As the New Year looms, Cork’s small and medium businesses are bracing themselves, says Cork Business Association (CBA). With a likely hike in the national minimum wage, the possibility that VAT will not be reduced for hospitality businesses, and the full commencement of pension auto-enrolment, many SMEs say that the combined burden could be more than they can absorb.
Recent media reports indicate that the Low Pay Commission has recommended a 5 per cent increase to the National Minimum Wage, which would take it from €13.50/hour to around €14.15/hour if approved by the Government. While businesses support a living wage, this increment compounds rapidly across payroll, with knock-on effects across all salary bands.
Although larger businesses may already operate pension schemes or pay above the minimum wage — and thus feel less impact — CBA is predicting this will be difficult for vulnerable small businesses already under strain. There is concern that employers may be forced to reduce staff hours, delay hiring, or absorb the cost in a way that jeopardises viability. “Or we will see more closures in January, as it’s too much too quickly”, says CBA President and Head of Tax at Xeinadin, Dave O’Brien.
This challenge does not exist in a vacuum says O Brien. “Many in hospitality are still recovering from the increase in VAT rates — which Government has hinted will not be reversed in the upcoming Budget — squeezing already narrow margins across pubs, restaurants, and cafés. Overlay this with the introduction of pension auto-enrolment from 1 January 2026, and the weight on small employers, including other struggling sectors like retail, becomes heavier still.”
On top of that, businesses are being hit by the continued rise in food and raw material costs, and in particular soaring regulation-related charges on energy, which show no sign of abating. “Certain sectors are already operating on thin profit margins, and are bracing themselves for more costs in the New Year, meaning any additional wage cost will be acutely felt”, continued O’Brien. “They are being squeezed from multiple directions. Sudden jumps in wage, pension and operating costs may force tough decisions. One change at a time is manageable; many at once is perilous. We need to space out these increments to businesses and supports need to be considered to help them cope”.
“The government needs to consider that wage rises beyond sustainable levels can lead to reduced hiring, staff cuts, or automation — outcomes nobody wants. SME’s are the backbone of our economy and we can’t squeeze them out.”
CBA is calling for phased implementation and supports. “Rather than front-loading all changes at once, — sectors with low margins — should receive support (grants, tax credits, PRSI relief) to buffer the impact. Advisory services, subsidies, or interest free loans could be introduced to help businesses manage payroll systems, compliance, and financial planning around these changes.”
“We understand that workers must see their contribution valued in the form of fair wages and future pension security. However, asking too much, too soon risks destabilising the very businesses that create those jobs. If businesses grow, so too will salaries.”
The message from CBA is clear. The economy thrives when its small businesses thrive: in vibrant main streets, cafés, boutiques, hotels, and services. If these operators are weakened, the ripple effects are broad — on employment, community vitality, and investor confidence.
“We encourage Government to pause, reassess the scale and pace of reform, and work hand-in-hand with local business groups to craft a more sustainable path,” concluded Dave O Brien, CBA.
For more on Cork Business Association, see www.corkbusiness.ie