Government study urges slower rollout of Living Wage – LVA

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The hospitality sector cautions against the Government's rapid rollout of the 'Living Wage' pointing to a projected 36.7% increase in employment costs for small businesses by 2026



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7 March 2024

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The Licensed Vintners Association (LVA) has said the Government’s assessment on changes to employment conditions shows that the introduction of the ‘Living Wage’ must be slowed down.

The LVA believes that the Government should instead commit to a five year timeframe from this year for the introduction of the Living Wage, i.e. 2024-29, so as to allow labour intensive, low margin sectors like hospitality to have time to adapt to the increased costs.

In the Government’s study entitled, ‘An Assessment of the Cumulative Impact of Proposed Measures to Improve Working Conditions in Ireland’, it is estimated that the impact of the Government imposed employment costs could come to as much as 36.7% for a small hospitality business by 2026. The LVA says no pubs or hospitality businesses can sustain such a rapid increase in costs.

This Government estimate does not include the increased rates of Employers’ PRSI which will also take effect, meaning the cost is likely to be even higher.  Among the Government measures included in the estimate are the Living Wage, the pension auto-enrolment and the increased sick leave entitlements. 

Donall O’Keeffe, chief executive officer, LVA, said: “We believe that these Government imposed costs of employment represent too much, too fast for the hospitality sector. Small businesses can’t be expected to accommodate a rise in employment costs of this level in the next three years. The Government’s own study says they could reach as high as 36.7% by 2026, a figure which doesn’t even include Employers’ PRSI. That simply isn’t sustainable for hospitality or small businesses.”

O’Keefe suggests a more gradual transition to a ‘Living Wage,’ proposing a phased implementation over the next five years starting from 2024, as opposed to the current two-year plan. This extended timeframe, according to him, would provide businesses, particularly those with high labour costs and narrow profit margins in sectors like hospitality, sufficient time to adapt without causing abrupt disruptions.

“We also don’t think it is realistic how the Government has gone about calculating these raises. Linking these increases to what is happening at the multinational or public sector simply isn’t comparable to the situation facing small businesses with high labour costs.. A re-introduction of the VAT9% on food is now essential and well as evaluation of wage/cost supports for low margin, labour intensive businesses such as hospitality.

“The Government’s report seems to want to avoid situations whereby businesses reduce their headcounts or hours to adapt to these changes. Yet that is exactly what they can expect to see happen in hospitality if the current proposals remain in place” concludes O’Keefe. 


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