Businesses braced for introduction of scheme on January 1, with profitability already in decline
Two SME surveys highlight costs and administration linked to pension auto-enrolment as a major issues for businesses.
A nationwide survey conducted by FRS Recruitment of 500 firms and employees found that 76pc of Irish businesses expect the new scheme to negatively impact profitability in 2026.
Businesses are considering price increases, hiring pauses or lower investment to mitigate against the additional costs of auto-enrolment.
A survey of employers found the consensus among respondents is that the new auto-enrolment pension scheme will cost the average Irish business an additional €25,000 in employee-related charges from next year.
The survey of employees undertaken as part of the same research found the majority of Irish workers do not fully understand how auto-enrolment will work or what it will mean for their financial security.
The auto-enrolment scheme is a government-led initiative designed to dramatically increase the number of workers with a pension scheme.
It will automatically enrol more than 800,000 private sector workers into the so-called My Future Fund from January 1, 2026. Workers, employers and the State will all pay into individual worker’s savings pots.
About 3pc estimate their costs will increase by €100,000 or more
The FRS survey found almost one in 10 Irish businesses estimate the new auto-enrolment scheme will cost their company between €25,000 and €50,000 in additional employee related charges next year. A further 15pc expect costs to rise by €10,000 to €25,000.
Just under a fifth of Irish companies (19pc) expect auto-enrolment to add between €5,000 and €10,000 in costs next year, while 5pc estimate costs will rise between €50,000 and €100,000.
A small number, 3pc, estimate their costs will increase by €100,000 or more.
Meanwhile, a regular survey of SMEs by non-bank lender Bibby Financial Services also points to a squeeze on profitability that is likely to hit job numbers and prices.
The Bibby Financial Services’ Q4 SME Confidence Tracker, which surveys 250 small businesses, found 50pc expect to respond to rising costs by increasing their prices, while 25pc said they will reduce staff hours or even headcount.
A small number, at 13pc, plan to reduce their product/ service mix.
The Bibby report again highlights the looming impact of pensions auto-enrolment, with 90pc of businesses concerned about increased payroll costs and administrative burden.
The transition is expected to squeeze margins and may affect hiring and investment decisions.
Only 27pc of SMEs say they are fully prepared for the change.
It comes at a time when profitability is already in decline.
The Bibby tracker found that profitability among SMEs has slipped to 57pc, down from 64pc in the first three months of the year, as cost pressures mount.
Inflation and rising expenses are the top challenges cited but cashflow constraints, late payments and bad debt are squeezing margins, especially in construction and manufacturing.
Even so, the vast majority of Irish businesses (91pc) say they plan to invest in the coming year, focusing on digital transformation, operational efficiency and talent.
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