Business owners have spent the past three years navigating the far-reaching impacts of the pandemic, only to immediately turn into the headwinds of spiralling cost inflation. It has been far from plain sailing.
And while inflation and Covid hangovers persist, the new year is set to bring new challenges for employers.
Among them, the minimum wage has jumped by over 12 per cent from €11.30 per hour to €12.70 per hour (for those aged 20 and over) from January 1st, and statutory sick leave entitlement has also risen from three days to five on top of up to five days paid domestic violence leave introduced in November this year.
And later in the year, if the Government manages to meet the latest of its regularly amended deadlines, auto-enrolment to a workplace pension scheme is set to kick in for all workers aged between 23 and 60 and earning more than €20,000 per year if they are not already signed up to an occupational (private) scheme. Finally, PRSI contribution rates will rise by 0.1 per cent in October.
Speaking to The Irish Times, owners of small and medium-sized (SME) businesses – which account for more than 60 per cent of employment across the State – express cautious optimism about 2024 despite the hurdles ahead.
‘2024 won’t be a year where we will be doing a lot of capital investment but it will be a year where we will try to tighten up costs and find more new customers’
— Caroline Horgan is chief executive of Scatterbox and Abbeylands Furniture
Caroline Horgan is chief executive of Scatterbox and Abbeylands Furniture in Meath, specialising in manufacturing and supplying home furnishings to retailers as well as supplying foam to furniture manufacturers.
She is cautious about 2024 and says survival will depend on being “as lean as possible”.
She says: “2024 won’t be a year where we will be doing a lot of capital investment but it will be a year where we will try to tighten up costs and find more new customers.”
As close to a quarter of her staff have left over the past year, cost challenges mean she cannot replace them.
“This time last year we had 40 staff; this year we have 31 (although we are advertising for two roles). Since I started running the business [in 1999], I don’t recall such challenging staff costs,” she says.
“It’s always been a pride that we never paid minimum wage, we would pay at least 20 per cent more. While I welcome the increase [to the minimum wage], we will struggle to bring our wages up at the same percentage,” she says, adding that a recent review and increase to staff wages will mean she will be “lucky to break even if not have a loss” this year.
As a business that relies on exports, Ms Horgan says the cost of selling pallets to Britain and Europe is becoming “extremely hard to absorb” and the cost of building a stand and participating in international trade shows has doubled from €25,000 to €50,000 in just the past year.
“We’ve considered whether we should actually exhibit at international trade fairs. But on the other hand, we’re on a small island and we need to get out there and have boots on the ground and meet our customers,” she says.
Mark Williams, owner of sports retailer The Sports Room in Wicklow, says supply chain issues that persist since the pandemic are his “biggest concern” this year. He says that as many retailers stocked up on sports gear during lockdown, manufacturers either struggled to keep up with demand, or over-produced.
![Mark Williams, owner of The Sports Room in Wicklow town: 'I don’t really have a negative outlook [for 2024], but you just want the supply chain to normalise, which is probably six or eight months away.' Photograph: Laura Hutton/The Irish Times](https://www.irishtimes.com/resizer/v2/4SFSWC6QNFENTKR665KKU7M6BY.jpg?auth=b3577c4bff91d80f87e4913b2501d69d3fa10d8423f241a42861d83073f83d46&width=800&height=533)
“The supply chain hasn’t recovered, and there hasn’t been much innovation in new products when the supply chain has been fighting to survive,” he says. “I don’t really have a negative outlook [for 2024], but you just want the supply chain to normalise, which is probably six or eight months away.”
Mr Williams currently employs seven staff in his store, which specialises in bikes as well as running and swimming gear.
In an increasingly competitive environment, he says his business is focused on enhancing the in-store experience and “looking at old fashioned customer service being at its absolute best”.
‘If minimum wage is going up and the people coming on board are inexperienced, it becomes quite expensive to pay people who cannot do the role’
— Mark Williams, owner of sports retailer The Sports Room
With difficulties in recruiting and retaining staff having already driven up wage costs, Mr Williams says that the higher minimum wage “makes one of your biggest overheads even bigger”.
He suggests there should be some kind of wage or training scheme for the retail sector to help bring people on board who add value to the business.
“Sometimes people see working in a shop as just standing at a till but in our store, you’ve got to have expertise and you’re helping with running the business. It’s a challenging role” he says.
“If minimum wage is going up and the people coming on board are inexperienced, it becomes quite expensive to pay people who cannot do the role. I think there are roles within retail and the service industry that need training programmes, and then people would be worth those wages and higher,” he added.
Regina Bushell, owner of Grovelands Childcare, also says that some kind of apprenticeship scheme could help address rising wage costs and staffing issues within the childcare sector.
