The Low Pay Commission is expected to recommend to the Government an increase of 5% to the National Minimum Wage.
The rate is currently at €13.50 an hour and an increase of 5% would bring the rate to €14.17 an hour.
The Government usually follows the Commission's recommendations.
The national minimum wage rate was last changed on 1 January 2025, when it was increased from €12.70 to €13.50.
The CEO of Retail Excellence Ireland, Jean McCabe, said she was "stunned and flabbergasted" to hear about the recommendation, adding that it could be the "nail in the coffin" for a lot of small businesses.
Ms McCabe said that businesses have had to shoulder a 35% increase in wage costs in the last five years and "no industry can sustain that".
She added that it appears the Low Pay Commission is out of touch as it wants to increase the minimum wage despite reports that the sector is under immense pressure, while there has been no relief from Government in relation in reduction in VAT or PRSI.
She said that in many cases, retailers and businesses are managing costs by reducing hours.
Due to the 2020 minimum wage increase, she said that employees are working two hours less so they are not benefitting from the change, and are seeing their hours reduced to pay for the wage increase.
"There is no real winner here," she said adding that she expects to see more more business closures and less jobs, with increased insolvency by the end of the year.
She said that retailers were not against workers being paid more, but they want to keep jobs for minimum wage employees.
She also said that costs overall are going up as a result of the minimum wage increases that we have seen and they have become embedded into the supply chain which is adding to the cost of living issues.
She described the measure as a "blunt instrument", adding that it is not sustainable.
Reacting to the proposed 5% increase in the National Minimum Wage by the Low Paid Commission, SFA Director David Broderick said the proposed increase flies in the face of reality.
"Spiralling business costs are impeding small businesses from hiring more staff, expanding operations and making further investments into their businesses," Mr Broderick said.
"Many small businesses will not be able to cope with this latest hike in the minimum wage as it will raise all other wage brackets on a pro rata basis," he said.
The SFA Director noted that the minimum wage has increased every year since 2017.
"After several turbulent years, what small business owners need now is breathing space. If Government choses to accept this proposal, it will suffocate small businesses," he warned.
He said the Small Firms Association was renewing its call for the Government to introduce a temporary PRSI rebate in Budget 2026 to help small business owners cope with rising labour costs.
"The SFA has been calling for this rebate for over a year and has included it in its recent pre-budget submission. Failure to act on this will devastate the livelihoods of small owners in communities across the country," David Broderick said.
Dr Paul Redmond, Associate Research Professor with the ESRI who conducted research into the impact of a minimum wage change on wages and household incomes, told RTÉ's Morning Ireland that the minimum wage has been going up since the Commission was established in 2015.
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But he pointed out that in 2015, it was starting from a very low base, as the rate then was the same as 2008.
The increase from €8.65 in 2015 to €13.50 earlier this year represented an increase of about 55%.
Mr Redmond said that recent recommendations from the Low Pay Commission have the aim of achieving the living wage, which is 60% of median income.
"We are actually quite close to that at the moment," Mr Redmond stated.
He also noted that recent increases to the minimum wage have been larger than previous increases.
