Last month the government and the public service unions came to an agreement on a wage increase. It amounted to 10.25% spread over three years with 4.25% being paid this year, backdating to the 1st of January 2024. A further 4.25% increase will be given in 2025.
Not surprisingly, workers in the private sector felt a little bit left out. As a result, the Irish Congress of Trade Unions (ICTU) has recommended that unions should be seeking pay increases of between 4% and 6% in the private sector during the coming year, as long as they are affordable for employers. This is all very well in theory but can dealers afford to give such a pay increase?
Given the background that tractor sales have dropped in Ireland and across Europe over the last few months with no sign of an immediate improvement and if you also include the already high fuel, energy and insurance costs in running a business, a further increase on the wage bill may not be feasible for some dealers.
No dealer will begrudge giving their employees a pay rise, provided that they can afford it. More tractor and machinery sales will be required to make it possible for awarding pay increases. Passing on the extra costs to customers may not be an option either as already high interest rates and lower crop prices are affecting demand for tractors, especially in the higher price market. This was evident in the recent John Deere financial results for 2023. They showed that operating margins contracted due to lower sales of large agricultural equipment. John Deere expect a further decline of 20% in 2024.
The Central Statistics Office (CSO) recorded 2,310 new tractors licensed for the first time in Ireland during 2023. This is a decrease of 58 compared to the 2022 figures. However, the number of second hand tractors that were licensed for the first time increased in 2023 compared to 2022. CSO figures showed that 2,510 second hand tractors were licensed in 2023 versus 2,381 in 2022.
Premiums for property and public liability insurance are also on the rise and they are increasing a lot faster than the rate of inflation. The recent floods around the country, especially in the Cork town of Middleton, showed the devastation they caused to business owners. More floods like these are expected in the future, which will put a lot of upward pressure on insurance premiums.
One possible option that is available is to offer tax free vouchers to your employees. Since January 2022, workers can receive up to €1,000 a year in vouchers. This could be a cost effective means of rewarding employees. For staff to receive €1,000 into their hand through the tax system would cost employers a lot more. You can find out about tax free vouchers by visiting Revenue.ie under ‘Small Benefit Exemption’.
2024 will be a challenging year for dealers. Increased costs are staring us in the face. Let’s hope that the market for our machines improves to offset these extra costs.
