Salaries for top roles in the cash-rich finance and technology sectors may be up by one fifth, but it isn’t just in multinationals that employers face demands to pay more. Some indigenous SMEs are also feeling the heat, if for different reasons.
Sam Donnelly runs Sam's Barbers, a chain of seven salons in Dublin. He pays his staff of almost 40 in or around the "living wage", which is estimated by civil society and worker groups to be €12.90 per hour. His employees also get commissions for how many haircuts they do each week.
A good barber usually earned commission of about €250 per week before the pandemic, he says. But with business in its city locations still down by almost 40 per cent as office workers keep working from home, commissions have dropped to about €100. “And that’s if they’re lucky,” says Donnelly.
The average barber’s weekly pay has fallen from more than €700 to about €550.
“Now they want to make up the difference with salary increases and I can’t afford it. There is only so much extra cost I can push onto customers,” he says.
Donnelly has so far held the line on hourly rates. This has cost him barbers. Sam’s operates as a cashless chain – it only accepts card payments and most business is pre-booked online. Donnelly believes many other barbers outlets are paying their staff extra cash under the table.
“In three different interviews we did recently, when the candidate was told the hourly rate, they asked us how much extra cash we’d give them at the end of the week on top of that. They tell you what they want and walk away if they don’t get it,” says Donnelly, a national council member of the Small and Medium Enterprises Association (Isme).
He also owns two coffee shops. Baristas, too, are “naming their price”.
“I want to look after my staff because, without them, I’d have nothing. I don’t want slave labour. But this is putting me in a real rut.”
Inflation
Currently, the only way is up for the pay rates of most Irish workers. Recruiters say increases are "across the board" as general inflation of more than 5 per cent prompts employees to seek to protect their standard of living. Wages across the economy were up by an average of 5.4 per cent in the third quarter of last year, according to the Central Statistics Office.
Labour shortages in the tightest of markets are compounding the effect for many employers.
Unions have suggested workers should seek further increases of 2.5 to 4.5 per cent in 2022, while Bank of Ireland’s research suggests most workers will expect 3 to 4 per cent. In reality, many, especially those who change jobs or threaten to do so, will see even bigger increases in 2022.
At the lower end of the scale of increases, public sector workers recently got a rise of 1 per cent last October, with the same again due later this year. Construction workers negotiated a 2.8 per cent pay rise from this month, with a similar rise locked in for February next year. The rise this month brings the industry-wide hourly rate for many construction craft workers up to at least €20.52 per hour, as part of a sectoral employment order overseen by the Government.
"But the management professionals, the engineers and project managers – they're commanding much more serious increases," says Tom Parlon, the director general of the Construction Industry Federation. Figures from recruitment firm Hays Ireland suggest some top construction professionals saw their wage rates rise by 8 to 10 per cent last year.
A salary calculator from Morgan McKinley, another recruitment firm that is predicting large increases for 2022, estimates the rates that professionals in the sector can now expect. It suggests structural engineers with five years’ experience can expect up to €80,000, while an experienced quantity surveyor might be paid up to €110,000 in Dublin, or €90,000 if located in Galway.
Ulster Bank staff will be balloted shortly on a deal negotiated this week by the Financial Services Union (FSU), which includes "inflation-proofed" pay rises of 4 to 6.5 per cent. Entry-level bank workers will now start on salaries of more than €30,000 per year.
The FSU says it has lodged similar pay claims at Permanent TSB and AIB. A pay claim of a similar magnitude with Bank of Ireland has been referred to the Workplace Relations Commission.
Hospitality
Hospitality businesses, hollowed out by the pandemic, will struggle to afford any increases, as will many retailers. But it won’t stop the upwards pressure from modestly-paid staff who are at the sharp end of the impact of inflation.
Some major players in the grocery retail sector, meanwhile, are set to share the spoils from the bumper trading of the pandemic. Lidl, which already pays staff at least the living wage (€2.40 per hour above the €10.50 legal minimum rate), this month announced average pay rises of 5 per cent for its workers.
"Where employers can afford pay rises, they should do them," the Tánaiste, Leo Varadkar, said last month. Of all employers, multinationals are most able to afford it. Pay inflation is rampant among the white-collar professionals who work for foreign direct investment (FDI) employers, and the local professional firms that service them.
The increases are driven by the pandemic, which staunched the flow of internationally-mobile professionals, many of whom change jobs every few years anyway to boost their earning power. This has provided a boon for the wages of locally-based professionals, who are cashing in.
“I’m 16 years in recruitment and I’ve never seen it like this before,” says Trayc Keevans, the global FDI director at Morgan McKinley. She says most jobseekers in relevant sectors will have “five or six” job offers if they are willing to move. Most can expect counteroffers from existing employers.
The salary estimates from firms such as Morgan McKinley, Hays and Robert Walters all broadly tally – some sought-after roles saw pay rates rise by 15-20 per cent or even more in the last year. Salaries for many roles are expected to go up by a further 5-10 per cent in 2022, or by close to a fifth for a select few niche professionals in high demand.
