Government launches public consultation on plans to phase in a new Living Wage by 2026

Under plans presented to Cabinet in June by the Tánaiste Leo Varadkar, and based on recommendations by the Low Pay Commission, it is proposed that the national minimum wage will be phased out by 2026 and replaced by a new living wage. It is proposed that the living wage be set at 60 per cent of the median wage in any given year. In our ongoing engagement with Government on this issue and in our response to the public consultation, Ibec has highlighted the challenges presented by the lack of coordination in introducing this measure at a time when employers are also facing multiple other legislative costs and the impact of inflation in the economy.

Ibec estimates suggest that the rollout of auto-enrolment, the living wage, pensions, statutory sick pay, and other leave proposals already announced will add 9% to average labour costs in Ireland over the coming decade. This total is across the whole economy, for many companies in domestic facing sectors, low margin exporters and the SME community the cost of implementing increases in pensions coverage and wage floors will be higher.

These costs are on top of the existing significant cost pressures facing Irish companies, with energy, commodity, and transport costs challenging profitability for many. Whilst many of the additions to the so-called Social Wage have merit on their own terms, if phased correctly, they represent a major change in the Irish labour market model. The ongoing lack of co-ordination regarding their phasing is causing major concern amongst our members – particularly in the current economic environment.

Ibec has raised with Government, the critical need for ongoing competitiveness and transition supports for the most challenged sectors over the coming years if they are to implement these changes, beginning in Budget 2023.