Editor’s Note
Small firms will welcome the Increased Cost of Business (ICOB) grant that will be paid to commercial rates payers in the first quarter of 2024. It’s worth a maximum of €5,000 and enterprise minister Simon Coveney estimates that up to 140,000 small firms stand to benefit. However, the €260m scheme is not targeted and leaves most enterprises out in the cold. The latest official enterprise count is 366,000, with 92% of them having fewer than ten employees. The ICOB rates-related solution works for civil servants because it is easy to administer, but it doesn’t work for the majority of businesses.
Meanwhile, government is piling on costs for employers. Lobby group Ibec says government’s “unprecedented spending spree on the credit card of Irish companies” is paying for the biggest change in labour market policy in decades. From January 2024, the minimum wage is being raised by 12%. Because finance minister Michael McGrath ignored the Low Pay Commission’s recommendation to increase PRSI thresholds in Budget 2024, in line with previous practice, the overall hike in labour costs will be 15%.
Ministers have also committed to increasing the full-time minimum wage equivalent by one-third to over €30,000 by 2026. It is estimated that the new ‘living wage’ will be worth over 70% of the current median wages in sectors such as accommodation, food service, personal services, the cultural sector, childcare, residential care, retail and in low-margin parts of the manufacturing sector. Ibec estimates that this step-change for the 330,000 or so employees earning less than the 2026 target will add c.€1.3bn per year to employer payroll costs.
Ibec also points to the knock-on costs when other workers look for their relative pay to keep ahead of the new wage floor. The employers’ organisation says that many heavily impacted companies are planning for cumulative increases in labour costs of over 25% over the next two years.
Also looming is pensions auto-enrolment. Government estimates that the cost to employers will total €9bn over the next decade. PRSI increases for employers and employees over the coming years will add c.€750m p.a. to payroll overheads, while the Regulatory Impact Assessment of the new statutory right to sick pay estimates that the entitlement cost to employers will be c.€600m in 2024, rising to over €1bn by 2026. To rub salt in the wound, there are significant additional Revenue reporting requirements on employees’ non-taxable expenses.
“At a time when the global economy is slowing, we need to remain conscious that no-one owes us a living as a country,” Ibec boss Danny McCoy rightly points out.