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SFA: Labour Costs A Going Concern

The majority of businesses in Ireland plan to leave staff numbers unchanged for the rest of 2014, while 7% expect to shed staff in the coming months, according to research from the Small Firms Association (SFA).

The SFA's jobs sentiment survey for the second half of 2014 found that 63% of small firms plan to retain employee numbers. Three in ten businesses hope to increase staff this year.

Regarding pay, over half of respondents (53%) expect their total pay bill to remain at its current level, while 45% of small firms expect their pay bill to increase.

According to Patricia Callan, director of SFA, Irish labour costs are still the 11th highest in Europe and 16% above the EU average.

She adds that, in terms of hourly labour costs, Ireland is 30.8% ahead of its nearest competitor, the UK, putting it at a distinct competitive disadvantage.

“Labour costs have risen in recent times; this reflects the impact of Budget 2014 on employers, with increases in employers' PRSI and health insurance.

“While some moderate wage growth will continue during the remainder of 2014, mainly in the form of performance-related bonuses rather than wage increases, these will be focused on the more strongly performing sectors of the economy, with many small firms not in a position to carry additional wage costs.”

Callan's recommendations for Budget 2015 include changes to employer PRSI as a means of tackling unemployment.

She says: “The government should reduce the lower rate of employer PRSI from 8.5% to 4.25%, reduce the marginal rate of tax, extend the entry point to the marginal rate and drop the pension levy. There must be no additional taxes introduced on labour.”

Callan concludes that the SFA's latest survey reflects a move in the right direction for employment trends.

“There are sectors such as traded services and hospitality that are showing strong job growth. For other sectors, job creation will be fragile and every step must be taken to ensure no additional taxes are placed on labour to ensure job retention and growth.” (September 2014)

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