Tánaiste and employment minster Leo Varadkar has received government approval to accept the recommendation of the Low Pay Commission to increase the National Minimum Wage to €11.30 per hour from 1 January 2023.

This represents an 80 cents increase, or 7.6%, on the current National Minimum Wage of €10.50 per hour and will see an estimated 165,000 people get a boost to their wages courtesy of their employer.

For someone on the minimum wage working a 39-hour week, this translates to a pay increase of €31.20 per week or more than €120 per month, or €1,600 per annum.

The Tánaiste also announced that the Low Pay Commission has set an indicative National Living Wage for 2023 of €13.10 per hour.

The intention is to phase in the Living Wage between now and 2026 when it will become mandatory. In the meantime, it will be revised annually as a benchmark for employers.

In Association with

The Tánaiste also announced that he will commence the Sick Leave Act on 1 January 2023. This Act will introduce an entitlement for all employees to sick leave paid by their employer in addition to illness benefit from the state.

Small Firms Association (SFA) director Sven Spollen-Behrens said that costs for small business owners are at a never seen before high, so it is disappointing that government is now adding to these by imposing a further increase in the NMW.

“A minimum wage increase would be on top of the existing significant cost pressures facing small firms. Energy, transport, insurance, materials, technology, and operating costs in general are all rising in price faster than small businesses can keep up with,” he said.

“This is not the only increase in labour costs being imposed on small firms in the coming months. A statutory sick pay scheme will come in to effect next year, and the Automatic Enrolment retirement savings system will be set up in 2023 for employee enrolments in 2024.

“The cost of labour is the most significant driver of business costs in small firms, amounting to 82% of overall monthly costs, so these cumulative impacts are causing major concern amongst the small business community.”

Spollen-Behrens added: “Ireland cannot allow its competitiveness to be eroded through costs imposed by government. The energy crisis makes it all the more important to manage the costs that are within our domestic control."

Moira Grassick, COO at Peninsula, the HR and employment law provider, noted that the most recent increase to the NMW hourly rate was 30c.

“An 80c increase to €11.30 per hour is therefore well outside the previous 10c to 60c range employers had typically needed to incorporate into their labour costs,” said Grassick.

“While this increase in the minimum wage aims to help lower income workers manage the cost-of-living crisis, there is also the risk that employers will have to cut hours or jobs to absorb continuing increases in labour costs.

“As the ongoing cost-of-living crisis is also a cost-of-doing-business crisis, this represents an additional financial pressure that employers could do without. Energy costs are already squeezing SMEs. Increasing payroll costs, particularly for sectors that rely on unskilled or low-skilled labour will be especially hard to bear."

Grassick added: “With the SME sector facing increased costs on several fronts, the bottom line for many Irish businesses could be less growth, jobs, and competitiveness. There is a risk that all these additional costs may be too much to bear for certain employers, particularly SMEs.

“Unfortunately, this could lead to a reduction in business and the prospect of layoffs or redundancies. While reducing headcount should be a last resort, it’s vital to ensure that any termination of employment complies with the relevant redundancy or unfair dismissals legislation that applies.”

It is expected that Budget 2023 will provide for changes to USC and PRSI to minimise their impact on people paid the minimum wage.

People Before Profit TD Paul Murphy has said that the increase in the minimum wage is "not enough and equates to a pay cut due to staggering inflation figures".

People Before Profit wants the NMW set at €15 per hour.