Rising labor costs threaten Irish business competitiveness, ERF warns
DUBLIN, IRELAND — The Employment and Recruitment Federation (ERF) has warned about the rising cost of labor in Ireland, citing concerns that it may hinder job creation and undermine the country’s economic competitiveness.
Siobhan Kinsella, ERF president and managing director of Strategic Placements Dublin, emphasized the growing challenges faced by businesses, particularly small enterprises, in coping with escalating labor costs.
Government policies driving up labor costs
A series of government-led initiatives have contributed to the surge in labor expenses, including:
- A 12.4% increase in the minimum wage, raising hourly pay by €1.40 in January
- Proposed introduction of pensions auto-enrolment
- New statutory sick pay regulations
- Additional leave changes
- Changes to Pay Related Social Insurance (PRSI) and Universal Social Charge (USC)
PRSI rates are set to increase in October, and employers are required to pay 8.9% on wages up to €496 (US$541).
“Ireland is becoming a very expensive place to do business,” Kinsella said.
“While obviously important for workers, for a small business, this can quickly become unaffordable.”
Impact on SMEs and vulnerable sectors
The recruitment industry has observed a decline in demand for staff placement in sectors such as retail and hospitality due to higher costs.
Research by the Department of Enterprise also indicates that the cost of complying with new employment laws and regulations is significantly higher for medium-sized and small firms than for large employers, who benefit from economies of scale.
To address this, the ERF is advocating for a pause on new legislation and suggests that regulatory changes should only be implemented as a last resort after voluntary approaches, such as codes of practice or guidelines, have been exhausted.
Schemes such as grants from the Government’s Increased Cost of Business (ICOB) initiative have not sufficiently mitigated the impact of these policy changes, according to Kinsella.
“Current Government policy is increasing cost which makes smaller enterprise uncompetitive. We risk local jobs and damaging our economic success, unless we support smaller business to meet the new legislation demands,” Kinsella emphasized.
As Ireland grapples with these challenges, the balance between worker benefits and business sustainability remains a critical issue for policymakers and industry leaders alike.
