Divergence in wage levels is enormous.
19th July 2023: ISME is concerned that the big increase in the minimum wage planned by the Low Pay Commission for next year will be unaffordable for many small businesses.
- A 12.4% increase in the National Minimum Wage will increase the gross wage bill for an employee on the national minimum wage (NMW) by €3,153 pa.
- That excludes the cost of Brigid’s Day bank holiday introduced this year (€110) and the contingent cost of five days statutory sick pay (€550).
- Auto-enrolment will add €386 in wage costs to an employee on the NMW.
- This won’t just impact workers on the NMW. The basic NMW rate works as a benchmark rate for most wages up to €30,000.
- Unless that additional €3,000 can be recovered from customers through price increases, it will result in reduced hours or a higher productivity requirement from employees.
- For workers in sectors where the employer can’t pass the cost on, this will mean that, at best, they will earn the same amount next year as they did in 2023.
- This will severely impact high-wages services jobs: childcare, nursing homes, convenience retail, grooming, hospitality.
- We already see convenience retailers reduce labour cost through automation and introduction of self-check-out. The labour cost of retail ranges from 8% (German discounters) to 20% (small convenience). This would mean grocery price rises of 1% to 2.5%.
Neil McDonnell, Chief Executive of ISME said: “The divergence in wage levels paid between the minority of those working in multinationals and the public service, and the majority working for small firms, is enormous. The Low Pay Commission’s recommendation must reflect the ability of small employers to pay realistic, affordable rates of pay.
While it is easy for unions and large multinational firms to say “just pay more,” the evidence based reality is that wages in small firms have been rising faster than the average industrial wage and the NMW.
Trying to tackle cost inflation via the NMW is a fool’s errand. Ireland has overtaken Denmark as the most expensive country for consumer prices in the EU. We need to tackle costs, rather than pass them on to consumers in higher service prices, if we are to address our cost of living.”
Wage increases 2019-2023: Average Industrial Wage (+22%), National Minimum Wage (+18%), Weekly Wage Small Firms (+25%).