GUEST COLUMN: Seven steps to securing Irish SMEs’ future

There are 365,000 small and medium-sized enterprises (SMEs) in Ireland, many of whom looking into 2025 with fear and concern. Over half of the national workforce – 1.19 million people – are employed in these businesses, the backbone of the Irish economy. Yet national policy discussions often ignore SMEs to meet the needs of large, multinational corporations. This must change in order to foster a fair and prosperous entrepreneurial climate.
ISME has outlined seven key steps the new Government must take to unlock the potential of the SME sector and deliver economic growth that will be seen and felt in towns and villages across Ireland. These relate to the Labour Employer Economic Forum (LEEF); the need for an SME minster; the minimum wage; taxation; the Social Insurance Fund deficit; the legal system; and business costs.
LEEF is the official mechanism by which Government talks to businesses and trade unions about the economy, the labour market and employment. Despite being the country’s largest employer, SMEs are not included in the forum. SMEs must be given a voice in a forum that shapes national policies.
Ireland needs a Minister of State for Small and Medium Enterprises. While the Minister for Enterprise oversees broad economic initiatives, SMEs require focused attention to address their unique challenges and opportunities.
Ireland’s minimum wage has risen 33 percent since 2020, with a huge rise of 80 percent this year alone. This is an unprecedented rate of increase, which is hammering SMEs like pubs, restaurants, hotels, childcare, nursing homes, grooming and leisure facilities.
The current method for calculating the National Minimum Wage fails to reflect the realities faced by SMEs. Public sector and multinational employers, with higher wages and greater job security, skew the benchmarks. ISME firmly believes that public-sector pay should be excluded from these calculations, and future increases must not exceed the Consumer Price Index.
Budget 2025 introduced some modest personal tax changes, but more is needed. The 8.8 percent PRSI rate should apply across all minimum-wage workers to ensure consistency and fairness. Additionally, sectors like food service and grooming, which are struggling to stay afloat, need the permanent reinstatement of the 9 percent VAT rate. The current 23 percent VAT rate is an undue burden on consumers and businesses alike, particularly in a high-cost economy like Ireland’s, and should revert to our historic 21 percent rate.
Ireland’s Social Insurance Fund is underfunded by a staggering €350 billion. To address this, ISME proposes a 2 percent PRSI rate on earnings up to €424 per week and 6 percent on the balance. This reform would reduce PRSI payments for full-time workers earning up to €848 per week, providing relief while shoring up the fund’s sustainability.
Our legal system is a bottleneck to progress in infrastructure, housing and commercial dispute resolution. Delays in civil procedure and cost reforms perpetuate inefficiencies that discourage investment and burden domestic businesses. ISME strongly opposes any move to increase personal-injury awards as recently requested by the Judicial Council. Irish awards already far exceed those in other EU countries, inflating insurance costs for everyone.
Lastly, Ireland’s position as one of the most expensive states in the eurozone is unsustainable. We should aspire to be the most affordable by reforming VAT, energy costs, insurance premiums, legal fees and labour costs. Increased investment in infrastructure and housing is also critical.
Our new Government should empower SMEs, the lifeblood of our economy, to thrive. By addressing these key priorities, we can create an entrepreneurial environment that benefits all and creates new opportunities.