Enterprise Forum

Ireland’s Competitiveness Challenge 2022

In line with a recommendation from the National Competitiveness and Productivity Council (NCPC) in the report Ireland’s Competitiveness Challenge 2022 an assessment has been carried out by the Department of Enterprise, Trade and Employment (in conjunction with the Department of Social Protection). The assessment examined the cumulative impact of measures including Auto-Enrolment Retirement Savings, Parent’s Leave and Benefit, Statutory Sick Pay (SSP), Additional Public Holiday, the transition to a Living Wage, and the Right to Request Remote Working.

The study provides an overarching assessment of the potential impacts – both costs and benefits – accruing to employers and employees on foot of these measures. The various improvements to working conditions have been signalled in advance, were typically subject to a public consultation process prior to being adopted as public policy and are to be implemented on an incremental basis over several years.

Key Findings:

• For large swathes of workers across the private sector – and their employers – these measures will have little, if any, impact given that terms and conditions are already in excess of those stipulated by these changes (i.e. pay levels, access to occupational pension coverage, etc.).
• The analysis suggests that the introduction of these measures would have only a modest effect on the economy as a whole, but a single numeric estimate is of limited value. The impact on payroll costs are highly sector-specific, notably for those sectors where payroll represents a high proportion of overall operating costs (i.e., retail, hospitality and personal services)
• To highlight the difference in potential impact across – and within – sectors, the assessment presents results using stylised examples (supported by a series of case studies and workshop findings). In so doing, the analysis underscores the sizeable gap in potential impact between different sectors of the economy.
• As modelled, a small hospitality business could experience payroll cost increases of close to 7% in 2024 and 19% by 2026.The implementation of the Living Wage is assessed to have the most significant impact on costs in the near-term, with those operating in the hospitality and retail sectors expected to experience a much sharper increase in their costs compared to others.
• A broad range of benefits are associated with these measures. For employees in sectors typically characterised by low pay, these changes will lead to not only higher disposable incomes but will also extend access to entitlements such as sick pay and pension coverage.
• There are also benefits for employers. One notable example relates to the issue of staff turnover and the difficulty – and cost – faced by employers in trying to replace experienced staff.
• There are considerable societal benefits which will accrue from these improvements to working conditions, including improvements in terms of gender equality (Parental Leave), participation rates (Parental Leave, Statutory Sick Pay), reductions in current in-work poverty rates (Living Wage), and the preservation of future living standards arising from automatic enrolment in retirement savings.

In acknowledgement that there will be a cost to certain sectors arising from these new measures, a suite of measures are being introduced to assist businesses in adjusting to these increased costs (as well as more generally to improve cost competitiveness of firms), including:

• Making available up to €15 million to Local Enterprise Offices to enable a top up payment of up to €3,000 in the Energy Efficiency Grant for businesses in the hospitality and retail sectors bringing the grant up to €8,000.
• Preparation of an options paper on the application of the lower 8.8% rate of Employer PRSI contribution. This paper could also consider how the National Training Fund could help assist in supporting businesses, in agreement with the Minister for Further and Higher Education, Research, Innovation and Science.
• A range of measures to reduce red tape and the administrative burden on business, including: an enhanced SME Test.
• Accelerating the roll out of a fully functioning National Enterprise Hub with staff available to provide immediate advice and support to vulnerable firms.