Challenges facing small businesses not being recognised, argues Isme

The scale of the challenges faced by small businesses was entirely predictable given increases to the minimum wage, restoration of the 13.5 per cent hospitality sector VAT rate and other cost increases that have resulted from Government policy measures, the Irish Small and Medium Enterprises Association (Isme) has said.

The organisation claims the position of small businesses and employers was not adequately taken into account while measures such as the recent 12 per cent increase to the minimum wage were being considered.

Isme strongly opposed the restoration of the higher VAT rate last September, arguing that retention of the 9 per cent introduced in 2020 due to the particular problems caused by the pandemic was essential to the survival of many businesses in the sector.

It argues for a range of other measures including that the lower, 8.8 per cent, rate of employer PRSI should be extended to support businesses adversely affected by the increased minimum wage; that future increases to the national minimum wage should not exceed the consumer price index (CPI); and that the 1 per cent training levy should be suspended given the substantial surplus in the overall fund.

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The Irish Business and Employers Confederation, which includes the separate Small Firms Association, is to host a meeting of industry organisations on Wednesday to consider the situation faced by businesses.

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Isme chief executive Neil McDonnell welcomed the move but suggested it was overdue.

“While we are frustrated it has taken so long to acknowledge the issues facing small businesses in particular, belated recognition is better than no recognition at all,” he said.

His organisation has again been critical of the scale of the package of supports to be provided by Government to small businesses, suggesting the money to be made available does not come close to addressing increased costs.

“While Government has hailed the promised support package of €257 million for small employers soon to be commenced, this amounts to one 10th of the increase in public-sector pay announced last month; despite the fact that small and medium businesses employ about 1.4 million workers, almost four times the workforce on the public payroll,” the organisation said on Tuesday.

On the specifics of the plan to replace the minimum wage with a national living wage, which contributed to the decision to increase the minimum wage in January from €11.30 to €12.70, it said the Europe-wide mechanism for setting the living wage rate – 50 per cent of average full-time earnings or 60 per cent the median full-time hourly income – had particular ramifications in Ireland because of the make-up of the workforce with public-sector earnings and the high proportion of people employed by large or multinational businesses distorting the figures.

“The very high level of wages enjoyed by workers in multinationals and in the public service simply cannot be matched by small employers. Benchmarking our minimum wage against these high wages is therefore doomed to fail,” it said.

Responding to the comments, the Irish Congress of Trade Unions said the high number of low earners and part-time workers in the Irish economy has the effect of dragging the median figure down.

The organisation’s policy officer, Laura Bambrick, said the organisation’s position is that the calculation should be based on full-time workers.

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