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Tourism businesses have warned the cumulative impact of changes to payroll costs, including an increase in the national minimum wage, could harm Ireland’s competitiveness as a holiday destination.
It is estimated the owners of bars, restaurants, and visitor attractions could see their labour costs increase by over 10% this year as a result of the changes and by 31% annually in the longer term.
The increases will be somewhat smaller for hotel operators, at 6% this year and 21% from 2026 onwards.
A report commissioned by Fáilte Ireland shows half of all owners of businesses in the tourism and hospitality industry fear the increase in the minimum wage to €12.70 an hour since January will have a significant impact on their payroll costs.
The figure increases to 77% for businesses operating in the food and drink sector.
A survey of more than 1,200 business owners in the tourism industry found 59% said they would deal with the extra labour costs by increasing their prices to customers, while 37% said they would reduce worker hours to maintain staff costs at their current level.
However, the report said most businesses did not actually want to increase their prices but felt they had to cover their costs somehow.
Three out of 10 owners said they would address the issues by employing fewer staff, while 28% said they would absorb the cost increase by lowering their operating margins.
About one in five businesses claimed the increase in the national minimum wage would have minimal or no impact on their business.
The most common reason provided why they felt they would largely be unaffected by the increase was because they already paid their staff well above the minimum rate.
However, they also acknowledged other staff employed above the minimum wage would expect proportionate increases to their salary.
“It perpetuates the upward spiral of all costs. It sets a floor for expenses that are uncompetitive against our competitors in Europe when competing for visitors who have a choice on where to go on vacation,” said one business owner.
Among other key changes in employment costs made as a result of recent Government policies are increased public holidays, the introduction of statutory sick pay, PRSI increases and the rollout of auto-enrolment for pensions.
Other measures with the potential to impact on the tourism sector are extended parental leave and proposed remote working legislation.
In addition, the Government has given a commitment to gradually increase the national minimum wage until it reaches the national living wage in 2026 when it is estimated it will be about €15 an hour.
Since January 1, 2024, the national minimum wage rose by €1.40 to €12.70 an hour — an increase of 12.4%.
The report by consultants Crowe pointed out a comparatively high share of employees in the accommodation and food services sector are at the lower end of the wage bracket, which makes it more exposed than other sectors to increases in the national minimum wage.
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