Rising costs, labour shortages and employee retention remain the most significant barriers for Irish SMEs as we enter 2025, according to a survey of 6,400 Irish businesses from diverse industries.

Peninsula Ireland released its latest global survey highlighting the pressing challenges that small and medium-sized enterprises (SMEs) face as they prepare for the new year.

SMEs (<250 persons employed) in Ireland accounted for 99.8% of all enterprises and 68% of people employed in 2022.

More than two-fifths (43%) of total turnover and 41% of (GVA) was attributed to these enterprises, meaning they are key to the Irish economy.

With 64% of participants based outside of Dublin and the majority employing fewer than 50 staff, the findings provide a vital snapshot of concerns among Ireland’s economic backbone.

Key Findings:

• Rising Costs: 43% of SMEs identified escalating costs — including recruitment expenses, payroll increases, and the cost of living — as their top concern, with 26% prioritising survival as their biggest goal in the current economic climate.
• Labour Shortages: 16% reported a labour shortage as a top business concern. Additionally, over half (56%) of participants named recruitment as their primary staffing challenge. To address this, and to attract new talent, 48% have offered increased wages, 46% offered flexible working hours, while 37% invested in upskilling.
• Employee Retention: In efforts to retain their existing employees, 46% of businesses offered flexible working hours, 45% offered enhanced financial incentives, and 44% invested in improved mental health support.

Despite ongoing challenges, SMEs are focused on growth (36%), survival (26%) and expansion of services (18%) in the coming year.

The adoption of technology is increasingly seen as a solution, with many businesses using HR platforms to enhance operational efficiency.

Most of the participants (over 30%) were “somewhat confident” that investing in HR and Marketing technology, as well as investing in technology to improve operational efficiency through existing HR technologies, is an opportunity they see in their planning for 2025.

Additionally, over 20% of participants are unsure about their plan to leverage technology.

The survey also revealed that 25% of Irish businesses have implemented additional support measures to address employee well-being.

However, despite these efforts, employees in Ireland remain the least likely from the countries surveyed to discuss their mental health at work.

The survey found that 24% of SMEs have enhanced mental health support initiatives to encourage employees to speak openly about their struggles.

Globally, the impact of mental health on the workplace is significant.

According to the World Health Organisation, depression and anxiety result in an estimated loss of 12 billion working days each year, resulting in a staggering cost of US$1 trillion in lost productivity.

Closer to home, a survey from the Irish Business and Employers Confederation reports that absenteeism in Ireland accounts for 11 million lost workdays annually, costing the economy €1.5bn, or approximately €818 per employee.

Speaking about the findings, Moira Grassick, Chief Operations Officer, says, “To survive long-term, SMEs must focus on growth and innovation.

“Challenges with recruitment and retention, which we hear about every day from business owners, are adding strain and could put the brakes on growth goals.

She emphasized “the recent general election and Budget 2025 are likely to introduce opportunities for businesses to better support their staff while maintaining financial stability.

“Reforms such as adjustments to the Universal Social Charge (USC) and tax incentives for employers to reward their staff offer some relief for business owners.”

“While these measures are certainly welcome”, Moira added, “the real challenge lies in how businesses strategically adapt.

“Early engagement with HR experts can make a big difference in managing these changes effectively and keeping operations smooth”.