Trade organisations are urging for significant financial assistance to be given to the industries most affected by rising expenses, in response to actions like the upped minimum wage. It is forecast that within the following three years, small establishments within the retail and restaurant sectors may observe a surge in related expenses by nearly 20%, as revealed by a report commissioned by the Government.
The research indicated that sectors such as construction, information technology, and professional services will be mostly unimpacted by hikes connected to Government-supported adjustments to the National Minimum Wage (NMW), enhanced sick leave provision, and automatic pension enrolment, given the existing pay structures and conditions. However, small enterprises in retail and the hospitality industry are expected to endure significant bumps in their overheads.
The Department of Enterprise and Employment’s report, titled An Assessment of the Cumulative Impact of Proposed Measures to Improve Working Conditions in Ireland, proposed that the cumulative cost of the modifications, which encompass parental leave, an extra bank holiday, and the ability to request remote work, would contribute an additional 1.8 – 2.2% to wages within the economy.
The report suggested that small establishments in the hospitality sector might anticipate a 7% surge in costs this year, with a cumulative rise of 19% by 2026. The key contributing factor was identified to be the ongoing transition from the minimum wage to a living wage, benchmarked at 60% of median hourly wages across the economy. This transition resulted in a 12.4% rise to the NMW in the first quarter of the year. The report also advocated for further emphatic increases in the NMW from 2024 to 2026 to achieve the target 60%.
Simon Coveney, the Minister for Enterprise, and his department have indicated plans to provide certain supports, inclusive of a €3,000 augmentation to grants designed to assist with energy expenses. They also proposed a reappraisal of the threshold for the higher rate of employer PRSI; currently that stands at €441, marginally above a full-time NMW employee’s wage.
Danny McCoy, representing Ibec, in response to the publication, suggested the lower 8.8% should be projected above the weekly NMW wage of €495. He further stated that the government should implement a reduction in PRSI for companies most vulnerable to heightened costs, proportional to their exposure.
The assertion by Neil McDonnell from Isme that the calculation using 60 per cent of median earnings is fundamentally flawed drew attention to the fact that 48 per cent of employed individuals in the economy work for either the public service or multinationals. The argument put forth is that assertions those earning high wages aren’t distorting the statistics are “merely statistical gibberish”. Pushing forth with the full envisioned Living Wage, McDonnell warns, would be devastating to the service sector. He also indicated it wasn’t feasible to accomplish this level of change and suggested that if an overall increase of 9 per cent is intended for the next two years, the repercussions would be obvious in unemployment figures.
In addition, a declaration made by Adrian Cummins, a representative of the Restaurants Association of Ireland, suggested that results from these findings might reopen the debate to reduce the 13.5 per cent VAT rate in his industry. He added that they are observing the trends of a business grappling with exorbitant cost spikes stemming from Government policy, and as a result, they will be asking the government for assistance due to the disappearance of the sector’s profitability.
Laura Bambrick from the Irish Congress of Trade Unions applauded the report, affirming it supported the union’s stance that numerous employers remain unaffected. She admitted that there’s an understanding that certain businesses, particularly smaller ones in the hospitality and retail sectors, may face challenges due to overdependence on the minimum wage. Still, she emphasised the necessity for these businesses to adapt to the increased minimum standards. She stated that even though businesses need support, it doesn’t mean extreme measures, like the 9 per cent VAT rate should be applied to an industry that isn’t universally struggling.
For the latest discussions and analysis, listen to our Inside Politics Podcast. Sign up to receive instant alerts and have top news, analysis and commentary delivered directly to your phone. Follow The Irish Times on WhatsApp to stay informed.