Will the VAT rate increase cause job loses?

In 2018, the Irish government decided that the Value Added Tax (VAT) rate for the tourism and hospitality sector would increase from 9% to 13.5%, effective from 1 January 2019.

Listening to the reaction of some pub owners, you could be left thinking that this 50% increase in the rate will be dreadful for businesses, and cause lots of job losses.

Should people working in restaurants and pubs should be worried about their jobs?   Will staff be laid off, or have their hours reduced?   Will businesses stop hiring new waiting staff, bar-tenders and chefs in 2019?

No one will know for certain until the year is well under way. 

But it looks unlikely

Yes, there will be some price increases, probably between 20 and 25c per pint (see below for an explanation of this).   Some customers will be annoyed, and January might be a little drier than usual while they get over this.   Price increases in expensive venue will be proportionately higher:  a meal that is €100 now will likely increase to €104.50.  But probably the effect will be small, and barely notice by most people employed in the hospitality industry.

That said, maybe some jobs which would have been filled in early January will be delayed a little - but this is likely to be due to worries about the effect of Brexit, than a minor change to the VAT rate.   Some people will have their hours - but this happens most years in the winter season.

Working out the effect of the VAT increase on the price of a pint

Imagine a pint that costs €5.00 in 2018.   (It's easier to work with a nice round figure).  Roughly speaking this is made up of:
  • The cost of the beer (including profit for the brewery and distributor, and brand-marketing), 
  • The excise tax on it, 
  • The cost of getting it to the pub where it's served (including profit for the transport company)
  • The cost of serving it (including the building rental, heating, lighting, insurance, the staff time, washing the glass it's served in - and profit for the publican).
Once these parts are added together, a "value added tax" (ie VAT), is added to get the overall price that a customer pays.   (Similar to sales-tax in some other countries).
  • If the VAT rate is 9% then €5 is made up of around €0.41 of VAT, and €4.59 of pre-tax-price.
  • When the VAT rate is 13.5%, the pre-VAT price is still €4.59, the VAT is €0.61, taking the likely final price to €5.20 or €5.25.

How much a pint of beer will cost in 2019, after the tax rate increases:   a pint that now costs €4.50 will likely cost €4.70.

The minimum wage is going up on 1 January 2019

The Minimum Wage in Ireland is going up on 1 January 2019.

The minimum adult hourly rate is increasing by 25c to €9.80 per hour.  It applies to  everyone who does not fit into these categories:
  • People aged 19+ and who have worked(*) for less than two years since they turned 18:  For them, the minimum hourly rate is 90% of the adult rate, so it becomes €8.82 per hour.
  • People aged 18+  and who have worked(*) for less than one year since they turned 18:  For them, the minimum hourly rate is 80% of the adult rate, so it becomes €7.84 per hour.
  • People aged less than 18:  for them, the minimum hourly rate is 70% of the adult rate, so it becomes €6.86 per hour.
(*)  Any paid work after turning 18 counts:   It doesn't need to be full time, or in the same industry.  These rules are set out in the National Minimum Wage Act 2000, which is a law passed by the Irish government.   If you think that parts of this law are unfair - for example, that work experience before you turn 18 is not counted - then you should discuss this with your local TD, or political party.

Do you have to be paid the minimum wage?

The law says that you must be paid at least the minimum wage.   Employers can choose to pay you more than this - even if you are under 18 or have not been working for very long.   Many employers do pay more than the minimum wage.

Will everyone else's wages also increase?

An increase to the minimum wage doesn't apply to people who are being paid a higher rate - unless they have a contract which says they are linked   eg  "Your hourly pay rate is the minimum wage plus 50c".

However over time, it is likely that other low-wage jobs will have wage increases, so they are still attractive to people who are looking for work.

What to do if you are being paid less than the minimum wage

If  you are getting less than the minimum wage, then the first thing to do is to check:
  • Is there any exemption for your job (eg for trainees, apprentices, or employers in financial difficulty), or
  • It is because of the way your hourly rate is calculated.   (In some jobs, there are allowances or particular times that are or aren't included).
You can find more details about this here on the Citizen's Information website.

If you are not being paid correctly, you can choose what to do next.   Some options are:

Talk to your employer

Sometimes employers make mistakes, don't know about the increased rates, or the amount of work experience that you have.   It is usually best to ask them about the problem first and give them a chance to fix the problem, before getting anyone else involved.

Talk to your union

If you belong to a union, then a union delegate or staff member can talk to your employer about the minimum wage rate, and how it applies to you.   They will also know if your employer regularly pays people less than they should, and what to do about it.

Talk to Workplace Relations

The Workplace Relations Commission is a government agency that helps to protect employees' rights. They can investigate and may do various things to help convince your employer to pay you correctly - anything from a gentle reminder letter or phone-call, right through to a full audit of your workplace and/or taking your employer to court.
  • You can ask them a general question using this form or by phoning 059 9178990  / Lo-call: 1890 80 80 90 during office hours.
  • Find out about making a formal complaint to them is on this page.

Do nothing - or find a better job

If someone is paying you less than the minimum-wage, then they are breaking the law.

f they keep doing it, even after they know about the law, then probably it's not a great place to be working:  Many people would say that you should focus on finding a better job, with an employer who is not going to behave like this.


As always, this isn't legal advice.