Businesses could face a major struggle under the proposed rise in minimum wage, according to Retail Excellence.
The Low Pay Commission has announced its intention to recommend a 5% increase in the National Minimum Wage, a move that could significantly impact both employees and businesses alike.
If the recommendation is implemented, the National Minimum Wage rate will rise to €14.17 per hour, marking a notable increase from the current rate of €13.50. This increase follows a significant jump in 2020, when the minimum wage rose from €8.65 to its current level, representing an increase of about 55%.
The proposed increase has been welcomed by some, with Dr Paul Redmond, Associate Research Professor with the ESRI, noting that we are "quite close to achieving the living wage". However, the recommendation has sparked concern among businesses, particularly in the retail sector.
Jean McCabe, CEO of Retail Excellence Ireland, has expressed her concerns, stating that the increase could lead to business closures, job losses, and insolvency by the end of the year. She pointed out that businesses have faced a 35% increase in wage costs over the past five years, and the retail sector has not received any relief from the Government in terms of VAT or PRSI reductions.
Ms. McCabe also mentioned that due to the 2020 minimum wage increase, employees are working two hours less to pay for the increase. She emphasised that retailers are not against workers being paid more, but want to ensure that jobs for minimum wage employees are preserved.
The Government typically follows the recommendations of the Low Pay Commission, as was the case in 2021 when the Minimum Wage Commission (Mindestlohnkommission) in Germany recommended a 5% increase to the German government.
Dr Redmond also highlighted that recent recommendations from the Low Pay Commission aim to achieve the living wage, which is 60% of median income. However, he also pointed out that costs overall are increasing due to minimum wage increases and are embedded into the supply chain, adding to cost of living issues.
The National Minimum Wage rate was last changed on 1 January 2025, from €12.70 to €13.50. As the debate continues, it remains to be seen how the proposed increase will impact both employees and businesses in the coming months.
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