it will add disproportionately to the costs of small and medium-sized enterprises (SMEs).
The cover will rise to five days in 2024, seven days the following year and 10 days from 2026.
Recruitment group Excel has called on the Government to clarify the implementation of the Sick Pay Act and its impact on SMEs in Ireland. It argues that the move will lead to an acceleration of the number of companies falling into insolvency, leading to business closures and job cuts.
And its chief executive, Barry Whelan also warned that “experience tells us that ... staff often see sick pay leave as annual leave – so employers essentially have to plan to approve three additional ‘annual leave’ days a year from next year for every employee”.
The recruiter says there has already been a sharp rise in the number of companies going bust this year as businesses contend with rising energy costs, record levels of inflation and supply chain issues along with increased wages. Is says the introduction of the new sick pay measure leaves companies “fraught with uncertainty”.
“This really has the makings of a perfect storm for SMEs throughout the country,” he said. “SMEs employ seven in every 10 workers in Ireland. This mandatory sick-pay legislation will hit employers at the same time as the biggest ever increase in the minimum wage.
“The Government needs to do more to shield businesses and employers from the cost-of-living crisis while also setting out a clear roadmap of the oncoming changes,” Mr Whelan said. “There seems to be a belief that employers can absorb whatever costs the Government sends it way. However, the uptake in insolvency figures shows clearly that this is not the case.”
Tánaiste and Minister for Enterprise, Trade and Employment Leo Varadkar said in response to a recent parliamentary question that about half of Irish workers are covered by workplace sick leave programmes, although definitive figures are not available.
Excel Recruitment says the lack of hard data is “worrying” as it infers that the Minister may not be aware of the true financial impact this scheme will have on private-sector employees.
Stripping out the public sector, where coverage is effectively 100 per cent, Excel says about 64 per cent of private-sector workers do not currently have access to employer-paid sick leave. That amounts to more than 936,000 workers.
Data from the Central Statistics Office shows that 9.4 per cent of employees – close to one in 10 – were absent from work at some point during the second quarter of last year.
Addressing the issue in a parliamentary question recently, the Mr Varadkar said the new legislation “will provide protection to employees who do not currently have employer-paid sick pay schemes, many of whom are low-paid and cannot afford to miss work”.
He said the financial ceiling on the entitlement was designed to “ensure excessive costs are not placed on employers”. He added the scheme was being phased in “to take account of the current economic climate and the existing financial pressures on businesses”.