The technology, finance and pharmaceuticals sectors that are dominated by foreign employers lead the way. According to Morgan McKinley’s salary calculator, the average tax accountant with five years or more experience can expect up to €75,000, while a senior tax manager may get up to €110,000. The head of IT at a large firm can expect up €160,000.
Buoyant sector
In the perpetually buoyant tech sector, Hays Ireland cites current average salaries of €76,000 for full stack developers, while Morgan McKinley suggests experienced software development architects can expect to be paid up to €100,000.
As the staffing crisis bites and companies beef up their human resource departments to cope with a perpetual hiring process, recruiters themselves are in high demand and this is being reflected in their pay. It costs up to €80,000 per year to hire a typical talent acquisition partner, and up to €120,000 for a head of the recruiting function, Morgan McKinley says.
Corporate lawyers, scientists for the biopharma industry and data centre managers are all in desperately short supply, driving up wage rates.
“It will not be beneficial to anyone if this sort of salary inflation continues,” says Keevans. “If it keeps up, it may make Ireland less competitive.”
For now, she says, Ireland remains broadly competitive with other European locations, most of whom face similar pressures. But Dublin, a major European tech hub, may soon be in danger of becoming uncompetitive when it comes to pay for software engineers.
Keevans believes the current spike in wage inflation will even out over the year as the flow of international workers picks up again: “But if it doesn’t, some employers are going to have to take a stand and say ‘we can’t keep doing this’.”
Maureen Lynch, a director of Hays Ireland, says reported delays of up to 12 weeks in processing visas for international workers is not helping the situation.
“It is creating a fantastic opportunity for local professionals. That’s where the salary inflation is coming from,” she says. “The sustainability question is real: just how far can organisations go on pay? But it isn’t all about salaries. There are other things to consider.”
Generous benefits packages, including healthcare and gym membership, are now standard in many executive roles. But Lynch says any organisation that isn’t offering a degree of remote working needs to consider it, as it is expected by many employees. Some FDI companies are said to be using the “carrot” of six weeks each year based abroad to hire foreign staff.
“Also, in lockdown, you had people in Cork, Limerick and Waterford taking jobs in Dublin on Dublin salaries,” says Lynch. Take a newly qualified accountant outside of Dublin with two years experience who might normally be on €50,000. Suddenly they get €60,000.
“As working from home ends and staff have to go back to the office at least part-time, they will look at their salary and probably still be prepared to go to Dublin two days per week.”
Smaller employers
Smaller indigenous employers seeking professionals cannot match the salaries on offer in FDI companies. But some staff do jump ship from FDI employers to local businesses to be “closer to decision-making level”, says Lynch.
Economist Tom O'Donnell, the co-director of left-leaning think tank, the Nevin Economic Research Institute (Neri), said it is inevitable that indigenous employers will come under pressure to keep up with foreign firms' pay rates.
“There will be significant wage inflation [in the domestic sector]. It is reasonable to expect across the board pay increases. If you don’t want churn, you need to pay your staff. It is not up to workers to ask for lower increases. The Government must try to control inflation but a lot of this is also out of our hands.”
He cites energy costs as an example. O’Donnell says a defining factor in the current round of wage rises will be whether elevated levels of inflation in the economy are temporary, as central bankers insist, or if it sticks for longer. For now, the Central Bank of Ireland says it does not see evidence of a wage-price spiral.
“But if inflation stays above 5 per cent and this is going to be sustained, then wage claims need to be even higher,” says O’Donnell. “If the inflation problem is Europe-wide, there is no reason why Ireland should lose competitiveness.”
A sensible course of action may be for short-term pay agreements between employers and unions, he says.
Flexible working
Back in the indigenous SME sector, the ability to fund pay increases is a real problem. The most recent research from Isme, in a trends report late last year, suggested 30 per cent of smaller businesses couldn’t afford any pay rises, up from 17 per cent in the middle of the year.
“Work contracts are going to get revised with flexible working and other changes,” says Neil McDonnell, Isme’s chief executive. “There might be an opportunity there to net that off with pay increases for some employers. But the market is fluid. It really is a jobseeker’s market.”
Many SME owners quote the housing crisis as a complicating factor.
“We have employees coming in and explaining how they need an increase to pay rent and when our HR try to help with the financial planning, they need an increase or more overtime,” said Ciarán Murtagh, the managing director of midlands precast concrete company, and Isme member, Shay Murtagh.
At Sam’s Barbers, Donnelly believes the Government should give an incentive to cashless businesses such as his, to help it compete with other businesses that use under-the-table cash payments to get an edge in the employment market.
He suggests a cut in employers’ PRSI for cashless businesses, which would reduce the overall cost of employment and give headroom to compete with the black market on pay.
“It would flush out the cash-in-hand businesses. We need to do something, because if we can’t get staff because we can’t afford the pay rates, how will we ever expand?”
