New 'Living Wage' to replace the National Minimum Wage

First published: June 15th 2022
Last updated: November 17th 2022

The Government has now agreed the details of a new 'Living Wage' which will replace the current National Minimum Wage in Ireland of €10.50 per hour.

This new ‘Living Wage’ will be phased in over four years beginning with the 80c increase in the National Minimum Wage on 1 January 2023.

The new Living Wage in Ireland will be set at 60% of the median wage in any given year. For further details and to find out how the Living Wage will impact employers, read on…

What is a Living Wage?

A Living Wage is an hourly wage rate intended to enable employees to afford an agreed socially acceptable minimum standard of living. In 2021, Tánaiste Leo Varadkar asked the Low Pay Commission to undertake research on how best the Government can progress to a living wage. The newly agreed figures are based on the Low Pay Commission’s recommendations.

The Government has now agreed that the National Minimum Wage (NMW) will remain in place until the Living Wage is fully phased in by 2026.  NMW will increase incrementally over the intervening years until the gap between the National Minimum Wage and the Living Wage is closed.

The first step towards reaching a living wage will be the 80 cent increase to the National Minimum Wage from 1 January 2023 to €11.30 per hour. This will be followed by gradual increases to the National Minimum Wage until it reaches 60% of hourly median earnings in 2026.

In 2023, it is estimated that 60% of median earnings would equate to approximately €13.10 per hour.

Why a Living Wage, and why now?

The Living Wage has previously been recommended by the Living Wage Technical Group.

Speaking at the announcement of the Government’s agreement on the living wage, Tánaiste Leo Varadkar said:

"Improving terms and conditions for workers must be one of the legacies of the pandemic. Across the country thousands of minimum wage workers, regardless of what job, sector or location they work in, will benefit from this increase. In addition, many more employees will feel the benefits of knock-on increases resulting from the changes.

"The introduction of a living wage is an important step we are taking towards eradicating low-wage employment for all workers and it will be implemented gradually over a four-year period. Once it is successfully in place, the Low Pay Commission will investigate if we can increase the living wage further to reach 66% of hourly median earnings.

"Extensive research and consultation took place - including with employer and worker representative groups, unions and the public - in order to ensure we introduce the living wage in a way which will benefit workers whilst also being manageable for businesses. It’s important to get the balance right."

How will the incoming Living Wage impact employers?

The obvious impact that the incoming Living Wage will have on employers and business owners is increased labour costs. As Mr Varadkar stated, the intention is not to put employers under financial pressure which leads to reducing employees’ hours or letting staff go.

The four year lead in time is designed to give employers the chance to assess their own situation and calculate how the Living Wage will affect their bottom line.

On the point of preparation, it’s a good idea to consider how these changes will need to be reflected in your employment documentation. That way, you’ll avoid any unwanted problems that can often arise when employment law compliance is left to the last minute.

Need our help with the Irish minimum wage and Living Wage?

For further advice on the National Minimum Wage and incoming Living Wage from an expert, our HR consultants are ready to take your call on 1800 719 216.