Please note that this article is intended for educational purposes only and should not be deemed to be or used as legal, employment, or health & safety advice. For guidance or advice specific to your business, consult with a qualified professional.
As an employer running a small business in Ireland, meeting the national minimum wage requirements is an important legal obligation. This guide covers everything that you need to know, including the minimum wage for each employee category, the importance of paying it, how to calculate it and any exemptions. It also looks at the living wage and how this differs from the national minimum.
What is the national minimum wage?
The national minimum wage is a legal requirement that all employers must meet. It sets out the hourly wage that you must pay each of your employees, depending on which age category they fall in.
The rate can change annually and has increased in 2021. This minimum wage exists to protect workers in the labour force and helps to create a minimum standard of living.
What is the national minimum wage in Ireland?
The national minimum wage in Ireland was increased on 1 January 2021 and differs depending on age. To receive the national minimum wage of €10.20, the employee must be aged 20 or over.
The minimum hourly rate for 19-year-olds is €9.18. For those aged 18 it is €8.16 and any employees under 18 must receive at least €7.14. The Irish minimum wage is relevant to gross pay and includes the employee’s basic salary plus any bonus payment or shift premium.
If you provide an employee with board or lodging an allowance is included in the Irish minimum wage, including €3.45 per day for accommodation and €0.91 per hour worked for meals.
These wages are set by the Government following recommendations from the Low Pay Commission and are generally announced during the budget in October before coming into effect from January.
Why is minimum wage important for small business owners?
Setting a minimum wage helps to make employers accountable and provide employees with a minimum standard of living. Fair pay helps employees to feel valued and as a small business, the satisfaction of your employees can be essential for maintaining productivity.
For employers that do not comply with the National Minimum Wage Act, there are punishments including fines. Anyone who suspects that they are not being paid the correct amount can request that the Workplace Relations Commission investigate.
Are there any exceptions?
There are some exceptions employers should be aware of. For example, if an employee is a close relative of the employer, such as a spouse, parent, child or sibling, and the employer is a sole trader, then the minimum rate does not apply.
Employers are also exempt if the employee is defined as a craft apprentice within the meaning of or under the Industrial Training Act, 1967 or the Labour Services Act, 1987. Apprenticeships can be in a range of roles but some of the most common are plumbers, chefs, accountants, carpenters or mechanics.
What is the Irish ‘living wage’?
Employers can of course pay above the minimum wage. The national living wage is based on the idea that all workers should earn enough money to be able to afford a socially acceptable standard of living. It considers essential basic costs such as housing, food, clothing, transport, health, education and social activities.
The living wage in Ireland is currently set at €12.30 per hour and this figure is derived from Consensual Budget Standards research and updated annually in the third quarter of the year.
What is the difference between the national minimum wage and living wage?
The national minimum wage is the legal minimum that an employer can pay its staff whereas the living wage is calculated based on what an individual needs to meet the basic costs of living and is not legally enforced by the government.
Paying the living wage can benefit society and businesses through increasing spending power. It also helps to reduce reliance on social welfare.
How should small business owners plan for any changes to minimum wage?
Without properly managing your payroll, you risk not meeting your legal obligation to pay employees the national minimum wage. There are tools that you can use to help you manage and streamline this process.
To calculate the minimum wage, you can use an online wage calculator. For an hourly paid worker who’s pay reference period is one month, the national minimum wage should be multiplied by the number of hours worked during that reference period. For example, if an employee aged over 20 worked 100 hours at a rate of €10.20, they should be paid €1,020.
Using the Square’s software, employers can use the team management feature to help calculate and manage their entire team’s wages. Users can create accurate time cards that track time worked and flags any discrepancies between scheduled and actual hours worked.
As the minimum wage is raised in Ireland, you must also consider your budget and cash flow, ensuring that you have accounted for any increased labour costs in your cash flow forecasting.