The Government has announced plans to replace the current minimum wage of €10.50 per hour with a new 'living wage' which will be phased in over four years starting next year.

The living wage will be set at 60% of the median wage in any given year which, in 2022, would be €12.17 an hour.

Tánaiste and Minister for Enterprise, Trade and Employment Leo Varadkar will consult with various interested parties including employer and worker representative groups, unions and the wider public.

Unlike the minimum wage, the concept of a living wage is an hourly wage rate that should enable employees to afford an agreed socially acceptable minimum standard of living.

Last year, the Tánaiste asked the Low Pay Commission to conduct research on how best the Government can progress to a living wage, and today's proposals are based on those recommendations.

"It’s really important we get the balance right and I think this proposal achieves that, however I will be listening over the coming weeks for feedback before bringing a final plan to Government later this year," Mr Varadkar said.

"The most important workers’ right is their right to work, to have a job. That is why I am proposing we phase this in and I will be listening to employers’ views on these draft proposals," he added.

Under the draft proposals, the national minimum wage will remain in place until the living wage is fully phased in, in 2026, but will increase over the years as usual, closing the gap between it and the living wage.

From 2026, there will no longer be a national minimum wage, the living wage will be the floor and will be mandatory for all employers.

Depending on prevailing economic circumstances, it is planned to give the Low Pay Commission discretion to introduce the full living wage faster or slower than the 4 years proposed.

'Objective is to achieve full employment'

The Living Wage Technical Group, which includes representatives from trade unions and social justice groups, has previously recommended a living wage of €12.90 an hour.

Asked this afternoon if he believed such a wage was sufficient to live in Ireland, Mr Varadkar said that there will always be demands for the minimum wage to be higher, however he added that employers would like it to be lower.

Mr Varadkar told reporters outside Dublin Castle that many people earning the minimum wage in Ireland were not the main income earners in their households, such as students.

He said that Government had to be careful not to price them out of the employment market.

Speaking on RTÉ's News at One later, the Tánaiste said Ireland is now reaching a point where there are 2.5 million people at work and the objective is to achieve full employment.

"But we also want to make work pay and ensure that it pays better. So, whether you get up early in the morning or work late at night, we want you to be paid more, and this is a proposal to do exactly that. But it does need to be phased in."

He added: "What we don't want to do is, in an attempt to do something good by increasing people's pay and increasing it significantly, is actually put employers in a position where they have to lay people off for a couple of hours because that's the unintended consequence sometimes of trying to do something good is that you actually do harm."

Mr Varadkar also said that there is a commitment in the Programme For Government, agreed by all three Coalition parties, to have a "tax package" in every annual Budget.

He said: "The average person in Ireland is going to get a pay increase this year, the vast majority of people will, and they will lose more than half of that pay increase in income tax, PRSI and USC and we don't think that's fair.

"That's why we got that commitment to having a tax package in every Budget and that's why that's there, because we don't want to see people on average incomes, on €40,000 or €50,000 a year, losing more than half their pay increase on income tax, PRSI and USC."

Asked if there was any dissent from Fianna Fáil or the Green Party on this, he said: "It's what they signed up for in the Programme For Government and I haven't heard any of them say they want to change the Programme For Government."

Mr Varadkar also said the Government has no further plans for additional measures to alleviate cost of living increases before this year's Budget.

"The Government very much appreciates the impact the rising cost of living is having on people," he said.

"It's not just petrol or diesel or utility bills, we're seeing it now in the cost of groceries, the cost of pretty much everything. Everything is going up and really nothing is going down, and that's why we have taken a lot of measures already."

Asked if more reliefs will be introduced, he said: "At the moment there aren't any plans for additional measures this side of the Budget."

'Measures should be introduced in the Budget'

Sinn Féin said the living wage should be introduced in October's budget to help tackle low pay and the cost-of-living crisis for workers.

"Today's announcement by the Tánaiste that the government intends to implement a Living Wage by 2026 is welcome but the reality is workers cannot wait this long, the measure should be introduced in Budget 2023," said Sinn Féin's spokesperson on Enterprise, Trade and Employment, Louise O’Reilly.

The Labour Party said it was unacceptable that the Government was pushing its living wage commitments beyond the lifetime of its term in office.

"The Government is showing a profound lack of understanding on the urgency surrounding the cost of living crisis," said Labour's employment spokesperson, Senator Marie Sherlock.

'A step in the right direction'

The Irish Congress of Trade Unions described the living wage proposal as a step in the right direction and a milestone towards addressing endemic low pay in the Irish labour market.

"While we acknowledge the 60% median wage is the basis for the proposed rate it should be noted that The Low Pay Commission also recommends that the rate could be adjusted to 66% of the median wage in the future. ICTU believes this should be progressed immediately," said ICTU General Secretary, Patricia King.

"Given the current high inflation circumstances the introduction of the living wage should be accelerated, the first phase of which should have immediate effect," she added.