Over 70% of businesses expect to increase salaries this year, while 40% plan to hire more staff, new data shows.
The latest KPMG Enterprise Barometer reveals overall optimism among Irish businesses, with 65% expecting turnover to increase in the next 12 months
However, those surveyed highlighted a number of challenges facing businesses this year, with rising labour costs top of the list.
85% said labour costs will be their most significant hurdle, up from 43% last year.
Over half of respondents attributed the growing cost of doing business to wage inflation, a significant increase from 22% in 2023.
“There is a need for more proactive measures to support domestic entrepreneurship grappling with the cost pressures on business operations,” said Alan Bromell, Head of Private Enterprise at KPMG Ireland.
The data shows that recruitment remains a big issue for companies, with 64% facing problems finding suitable candidates, compared to 60% last year.
Most companies said the availability of housing is adding to their recruitment challenges.
When asked about their views on the current tax regime, less than 30% think it encourages entrepreneurship and growth, up slightly on last year.
70% believe the Irish tax regime is more challenging for domestic businesses, while 60% are concerned about the “administrative complexity” of the Irish tax system.
The top three tax measures businesses would like to see in Budget 2025 include the introduction of tax measures to encourage sustainable behaviour, amending Capital Gains Tax rates or rules to encourage investment in Irish companies, and enhancing the Employment Investment Incentive Scheme.
Among the other findings – sustainability remains an important issue for the vast majority of firms, with eight in ten supporting more action on climate change.
However, concerns remain regarding the financial implications of green initiatives, with 57% worried that an increase in green initiatives will lead to a rise in costs for their business.
When it comes to diversity, just 65% of respondents said they had a diverse management team, down from 76% in 2023.
Meanwhile, only half have policies and strategies to address any gender balance gap in their management team, a fall from 62% last year.
On the issue of Artificial Intelligence, just 15% of companies said they believe AI will lead them to reduce their workforce.
The findings suggest that the adoption of AI is still at a very early stage, with only 21% of firms currently having a defined AI strategy.
