SMEs: Don’t get caught out by changes to employment laws

Employment Laws

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Xeinadin Group

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The New Year is set to bring about some notable changes in employment regulations as they relate to workers’ remuneration and benefits.

From 1 January 2024, the national minimum wage in Ireland for workers over the age of 20 will increase by €1.40 to €12.70 an hour, a rise of just over 12%. 

Also from 1 January, Irish workers’ entitlement to sick pay will increase from three days to five. This is part of an incremental rise in sick pay entitlement until it reaches a maximum of 10 days paid leave in 2026.

Some industry groups have expressed concern about the changes – not at their substance or the principle of strengthening employment laws to benefit workers, but at the pace of the changes. Both the increase in the national minimum wage and the length of sick pay entitlement will add costs to businesses.

At a time when businesses in general are facing spiralling material and operating costs, there are plenty who view this avoidable added cost burden as ill-timed. 

It has also been widely pointed out that those likely to be most affected by the changes – small businesses in sectors like retail and hospitality where wages tend to be lower than average – are those already bearing the brunt of the difficult economic headwinds.

Little time to prepare

For business owners, time to prepare for the changes has also been tight. The increase in the minimum wage was only confirmed in October’s budget, less than three months before it comes into effect.

The obligation to pay sick pay is also a cost burden Irish businesses are only just getting used to. Before January 2023, there was no such thing as statutory sick pay. Now businesses face their liability going up by as much as 66% (although every absence will not extend to the full five days, of course). That obligation is then set to further double in the space of two years. 

Protecting workers is rightly seen as a sound economic investment, especially at a time when household budgets are being stretched. Workers who are not being paid enough to live on or don’t feel they are getting a fair wage will show little loyalty when new opportunities present themselves. High staff turnover presents employers with another financial headache in the form of recruitment costs. 

But at the same time, businesses have to be in a position to accommodate wage increases within their current budgetary and cost structures. This is difficult enough when margins are being squeezed from several other angles, and even more so when higher employment costs are imposed by regulation and at short notice. Many businesses will have to factor in increases to the national minimum wage without even having had the opportunity to draw up a new annual budget.

It’s important nonetheless that businesses don’t delay in assessing the cost implications of the changes and take appropriate action to mitigate them if needs be. For professional, impartial advice on the implications for your business, talk to our team.

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