Comment
If we want Scandinavian levels of rights, then someone has to pay for it and it should not be small businesses that cannot afford it.
A long list of progressive benefits for workers has been implemented in recent years. The minimum wage has risen steadily, increasing by a double-digit amount in January.
Statutory sick pay has increased from three days to five and employees now have the right to request to be allowed to work from home. More changes are coming, including a change from the national minimum wage to a living wage and the automatic enrollment of workers in a pension plan. We’re finally getting Scandinavian-style job benefits in this country.
It’s hard to argue that taking people out of low-paid jobs and guaranteeing them some kind of retirement provision is not a good idea. A joint report from the Department of Enterprise, Trade and Employment and the Department of Social Welfare published last week – with the snappy title Assessment of the Cumulative Impact of Measures Proposed to Improve Working Conditions in Ireland – notes that Ireland has fallen behind in improving the living conditions of those with lower incomes.
As the extensive analysis highlighted, there are good reasons why there is a need to move to a living wage in 2026, which will be set at 60 per cent of median earnings, and away from the minimum wage. Ireland has the eighth highest proportion of low-paid workers in the EU. Compare that to Sweden, where only 4 percent of the workforce is considered low-paid. As for other rights, statutory sick pay was not introduced until 2023 and we have fewer public holidays than the EU average, so it may be timely to give workers more rights.
What hasn’t been asked about all of these significant changes is who is really going to pay for them? The answer to that is simple. It is employers who have to take on much of this, without being asked if they can do it.
The report details how the minimum wage increases that have gone into effect and other planned changes will affect small businesses. According to the data, a small hotel business would see wage costs increase by almost 20 percent in 2026 compared to today. Taking into account the transition to the living wage, labor costs would be 36 percent higher in 2026.
This is a huge leap in such a short period and at a time when domestic businesses are still recovering from the scars of the Covid-19 pandemic and rising costs thanks to inflation.
It’s easy to dismiss small businesses as complainers and bad bosses; That is undoubtedly the vision that social networks have of them. That thinking also seems to permeate policymakers’ attitude toward them. They are almost given a seat at the table when it comes to negotiating with the government, but the real influence lies with multinationals and larger companies, who can afford higher salaries, offer pension plans, generous paid leave and other benefits. . The State, as a large employer, can give generously (and does not even get productivity in return) thanks to its seemingly endless well of resources.
When it comes to SMEs, the government either believes the money is there or is not aware of the financial situation many find themselves in. It’s probably a combination of both, which is pretty strange because the data is there to show that a good portion of these companies are not sitting on huge profits.
Figures from the Revenue Commissioners for 2021 show that of the almost 195,000 companies registered in Ireland, 109,000 had a negative or no tax liability, while almost 64,000 companies paid between €1 and €20,000. That year these companies employed around one million workers. Even assuming that trading has improved in recent years, it does not suggest that there is a huge amount of money left to cover all the increases that are coming.
Of course, the state intervened during the pandemic to keep employees in their jobs and largely prop up businesses. What it hasn’t learned is the fragility of small businesses, which are vulnerable to crises and don’t have the ability to take on debt to stay afloat or keep a lot of money from their owners forever.
The Department of Enterprise, Trade and Employment revealed cash grants of €5,000 to help businesses overcome various costs. According to calculations sent to me by a group of SMEs, this would cover the gross increase in the January minimum wage for 1.6 workers in a single year. They will need more help in the coming years.
The government’s proposals to raise wages and encourage uptake of pensions are all a very good and noble cause, which is easy to do when you’re not the one writing the check. In the end it can be counterproductive. Irish SMEs are notoriously cautious and, rather than simply raising their prices or absorbing them themselves, they could decide to cut jobs.
Our counterparts in Europe have enjoyed higher levels of basic income and many other benefits for decades, which have been largely funded by higher social security costs compared to ours. In the October Budget, Finance Minister Michael McGrath announced that both employees’ and employers’ PRSI would rise by 0.1 per cent each at the end of this year. That will do little to offset the coming financial hit.
If we truly believe it is the right thing to do, then increasing social security contributions is the best way to do it. Will those on higher salaries be happy to face higher PRSI contributions in solidarity with the lowest paid?
If we want Scandinavian levels of rights, then someone has to pay for it, and it shouldn’t be small businesses that can’t afford it.