New 'Living Wage' to replace the National Minimum

The Government has announced plans to introduce a new 'Living Wage' which will replace the current National Minimum Wage in Ireland of €10.50 per hour. This new ‘Living Wage’ will be phased in over four years starting in 2023.

The new Living Wage in Ireland will be set at 60% of the median wage in any given year. For further details and to find out how the Living Wage will impact employers, read on…

What is a Living Wage?
A Living Wage is an hourly wage rate intended to enable employees to afford an agreed socially acceptable minimum standard of living. In 2021, Tánaiste Leo Varadkar asked the Low Pay Commission to undertake research on how best the Government can progress to a living wage. The new proposals are based on the Low Pay Commission’s recommendations.

Speaking about the Living Wage, Mr Varadkar said, "It’s really important we get the balance right and I think this proposal achieves that. However, I will be listening over the coming weeks for feedback before bringing a final plan to Government later this year.

"The most important workers’ right is their right to work, to have a job. That is why I am proposing we phase this in and I will be listening to employers’ views on these draft proposals," he added.

The draft proposals recommend that the National Minimum Wage (NMW) should remain in place until the Living Wage is fully phased in, in 2026. However, the NMW will increase incrementally over the years as usual, closing the gap between it and the Living Wage.

Come 2026, the NMW will cease to be. The Living Wage will be in effect and mandatory for all employers.

Why a Living Wage, and why now?
The Living Wage has previously been recommended by the Living Wage Technical Group.

Discussing whether a Living Wage was sufficient to live in Ireland, Mr Varadkar said that there will always be demands for the minimum wage to be higher. He added that, while 2.5 million people are working, the objective is to achieve full employment; "…we also want to make work pay and ensure that it pays better. So, whether you get up early in the morning or work late at night, we want you to be paid more, and this is a proposal to do exactly that. But it does need to be phased in."

He went on to say, "What we don't want to do is, in an attempt to do something good by increasing people's pay and increasing it significantly, is actually put employers in a position where they have to lay people off for a couple of hours because that's the unintended consequence sometimes of trying to do something good is that you actually do harm."

Regarding the timing of the announcement, Mr Varadkar said, "The average person in Ireland is going to get a pay increase this year, the vast majority of people will, and they will lose more than half of that pay increase in income tax, PRSI, and USC and we don't think that's fair.

"That's why we got that commitment to having a tax package in every Budget and that's why that's there, because we don't want to see people on average incomes, on €40,000 or €50,000 a year, losing more than half their pay increase on income tax, PRSI, and USC."

How will the incoming Living Wage impact employers?
The obvious impact that the incoming Living Wage will have on employers and business owners is increased costs. As Mr Varadkar stated, the intention is not to put employers under financial pressure which leads to reducing employees’ hours or letting staff go. So, it’s important that employers assess their own situation and calculate how the Living Wage will affect their bottom line.

Source: Peninsula