Minimum wage hike could cut net pay

Thousands of workers could be significantly out of pocket as a result of the proposed minimum wage increases due to an anomaly created by the abolition of the €100 weekly PRSI allowance three years ago.

Fianna Fáil finance spokesperson Michael McGrath said the suggested 50c pay rise would likely have a knock-on effect on those earning just above the minimum wage which could see workers’ net pay reduced by hundreds of euro.

Those earning just under €9.40 an hour — the cut-off point at which PRSI is paid — whose income rose to €9.60 would pay €749 more PRSI per annum and reduce their take home pay by €436 a year. Up to 120,000 workers could be affected, to varying degrees, by the anomaly which acts as an incentive to reduce the number of hours per week they work, Mr McGrath said.

Meanwhile, Enda Kenny has responded to a threat by businesses, to hike up costs for customers because of a rise in minimum wages, by promising to balance out employers’ costs by reducing PRSI payments.

The Taoiseach was forced to respond after a row threatened to engulf one of the first pre-election, and budget, measures being flagged for workers.

He confirmed the Cabinet will tomorrow consider a report from the newly formed low-pay commission — which will recommend increasing the minimum wage from €8.65 to €9.15 an hour. The report will also be launched today.

“But also, you have to balance that with a package in the budget because obviously any increase in the minimum wage impacts on employers who employ people in the first place.”

He said the Government would consider a package of measures to help “balance out” any potential 50c increase in wages. The same move was applied when the Coalition originally increased minimum wages, shortly after forming government in 2011.

“We did this before, so that you balance it out in terms of PRSI, for employers,” he explained.

Dublin North West Labour TD John Lyons said if businesses were reaping benefits from a growing economy, he asked why should workers not get the same. Most people already on the minimum wage also relied on subsidies, he said.

Furthermore, a 50c increase for the 75,000 workers on that level of pay was a “modest increase”, he added.

Jobs Minister Richard Bruton said that any wage rise must take account of what businesses could afford. Nonetheless, the Government wanted to see the growth in the economy shared and the issue would be considered as part of the budget, he said.

But business owners have expressed opposition to any wage increase. Paul Treyvaud, who runs a restaurant in Killarney, Co Kerry, said the Coalition could give money back without asking businesses to do so. He warned wage hikes would be passed on to customers.

But trade union Unite, which represents sectors with low pay, said many people had been left behind in the recovery.