by HRHQ Editorial Team
Changes in labour legislation are threatening the viability of small business and Ireland’s competitiveness, the Employment and Recruitment Federation (ERF) maintains.
New Government regulation includes the prospect of a living wage, to replace the national minimum wage, by 2026; on top of the 12.4% minimum wage increase, (€1.40 per hour), in force since January.
Minimum wage, PRSI and USC changes, the proposed introduction of pensions auto enrolment, new statutory sick pay, and other leave changes are simply unaffordable to some small employers, says Siobhan Kinsella, ERF President and Managing Director at Strategic Placements Dublin Ltd.
“Current Government policy is increasing cost which makes smaller enterprise uncompetitive. We risk local jobs and damaging our economic success, unless we support smaller business to meet the new legislation demands”, the head of the recruiters’ body says. Now €12.70 an hour, the NMW change increased the gross pay bill for those employed at this wage, by €2,840 a year, based on a 39-hour week. While obviously important for workers, for a small business, this can quickly become unaffordable, Siobhan Kinsella maintains.
PRSI rates are also due to increase in October, with employers paying 8.9% on employees’ wages up to €496, and further minimum wage adjustments and statutory sick pay increases (up to 7 days in 2025) are proposed. While this means employers with employees earning the equivalent of the national minimum wage will pay the lower rate of employer PRSI, overall PRSI rates will still increase over 2024 to 2028.
The ERF maintains its members and other business sectors believe regulatory burdens are putting small firms at a significant disadvantage.
The recruitment group points to the fact that Ireland now has the second highest gross nominal national minimum wage of 22 EU member states, behind Luxembourg, and is ahead of the Netherlands, Germany, Belgium and France.
“The Department of Enterprise, Trade and Employment has researched the cost of the new employment laws and admits that, where a large company may have to spend one euro per employee to comply with regulation, a medium-sized enterprise spends around four euros, and a small business up to ten euros”, Siobhan Kinsella explains.
92% of Irish companies are micro-enterprises, employing less than 10 people, and a further 6.8% of businesses employ between 10 and 49 people. Unless policy changes or supports are provided to SMEs, changing wage costs will impact negatively on employment, the welfare and taxation systems, and will create a disincentive to work or train, particularly among young people, the employment body says.
Sectors like hospitality and retail, employing many young workers, will be significantly impacted by pensions auto enrolment and moves toward a living wage, employers insist.
Government introduced measures to support businesses facing increased costs in last year’s budget, and grants such as the Increased Cost of Business (ICOB) scheme. But, feedback from SMEs is that it does not go far enough. “The ERF believes legislation should only be a last resort, when voluntary approaches, like codes of practice or guidelines, do not improve employment terms, and when a Sustainable Employment Test measures legislation costs, benefits, and other employment impacts”, the ERF spokesperson suggests.
