Tag: wage

58% of Irish SME businesses are confident they can meet new wage requirements

Nearly six out of ten (58%) Irish SME businesses are confident they can meet all new mandatory wage hikes and supplementary business expenses linked to staff expenditures in 2024, according to the latest Linked Finance SME Confidence Index, based on research conducted by B&A.

On the 1st of January 2024, businesses saw a 12% surge in the national minimum wage, climbing from €11.30 to €12.70 per hour placing fresh challenges and expenses on to SME businesses. In addition, SMEs are confronting additional hurdles including the introduction of new sick pay and parents’ leave entitlements.

In addition to the mandatory wage pressures, 37% of SME businesses expect to implement wage increases the coming year, with only 2% of businesses citing the need to reduce staff numbers to manage the increased wage costs.

Over the past 12 months, 92% of businesses have maintained or increased staff levels, showing the resilience and demand within the labour market in Ireland. This comes as the latest CSO unemployment rate for February fell to 4.2% from the rate of 4.5% recorded in January 2024, and from 4.1% in February 2023, as the Irish labour market remains tight.

Overall, the Business Optimism Index rose year-on-year from 60.1 in Q4 2022 to 62.4 in Q4 2023, but it is down from 64.13 in Q3 2023. Yet, 70% of SME businesses anticipate improved or stable results in Q1 2024 when compared with Q1 2023. This suggests the decline in optimism is more likely a recalibration rather than negativity, signalling a more cautious outlook among SMEs as they go into 2024.

Niall O’Grady, CEO of Linked Finance, said:

“The confidence exhibited by Irish SMEs in meeting new mandatory requirements at a time of continued economic challenges is a testament to their resilience and adaptability. As businesses continue to navigate challenges and pursue growth opportunities, strategic foresight and proactive measures will be crucial in ensuring long-term success.”

Nearly half of all SME businesses (49%) implemented a price increase in Q4 2023. While there are some tentative signs of a plateauing, there is large difference in the businesses willing to push prices onto customers, as 63% of larger SMEs (those with 10+ employees) increased prices in Q4 2024, compared with only 39% of micro-SMEs (those with 1-3 employees).

According to the flash estimate of the Harmonised Index of Consumer Prices (HICP) from the CSO, the inflation rate slowed to 2.3% in February 2024, yet businesses continue to feel the pinch, especially smaller SME businesses who may be experiencing heightened market competition and the imperative to maintain close customer relationships.

On a positive, 59% of SMEs reported either higher or the same level of operational profits in Q4 2023 compared to 12-months ago, suggesting that businesses are effectively managing their operations and remaining competitive in the market.

Niall O’Grady, CEO of Linked Finance, said:

“SMEs play a pivotal role in driving innovation and sustaining economic growth. At Linked Finance we are dedicated to empowering these businesses through accessible and efficient funding solutions. As SMEs navigate today’s competitive economic landscape the research shows positivity and resilience among SMEs, and with almost €300M in capital loans already provided to SMEs across Ireland, Linked Finance stands ready to continue supporting SMEs on their journey.”

For more information about the Linked Finance SME Index, please visit https://www.linkedfinance.com/.

Unemployment continues to fall to 4.1%, but wage pressures may be past their peak

The main unemployment rate was 4.1% in July on a seasonally adjusted basis, down from 4.2% in June and down from a level of 4.2% twelve months ago. The seasonally adjusted number of people unemployed fell by 3,600 in July but was up by 100 in the past 12 months.

Jack Kennedy, senior economist at global job site Indeed, comments on the latest CSO data:

“The labour market remains incredibly tight with the unemployment rate at 4.1% — the joint-record lowest since 2001 according to the latest revised figures— and is proving resilient amidst global challenges. The continuing low level of Ireland’s unemployment rate reflects the culmination of concerted efforts by both the public and private sectors to foster a robust and sustainable economy.

Recent data from Eurostat shows that the Eurozone economy returned to growth in the second quarter, as the euro area grew 0.3 per cent in the three months to July, after stagnating in the previous quarter. Unemployment in the eurozone also dipped to a new all-time low of 6.4%. This is an indication that the economy is stabilising; however, it is essential to remain cautious and vigilant.

Economic success is not without challenges, and as the labour market remains at near full employment, the coming months could reveal sector squeezes.

Pay pressures remain strong and workers will push for higher wages to compensate for high inflation. That said, wage pressures may be past their peak. The Indeed Wage Tracker, based on advertised pay for new hires, showed a further easing to 4.3% y/y in June, down from a peak of 5.5% in March. 

This corresponds with a gradual softening in employers’ hiring appetite, though the latter remains strong. The latest figures from Indeed show that job postings on Indeed Ireland are 30% above the pre-pandemic baseline as of July 2023 (Fig. 1).

The country’s commitment to nurturing a highly skilled and educated workforce has bolstered productivity and competitiveness. As we remain at full employment, now is the time to future-proof the Irish economy. Prioritising various educational routes, including apprenticeships, and investing in sustainable career options for young people who might otherwise seek to emigrate, can ensure our highly talented workforce remains a key driver of economic growth.