New research shows that 84% of businesses are planning to increase pay in 2025, with respondents forecasting an average increase of 3.4% across all business sectors.
Business group Ibec has published the first part of its annual HR Workplace and Trends report showing that 85% of respondents increased basic pay by an average of 4.1% in 2024.
"[This increase] compares with previous years quite well," said Maeve McElwee, Ibec's executive director of Employer Relations, who was speaking on RTÉ's Morning Ireland.
"We have seen higher increases over the last number of years, really reflecting the tight labour market and the number of job vacancies, so the 4.1% compares with what we saw in the past three years."
The sectors that saw the largest pay increases were tourism and retail, reflecting changes in the minimum wage.
"What we have seen is that very significant uplift at the national minimum wage, as we move towards the living wage, has had huge impacts on lots of businesses in terms of what they have implemented on those relativity rates," she said.
"So where other pay scales are dependent on the entry rate... they have had to increase those subsequent rates has fed through very considerably to employers across the board," she said.
"Irrespective of company size that has been a really key consideration for employers in their cost-competitiveness over the past number of years," she added.
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Almost a quarter of smaller businesses, with fewer than 50 employees, outside of the hospitality sector said they will not increase salaries in 2025.
The average increase in overall headcount in workplaces is predicted to taper off from a peak 9.4% in 2024 back to 7.2% in 2025.
According to the study, the primary drivers of additional headcount are increased production/demand, business expansion, and building the future supply of talent in workplaces.
"We have seen the stabilisation of inflation rates, inflation now settling around 2%, we're definitely seeing something of a push-back in terms of that rate of increase in wages," she said. "We're also seeing that softening within the labour market - even the vacancy rate is slowing somewhat within a still very tight labour market."
The report indicates that businesses in Ireland had an average staff turnover rate of 8.3% in 2024, down slightly from 9.7% in 2023.
The survey was conducted with over 400 senior HR professionals.
