A Wave of Legislative Change is Hitting Irish Employers Hard

by Barry Whelan, CEO of Excel Recruitment

As we approach the anniversary of Budget 2024, which introduced several measures aimed at enhancing employee working conditions, a review of their impact reveals that while these measures have been beneficial for workers, they have also posed significant challenges for employers, particularly small and medium-sized enterprises (SMEs).

Many SMEs, which often operate with limited resources and tighter margins, are now struggling to manage the increased payroll costs, additional administrative burdens, and often, the operational disruptions that go hand in hand with a change in practice and procedure.

Since January 1^st, the national minimum wage increased from €11.30 to €12.70 per hour^[1]. The increase will help to ensure a decent standard of living for minimum wage earners. In 2026, the living wage is expected to replace the national minimum wage at a rate of €15 per hour, or 60pc of the projected median wage when it is first introduced. Many employers, particularly SMEs with tight profit margins are finding it difficult to absorb these increased wage costs. Resultantly, to avoid the demise of their business, employers could be forced to raise prices for their goods and services or reduce or freeze hiring. It’s clear that the unintended consequence of what is deemed a positive development for workers could ultimately harm both workers and consumers in the long run.

Also, this year we saw the right to statutory sick pay increase from 3 to 5 days per year, providing workers with better financial support during illness. The entitlement, set out under the Sick Leave Act 2022, will increase to 7 days in 2025 and 10 days in 2026. Under the scheme, employers must cover 70pc of an employee’s normal weekly pay, up to €110 per day, thereby helping to reduce the financial stress associated with taking necessary time off, allowing employees to recover without fearing a loss of income. All of which are laudable strategic goals. However, employers not only face higher costs as a result of these provisions, but the increased sick pay obligations can also disrupt workforce management, requiring employers to redistribute tasks among remaining staff, or in some cases, find temporary replacements in an employee’s absence.

From November 27, 2023, employees experiencing domestic violence are entitled to take 5 days of paid leave annually if needed^[2]. This leave provides critical support for victims dealing with domestic violence, enabling them to seek medical attention, obtain legal assistance, find safe housing, and manage other urgent issues during a difficult time without fear of losing income. In emergency circumstances, workers are not obliged to give their employers notice to take domestic violence leave. No one would dispute the need for this legislation and its importance for those affected by domestic violence. But, it is still a financial consideration for employers, coming in tandem with the wage and sick pay increases.

Parent’s leave and benefits will extend from 7 to 9 weeks for parents with children under 2 years old or recently adopted children from August 1, 2024. While employers are not obliged to pay workers while on parent’s leave, they will still need to manage longer employee absences. This may pose challenges, such as hiring temporary replacements or reassigning tasks among existing staff.

Next in the long line of changes is the introduction of auto-enrolment pension scheme that is due to start in January 2025, requiring contributions from both employers and employees. Initially, contributions will be set at 1.5pc of gross earnings, increasing every three years until reaching 6pc. By automatically enrolling eligible workers into pension plans, the scheme aims to address the issue of inadequate retirement savings, providing a stable financial future for employees. There’s no doubt that this addresses a critical issue that needs a resolution, and that’s the fact that many Irish workers do not have adequate financial provisions in place for their retirement which will ultimately put a strain on the State coffers in years to come. But there’s no getting around the fact that the requirement for employer contributions will increase overall payroll costs and could potentially affect the financial stability and growth prospects of struggling businesses. Moreover, ensuring compliance with auto-enrolment requirements involves considerable administrative work including adjusting payroll systems, managing contributions, and keeping accurate records of employee enrolments and contributions.

Another piece of legislation in the pipeline is the Work-Life Balance and Miscellaneous Provisions Act 2023, which, when enacted, will allow employees to request remote working once certain conditions are met. Employers must respond within four weeks, considering both business and employee needs, and will be required to provide reasonable grounds for refusing to facilitate an employee’s request. Workers will gain flexibility, improving job satisfaction and work-life balance once the legislation takes effect. Employers will have to navigate the complexities of remote working arrangements, which may include technology investments and added administrative workload. It should be noted that employers have the right to end the remote working set-up if they find that it is having substantial negative effects on their business.

The upcoming Budget 2025 presents an opportunity for the Government to provide significantly greater support to employers than it did 12 months ago. The Government should pay particular attention to Ireland’s SMEs, the lifeblood of our economy, and help them to navigate the ongoing tide of change. Increased subsidies or grants could significantly alleviate the financial strain, while providing resources such as payroll management tools and consultancy services would help businesses manage the additional administrative burdens, ensuring a balanced approach that supports both workers and employees.

Footnotes:

^[1] with lower rates applicable for employees under 20

² Part-time workers also have the right to this time off, on a pro-rata basis.