‘Soaring wage bills biggest threat since the financial crisis’
RISING labour costs pose the ‘most significant cost-competitiveness challenge’ for Irish business since the financial crisis, Ibec has warned the Taoiseach.
Danny McCoy, head of the country’s largest business lobby group, issued the stark warning over soaring labour costs – and blamed them squarely on Government policy.
‘The current policy path by the Government represents the biggest single change in Irish labour market policy in decades,’ Danny McCoy wrote in a letter to the Taoiseach.
He said the Government’s current policy ‘now risks creating the most significant cost competitiveness challenge faced by businesses since the pre-financial crisis period’.
‘There has been no consideration given to the cumulative impact of the scattergun approach of labour market measures introduced by a range of different Government departments and agencies,’ said Mr McCoy.
‘We can already clearly see through our membership network that business failures, particularly in the SME sector, are rising rapidly. We fear that many more viable businesses will be lost.’
Mr McCoy called on the Government to reassess its policy approach and pause all further related policy measures, such as the increase to the minimum wage and additional leave entitlements, in the meantime.
Ibec’s analysis shows that more than €4billion will be added annually to the wage bill of employers from new costs including the Government’s commitment to a living wage by 2026, the introduction of pension autoenrolment, increases in employers’ PRSI and nonindexation of PRSI thresholds, broadening of statutory sick pay, and more leave entitlements for workers.
‘This is before even greater knock-on costs or relative effects arrive as other workers look for their pay to keep ahead of the new wage floors,’ he said. ‘Many companies in the most exposed sectors are expecting increases in their wage bills in the order of 25% over the next 24 months.’
He said the recent Government decision to increase income thresholds on work permits will be another ‘substantial cost increase’.
On January 1, the national minimum wage increased by €1.40 to €12.70 an hour after the Government accepted a recommendation from the Low Pay Commission.
The statutory sick leave entitlement also increased this year from three to five days, with proposals to increase it to a week by next year and to 10 days in 2026.
Auto-enrolment in pensions for employees not saving for retirement is expected to be introduced later this year by the Department of Social Protection. In October, the rate of PRSI will increase by 0.1%, followed by a further increase of 0.1% in 2025.
Mr McCoy said Government departments and agencies are introducing new regulations ‘regularly without any cognisance or reflection’ adding: ‘This haphazard approach and lack of co-ordination are now a serious concern and risk damaging Ireland’s reputation as a competitive place to do business.’
While Mr McCoy said improving workers’ conditions is important for ‘social stability’, he added: ‘It is not long since laxity in the face of deteriorating cost competitiveness contributed to our economic crisis.’ He wrote: ‘We are now gravely concerned that unless there is a rethink... Ireland will damage its economic credentials with severe implications for prosperity and society.’
‘We are gravely concerned’