Survey predicts period of employment stability with some growth.
More than 80% of SMEs expect employee wage rates to be unchanged or reduced in 2014.
Retailers not benefitting from economic progress to date.
Tax adjustment must be used to increase take-home pay.
ISME, the Irish Small and Medium Enterprises Association,called for a twelve month pay freeze at the publication of employment and wage figures for SMEs at the beginning of 2014. The information came from the Associations Quarterly SME Business Trends Survey for Q4’ 2013, which also ascertained the wage and employment intentions of SME owner-managers for the coming year. While the survey found that a net 18% of SMEs expect to increase employment in 2014, in the vast majority of cases, SMEs will not be increasing wage rates in the coming 12 months.
Commenting on the figures, Mark Fielding, ISME CEO said, “After an intensely difficult 6 years of cuts and redundancies we are starting to see signs of stability in the economy. 13% of SMEs are employing more staff than at the same time last year and 18% expect to increase employment in the next 12 months. This indicates that SMEs will continue to play a pivotal role in revitalising the economy in the coming months. However, the emphasis must be on increased productivity leading to increased jobs, rather than wage increases”.
“Despite the positive outlook for employment overall, the situation for SMEs remains precarious. They have been struggling to stay afloat until this point and owner-managers in particular have borne the brunt of the pain by taking huge pay cuts, and in some cases no salary at all, in an effort to keep their companies afloat. The survey findings indicate that the majority of SMEs will not be in a position to increase wages during 2014 and in a small percentage of cases further reductions will be necessary.”
The main findings of the survey are:
18% Net of SMEs expect to increase Employment in 2014, (10% expect employment to decrease and 28% increase).
A net 13% of respondents increased employment during 2013.
82% of SMEs expect employee wage rates to be unchanged or reduced in 2014.
72% of SMEs did not change wage rates during 2013.
9% of Retailers expect a decrease in employment in the next 12 months but 23% of Exporters are planning to increase employment.
A net 21% of Manufacturers and Service providers expect to increase employment in 2014.
18% of SMEs expect to increase wage rates in 2014, albeit at less than 2.5%.
A similar number increased wage rates in 2013.
76% of SME owner-managers do not expect to change their own wage rate in 2014, up from 69% in the previous survey.
10% of owner-managers believe they will have to further decrease their own salaries in 2014.
While the survey found that, across the economy, current employment levels have increased for the fifth consecutive quarter, not all sectors are benefitting equally. The Services sector saw employment increase from 6% to 11%. Exporters saw an employment increase of 6 points, a turnaround from the decrease reported in Q3’13. 28% of Manufacturers reported that their employment levels had increased. Retailers reported a decrease in employment in the sector during the quarter at minus 4%.
Expectations for future employment in Retail are -9%, a worrying signal of potential future lay-offs and redundancies. This is due to ongoing problems in the sector including legacy rents, depressed sales and increasing costs. The future employment expectations of Exporters also saw a drop of 9 points which is worrying in the one area showing some progress.
”With the domestic economy still depressed there is simply no room for manoeuvre on wages for the majority of Irish SMEs other than through tax reduction. Ireland is still a high-cost location for business, while general inflation is staying low, which helps the situation. Many existing SMEs find it extremely difficult to benefit from cost improvements because of legacy issues, including long term leases, agreements and old wage rates. Though there has been a slight improvement in our competitiveness, there is still a long way to go to regain past levels.”
“Wage pressure, driven in part by increased taxation, is understandably a crucial concern, as employees seek to offset net pay reductions through wage claims. These calls are being orchestrated by trade union officials who seem to have learnt nothing from the ‘bubble & bust’ years. While recovery remains tentative and costs are cripplingly high, it is imperative that employers and, in particular, SME employers ‘hold the line’ and insist and impose a one year pay freeze as a start.”
The Association recommended that all SME owner/managers negotiate a pay freeze for 2014 and called on the Government to assist SMEs and the recovery by:
Reviewing all relevant business costs which should be benchmarked internationally.
Reducing SME energy costs, still some of the highest in EU.
Addressing local government inefficiencies, commercial rates and upward only rents on legacy leases.
“Government tends to be weak when it comes to cost curtailment so business must continue to take the lead. The fragile signs of economic growth being reported are due to the prudence of business owners in cutting costs and margins. The economic realities of Ireland post-troika must be understood and Government, employers and employees must be prudent, productive in continuing to work on the economic revival,” Fielding concluded.