A 65 cent increase to the national minimum wage comes into effect from January 1st with the wage packets of hundreds of thousands of workers also set to be affected by the first auto-enrolment pension deductions.
The increase will take the minimum payable to almost all workers over the age of 20 to €14.15 an hour, an increase of almost 5 per cent, or about €25 per week, that will bring minimum basic salaries to €28,896 per annum for those working a 39-hour week.
The commencement of My Future Fund, the Government’s auto-enrolment pension scheme for workers not already included in an existing company or private scheme, means an estimated 750,000 workers will also see new deductions from any pay earned from January 1st.
The scheme automatically applies to those aged 23-60 earning more than €20,000 a year.
Under it, employees will initially pay 1.5 per cent of their gross salary, a figure that will be matched by their employers with the Government adding 0.5 per cent.
It means that a worker on the new minimum wage will pay about a third of the increase they receive, or €8.28 a week, into their new pension fund with their employer paying the same and the Government contributing a further €2.76.
It means the worker would start to amass a little under €20 per week or just over €1,000 per annum towards a fund from which they will ultimately receive a pension in addition to their existing State entitlements.
Somebody earning the national average wage of about €50,000 will initially pay about €15 per week and amass about €1,820 per year in total contributions.
The contributions will gradually increase over the coming decade until they reach 6 per cent of salary from both the worker and employer with 2 per cent coming from government.
Those enrolled automatically in the new scheme will have the opportunity to opt out after six months when their initial contributions would be refunded to them.
Just over 200,000 people earn the minimum wage in Ireland, a growing number disproportionately made up of women, younger workers and people with disabilities. Many of them are employed in the retail, hospitality and service sectors.
However, the rate impacts on thousands more whose pay is linked, often informally, to the national minimum wage, including thousands of young people whose pay is based on a proportion of it.
There have been repeated calls by trade unions and youth representatives for these “sub-minimum” rates to be abolished but the proposals have been opposed by small business groups who say the rates are paid to a relatively small number of less experienced workers who would find it harder to find jobs.
There have also been calls for changes to the rates paid to those starting apprenticeships who can be paid well below the minimum wage regardless of age.
The Irish Congress of Trade Unions, meanwhile, has criticised the decision by the Government to delay implementing a living wage, which it says would have resulted in an additional 30 cent increase on January 1st.
The decision to delay the living wage introduction from 2026 to 2029 will, it says, cost those currently on minimum wage about €600 in lost earnings during the coming year.
Ictu general secretary Owen Reidy said the delay came “while at the same time, the biggest minimum wage employers, the hospitality industry will pocket €681 million in VAT each year”.
He said that “where a business is struggling, any State support should be evidence-based, targeted and time limited. Instead, Government has left workers to pay a hefty price for reducing business costs.”