Small businesses warning over minimum wage increase

The increase in minimum wage will lead to cosumers paying more for services according to local employers who say the latest additional cost is putting businesses under serious pressure.

The minimum wage increased by 80 cent to €13.50 per hour on 1st January directly benefitting an estimated 195,000 workers.

However, many small businesses are warning it will be the latest in a series of cost increases and that ultimately it could be the consumer that will have to pay in the form of higher prices.

Russell Bailey who owns La Bucca Restaurants in Ratoath and Dunboyne and Cafe Novello in Ratoath says the move will be the final nail in the coffin for some businesses who are already struggling to survive.

"Sick pay increasing as well the auto-enrolment pension coming down the line along with suppliers putting up their prices means it's going to be a very tough year for everyone in the hospitality industry," said the restaurateur.

"The only thing we can do is pass the increase onto the consumer because if we don't we go out of business," he added.

"The sums just don't stack up in the way that they used to."

Russell who represents local businesses in the Restaurant Association of Ireland said he put forward practical solution at a recent meeting with TDs in a bid to however it fell on deaf ears.

"I asked if anyone in government ever thought of taking business profiles or models of existing businesses and stress testing them with all of the additional increases that the government are adding and nobody could answer me.

"There should be somebody in government like an economist that could say what happens if we add this, this and this and at the same time increase VAT and run some kind of spread sheet to see if the business would survive. If they did that they'd realise so many can't.

"I equate it to a game of Jenga where they are blind foldingly adding extra blocks on top until the tower falls over and that is what's happening."

Traditionally in resturants it was a third, a third, a third. A third would go to the costs of your food and drink, a third would go to payroll and the other third would pay your rent, your rates and your variable costs. But payroll is now over 40 percent.

"It has gotten to the stage where restaurants aren;t financially viable anymore."

In October of last year Russell labelled the government’s decision to reject calls to reinstate the 9% VAT rate for the hospitality industry a “devastating blow” for the sector.

The business owner had made a plea for the government to reduce the VAT rate for the hospitality sector in the budget after announcing that his restaurant La Bucca in Ashbourne was to close at the end of the same month due to spiraling running costs.

Russell and his team should have be celebrating the 20th anniversary of his eatery instead the business owner shut the doors for the last time due to rising costs, VAT rate hikes and constant roadwork disruption that took its toll on businesses in the area.

VAT for the tourism and hospitality sectors was reduced to 9% during the Covid-19 pandemic at a cost of €1.2bn to the exchequer.

The previous 13.5% rate was reinstated in August 2023, despite the sector’s opposition. Talks had been ongoing to reduce to VAT rate in the sector to 9% but no such reduction was forthcoming in October's Budget announcement.