By Business & Finance 
By Alan Price, managing director of Peninsula Ireland
Evaluating the impact of a statutory minimum wage increase can be of vital importance to any employer.
In light of the recent 50 cent increase to the National Minimum Wage in Ireland, meaning employees are entitled to earn at least €9.15 per hour from January 1st 2016, it is timely to consider the practical implications of the change for employers and what positive steps employers can take to adapt to the change.
It doesn’t seem that long ago when the previous government, in reaction to a 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.
Whilst we refer to the NMW as being €9.15 per hour, it is important to be mindful that this minimum rate applies to an ‘experienced adult worker’.
There are differing rates of pay depending on an employee’s experience, age, and whether or not they are a trainee. The following table should prove useful for any employer seeking to identify the relevant NMW for their employees:
| EMPLOYEE | PERCENTAGE | NMW |
| Experienced adult worker | 100% | €9.15 |
| Worker under the age of 18 | 70% | €6.40 |
| Worker over 18 and in first year of employment | 80% | €7.32 |
| Worker over 18 and in second year of employment | 90% | €8.23 |
| Trainee in the first 1/3 of training course | 75% | €6.86 |
| Trainee in the second 1/3 of training course | 80% | €7.32 |
| Trainee in the third 1/3 of training course | 90% | €8.23 |
In essence, an employer can pay less than the national minimum wage to an employee who is:
- Under the age of 18;
- In the first two years of their employment having attained the age of 18; or
- A trainee undergoing a course that satisfies certain statutory requirements.
PRACTICAL CONSIDERATIONS
Alan Price
In light of the increased minimum wage, it is advisable to complete an audit of your budget and finances. This will help you to assess the impact the increase may have on your business and your finances.
It may be the case that you have some employees who require an increase, you may have a lot of employees, or you may have no such employees. Engage with your accounts team and identify how many of your employees are affected and identify precisely the total cost of the increase.
This should be done in light of the lower PRSI scheme that was introduced to help employers cope financially with the change.
In light of the above points, what is the new break-even point for the business post January 2016?
- Are you aware that the National Minimum Wage Act permits employers in extenuating circumstances to apply to the Labour Court for a temporary exemption from having to pay employees the NMW? If the above assessment identifies a critical business risk in increasing wages then you may be able to secure a temporary exemption. Alternatively, employers may need to seek pay cuts from those earning above any new NMW level, reduce employee hours, increase prices, consider lay-off or redundancies, etc.
- 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?
- If some of your employees have attracted an increase then you may need to amend their contract of employment 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 who were already earning €9.15 per hour or higher coming to you looking for a pay increase as well simply because they are now earning in or around the new 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 employers’ bodies, particularly those within their industry. 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.
Photo (main): Dennis Skley
About the blogger
With over 15 years’ experience in employee relations, Alan Price is managing director of Peninsula Ireland, a subsidiary of the award-winning Peninsula Business Services which houses the largest team of employment law and HR experts.
Alan is also elected director and trustee for the Chartered Institute of Personnel and Development (CIPD), and also sat for four years as a board director at The Chambers of Commerce Ireland.
