Wages in small businesses increased on average by 7.5 per cent this year, well in excess of the rate of inflation, according to the latest edition of the ISME pay survey published today.
The ISME said increasing labour costs together with rising insurance costs represent "the biggest threat to the competitiveness of indigenous industry and consequently their very existence."
The association called on the Government to introduce initiatives such as profit sharing schemes to counter excessive wage demands.
The ISME found that pay increases are mainly due to continuing labour shortages in certain categories, high inflation, minimum wage increases and the cost of housing.
The ISME also blamed the Government for adding to the inflationary pressures by promoting what it calls "state led inflation", through increased prices in health, education and energy costs.
Strong inflationary pressures will continue to be embedded in the economy unless the Government introduces fresh initiatives in controlling the cost of providing public services, the ISME claimed.
The typical rate of pay for manual employees across all sectors is €17,414 ranging from €14,758 for unskilled staff to €20,922 for skilled staff. In comparison the average industrial wage as established by the CSO is €24,944.
The services sector recorded the highest increase in wage inflation at 7.5 per cent, manufacturing rose 7.1 per cent and distribution tose 6.4 per cent.
On average five days are lost per employee due to absenteeism representing a loss of €500 million per annum.