Govt measures aimed at improving working conditions may push costs up 36%

The cumulative effect of a raft of new Government measures aimed at improving working conditions here could be to increase employment costs for employers by a third over the next two years, new research has suggested.

Increases in the national minimum wage, the introduction of the planned living wage, new sick pay entitlements, improvements to parent's leave and benefit, the right to request remote working, hikes in PRSI and the new auto-enrolment pension scheme could push business costs up by 36% according to the analysis by Excel Recruitment.

It has called for the Government to publish immediately an assessment it is carrying out on the combined impact of the proposed measures to improve working conditions.

"Minister Coveney has said that this analysis will be published by the end of the year," said Shane McLave, Managing Director of Excel Recruitment, which works with more than 1,000 SMEs throughout the country.

"But the reality is Irish SMEs who employ 60% of the working population, need this guidance now."

"Already this year, businesses have had to incorporate changes around statutory sick pay, domestic leave entitlements and an increase in the minimum wage."

"They are now facing into a year of even greater change at the auto-enrolment looms, and the right to request remote working legislation pends."

Mr McLave added that employers do not oppose the reforms but require outside support.

"To ensure businesses can plan for, and survive, the coming year, the Government needs to put in place far greater supports that those that are currently available," he claimed.

"It imperative that the analysis Minister Coveney speaks of gives businesses a true indication as to how much these measures will ultimately cost them in the coming years and is followed up with significant Government support measures for businesses so they can better weather these costs."

"Otherwise we could see many businesses go under as a result of taking on board costs which ultimately are the Government’s responsibility."

Among the increased costs facing businesses are a rise in the minimum wage from €11.30 to €12.70 an hour on January 1st.

In 2026, this might increase further to €15 per hour when the living wage is set to replace the national minimum wage, according to projections from the Low Pay Commission.

Under statutory sick pay workers get 70% of their normal pay, up to a maximum of €110 per day and this entitlement will increase from three to five days in 2024, to seven days in 2025 and ten days in 2026.

While auto-enrolment will be introduced on a phased basis with an employer contribution of 1.5% of gross earnings up to €80,000 in the first three years.

Excel Recruitment is suggesting that to assist firms in the tourism and hospitality sector shoulder the extra cost, the reduced 9% VAT rate should be reintroduced and extended to other sectors also.

"There is already evidence that rising living costs have forced people to cut back on discretionary spending like hotel stays and meals out and unless something substantial is done, this will only continue," Mr McLave said.

"The reinstatement of the 13.5% VAT rate, as well as the cost of the various other Government measures coming down the line in 2024 and beyond, could be the straw that breaks the camel’s back for many hospitality and tourism businesses."

In a recent reply to a parliamentary question, Minister for Enterprise, Simon Coveney, said the Government is aware that this has been a challenging year for firms as they grapple with the effects of inflation and the aftermath of the Covid-19 pandemic.

"We are committed to supporting enterprises and Budget 2024 continues this approach," he said.