With 130 employees across six childcare centres in the midlands, she says recruiting and retaining qualified staff is “extremely challenging”. She is looking to Spain and Portugal to find graduates, but that creates other issues with finding accommodation for staff.
“There’s one thing that the sector definitely needs and that’s an apprenticeship model. Before regulations changed in 2016, we would always have had some school leavers or mature people who wanted to go back to work, who came in and trained alongside our qualified staff and went on to get their qualification in childcare,” she says.
Ms Bushell adds that with a current fee freeze in the childcare sector, there is nowhere to pass on rising costs, or those coming down the line over the course of the coming year.
“We’ve been in a fee freeze now for the last two years and some people are really struggling with that,” she says. “Additional costs of labour entitlements, like increased sick leave and domestic violence leave – which is, don’t get me wrong, great for people who need it – that’s an additional cost that we hadn’t factored in now that our fees our frozen.
“As a business owner, I’m optimistic about facing the challenges and taking positive steps to deal with everything, but there’s no doubt that some providers are saying they can’t deal with this and they’re pulling out of the childcare market,” she adds.
Gareth “Gaz” Smith is the owner of Michael’s Restaurant, which employs 72 staff across three locations in south Dublin. Although there is no fee freeze in place for the hospitality sector, Mr Smith says there is only so much customers will spend, so he has been focused on shaving down the numbers on the back end.
“Purchasing is probably more important than your price point. It’s so easy for the hidden price increases just to hit you from nowhere. If that happens, it can start to feel overwhelming and relentless.
“We’ve been focusing for the last six months on getting to grips with the numbers so, going into the first quarter of this year, we know where we stand,” he says.
With the hospitality VAT rate having been restored to 13.5 per cent from 9 per cent in September, ongoing inflation, and now a rise in the minimum wage, Mr Smith says his focus is “just to get every job through the next 12 months” and hopefully create new roles.
“The hard part is going to be trying to manage staff expectations of pay increases. Anything that we do now can’t be taken back. The whole fight this year is going to be about staff retention and nobody losing their jobs,” he says.
Among restaurateurs and publicans, he says, the “biggest fear” this year is the looming deadline of May 1st to make repayment arrangements for VAT debts warehoused during the pandemic.
“Every single restaurateur and publican I know is concerned about that. That they just get through the first quarter by the skin of their teeth and run into quicksand with that. I think it will be the one that will have people handing back their keys,” he says.
Mr Smith says this is “not the year to pressure [business owners] on warehoused VAT”. Government should push out the deadline “nine or 12 more months”, he says.
Small Firms Association (SFA) director David Broderick says businesses face “several concurrent and substantial changes in the labour market” early this year, “with those in the retail and experience economy likely to feel the biggest impact”.
He warns that with the extent of these changes, coupled with ongoing external pressures of rising operational costs and inflation, “there is a growing concern that the €250 million package announced in Budget 2024 will not adequately support all businesses struggling to grapple with these changes”.
Veronica Murphy, senior consulting partner with Cork based SME consultancy Discovery Partnership and a member of the national SME and Entrepreneurship Taskforce, says that the changes are likely to add at least 20 per cent to wage bills over the next two years.
I think often that panicking or being fearful about it is worse than what happens. I believe if we stick to our principles and watch things like a hawk, we’ll be just fine
— Gaz Smith, owner of Michael's Restaurant
Her advice to SME owners is to gather data on all costs, sit down and examine the figures and cut down where they can – noting that utilities and raw material inputs are often where most savings can be made.
“On the labour side of things, with costs coming down the tracks, using more digital tools is really important. It could be using [technology] to get back the eight hours that Mary spends doing the Excel file every Monday. Many businesses still don’t realise how a small change, using a little bit of AI, could make an enormous change,” she says.
Ms Murphy also recommends that business owners make themselves aware of supports available through Local Enterprise Offices and the Small Firms Association, and funding options such as the Sustainable Energy Authority of Ireland EXEED grant scheme, and the Strategic Banking Corporation of Ireland’s growth and sustainability loan scheme.
Overall, though, Michael’s owner, chef Gaz Smith, says that while business owners are cautious about what the year will bring, some of the fear in the air about the economy is worse than the reality.
“We’ve all been saying for the last four years, ‘this is the year of the whitewash’ and it just hasn’t happened. I think often that panicking or being fearful about it is worse than what happens. I believe if we stick to our principles and watch things like a hawk, we’ll be just fine,” he says.
- Sign up for Business push alerts and have the best news, analysis and comment delivered directly to your phone
- Find The Irish Times on WhatsApp and stay up to date
- Our Inside Business podcast is published weekly – Find the latest episode here
