National Minimum Wage Increase- Key Notes for Employers

The Government has announced an 0.80-cent increase in the National Minimum Wage to €11.30 p.a., with effect from the 1st of January 2023. The new rates are as follows;

National Minimum Wage – rates with effect from 1 January 2023

                                                                                    Minimum Hourly Rate of Pay €                     % of National Minimum Wage

National Minimum Wage

 (Aged 20 and over)                                         11.30                                                                               100

Aged 19                                                                 10.17                                                                                90

Aged 18                                                                 9.04                                                                                   80

Aged under 18                                                   7.91                                                                                   70

This measure follows a recommendation by the Low Pay Commission and is expected to result in at least 164,700 people receiving an increase from the current rate of €10.50 from next year.

Employers will now have to carry out costings around this new rate of pay for those earning the minimum wage and should also consider the possibility of knock-on claims for increases as a result, for those earning more than the new rate already, as the gap between pay levels is narrowed. In this regard, employers should be mindful that there is no automatic right to a similar increase for someone being paid in excess of the minimum wage unless the rate is contractually linked to the minimum wage.

Other considerations for employers are where consolidated rates exist. If employees are already earning the €11.30 rate, which currently includes a premium for things such as night shifts, or Sunday work, then they too need to increase the basic rate accordingly or they face a claim for being in breach of the Organisation of Working Time Act.

The government has stated that this increase in the National Minimum Wage is the first step toward the alignment of the minimum wage with the indicative Living Wage established by the Low Pay Commission. The Commission has indicated that using the government formula of 60% of the median wage in any given year, the Living Wage for 2023 would have been €13.10 per hour. It is expected that the Living Wage will be phased in on an annual basis, between now and 2026, at which time it will become mandatory. 

Employers should ensure to keep adequate records to prove they are complying with the National Minimum Wage rate.

Given the current cost of living crisis, we recommend that employers should start budgeting for the changes ahead both next year and in the coming years.