New National Minimum Wage – How Business Should Prepare

As you are no doubt aware, the Low Pay Commission recommended a €0.50 increase to the National Minimum Wage. It was further announced in the recent Budget that this increase will be effective from 01^st January 2016, meaning employees will be entitled to earn at least €9.15 per hour from that date. In this article we take a look at some positive steps employers can take to prepare for the change.

Download the new minimum wage rates here 

Download Information on exceptions to the minimum wage rates here

Employer Concerns

It doesn’t seem all that long ago that the previous government, in reaction to the crippling recession, reduced the minimum wage from €8.65 to €7.65 per hour. It therefore comes as some surprise to see the minimum wage increase to €9.15 per hour within the short time since we officially came out of recession. No doubt most employers will be concerned about the additional cost that the new minimum wage will bring to their bottom line.

Being Prepared

The following preparatory steps may just be able to reduce or eliminate the additional cost to your business.

• The first step is to complete an audit of your budget and finances. This will help you to assess, based on recent financial performances, the impact an increase may have on your business and your finances.
• Employers should engage with their accounts team and identify how many of your employees are currently earning below €9.15 per hour and identify precisely the total cost of moving such persons to €9.15 per hour. This should be done in light of the lower PRSI scheme being introduced to help employers cope financially with the change.
• What is the new break-even point for the business post January 2016?
• Businesses can use this as an opportunity to review their overall business strategy to determine if there are any other areas where money can be saved or generated. Every cost should be up for review. For consideration here would be price review, negotiate cheaper rates with suppliers, look into new ways of doing business, can it be done better and smarter?
• Revise contracts of employment for all employees earning below the new NMW to reflect the higher wage they will now be earning (a failure to do this would technically breach the terms of employment act)
• Don’t be surprised if you have employees currently earning €9.15 per hour or higher who come to you in January looking for a pay increase as well simply because they are now earning in or around the minimum wage. Whilst the National Minimum Wage Act specifically states that such employees are not entitled to a pay increase in such circumstances, it doesn’t stop the matter becoming a grievance or industrial relations issue.
• Get networking! Businesses should get networking with the Restaurants Association. By doing so, you may be able to more easily identify how other businesses save money, you may be able to share some support services with other companies, more easily identify subsidy schemes, etc.
• Employers may wish to tighten up their performance management processes to ensure that they are getting the most from their employees and accordingly are getting the most bang for their buck? Improved employee performance may in turn lead to an increase in productivity, client satisfaction and in a turn an increase in revenue.

After all these reviews and analysis, if employers feel that they are unable to pay NMW then do be mindful that there is an ability to apply to the Labour Court for a temporary exemption from doing so under existing legislation. Alternatively, employers may need to seek pay cuts from those earning above any new NMW level, reduce employee hours, increase prices, consider redundancies, etc.

If you have any queries in respect of the above article then please contact Peninsula Business Services on 01 850 6029 and quote RAI2015.