Can Dublin maintain its competitive edge in attracting overseas talent?

Challenge 1: Tax

At the Irish Government’s Third European Financial Forum, at Dublin Castle, 31st January 2018, the government admitted that the high marginal income tax rate was out of sync with that of other countries and that workers in Ireland are hitting that high tax rate too soon. There’s a determination to change it so that fewer people will pay a lesser amount of their income at the high tax rate. There is also a plan to reduce the cost to people accessing services and for parents who have children between the ages of six months and three years, there’ll be childcare subsidies without a means test. It was confirmed that Minister D’Arcy was working on reducing the cost of insurance; health and motor insurance premiums are already falling, and there is a desire to replicate the insurance reduction in others sectors too. The Taoiseach, Leo Varadkar said: “The third pillar is raising living standards in a sustainable way for all our citizens. That means real pay rises, but pay rises that are sustainable; an average pay growth in our economy at the moment is in the region of 2-3%.”

Marc Morrow, Business Manager at Page Executive, part of PageGroup, attended the Dublin Chamber of Commerce AGM, 15th February, where he met the Taoiseach. Ireland’s high level of personal taxation and exactly how it could impact the country’s ability to attract talent was discussed and it was acknowledged that it was a problem with no overnight fix. Although it was agreed that reducing the higher level of taxation or raising the top tax banding’s entry point may be one solution in the future, it wasn’t a viable option for Ireland at present. The more obvious and immediate fix may be regarding equity and share-options, where people pay both capital gains tax and income tax.

Mandatory tax contributions include the Pay Related Social Insurance (PRSI) which is made up of social insurance and 0.7% of the National Training Fund Levy, comprised of “weeks of insurable employment”. This is payable by most people over 16 years of age. The Universal Social Change payments (USC) are payable on income over €13,000 and one of the impacts of this is that lower paid workers will see large increases in net income, as well as low income families with dependents. PAYE workers on incomes between €20,000 and €35,000 will benefit the least.

Olivia Buckley, Communications Director, Irish Tax Institute, says: “We have one of the highest personal tax bills globally and we need to get them down, this will impact our ability to keep attracting talent.”

Irish workers can earn €34,550 before a higher tax band is implemented. For married couples the threshold rises from €42,800 to €43,550 where there is a single earner. Yet the constant 52% tax rate for anyone earning over €70,044 does provide a threat to Ireland in attracting global talent. Positive changes to Ireland’s income tax system could perhaps go some way in maintaining the city’s attraction for new talent. 

It would seem that a welcomed solution would be to increase the personal income tax breaks for Irish workers. However, in the event that this doesn’t occur, businesses will need to set in place contingency plans. This might mean relocating their HQs to lower tax locations in a bid to attract top talent should Ireland reach full employment to combat the numerous challenges they will face. 

Challenge 2: Housing, education, healthcare

Ireland’s demand for residential property outstrips its supply and if more multi-nationals try, as expected, to bring over employees, then they will need somewhere to live. As already mentioned, Google has invested in the Bolands Quay scheme which proves just how important the big multinationals view Ireland in the next stage of their economic growth.

Google’s Director of People Operations EMEA, Brian Kennan says: “Google presently employs 7000 in Dublin, 3500 permanent, 3500 agency and contractors. There are 76 different languages spoken in Dublin compared to 82 in London and 86 in Zurich, and offices in 57 countries. Google loves Ireland due to the culture and talent availability, and we have no interest in looking outside of Dublin.”

However, homelessness has increased significantly and not enough new homes are being built to meet the demand. This has driven up the cost of residential property and the cost of renting property in Dublin is now higher than it was during the pre-recession economic peak. It’s widely believed that that Irish banks are being cautious and construction costs remain high.

Kennan adds: “Google employees are viewed as preferred tenants due to being well paid and having steady employment.” He acknowledged that this is not an easy thing for the government to resolve but added: “…the government needs to move quicker.

Employees relocating to Ireland will, in many cases, be bringing their families along. Having the right environment for their children will help employees integrate into their new surroundings a lot more quickly. Therefore, there is an argument for more international schools to be built to meet demand. This would also potentially lead to more jobs with an increased need for teachers with the right skill sets. At the moment there are just a handful of international schools such as the International School of Dublin and St. Kilian’s Deutsche Schule Dublin. Nord Anglia Dublin is slated to open in September 2018, but more will be needed to meet the demand. 

On this subject Kennan says: “There is a lack of international schools in Dublin, people moving to Dublin from Europe etc. are surprised by this and view it as a negative when compared to other cities. This reduces the chances of foreign nationals making Dublin their permanent home.”

The healthcare system is at breaking point, with people spending an extortionate amount of time waiting to be admitted to hospitals and currently, those with private healthcare tend to be seen quicker than those without, contributing to an unattractive imbalance. Kennan says: “Foreign nationals are shocked by the state of Ireland’s healthcare, this makes Dublin/Ireland a less attractive location for permanent settlement.”

There is however, light at the end of the tunnel. For the first time, Irish investment and planning initiatives have been linked together to help create the Project Ireland 2040 programme. It will address the development issues of Ireland’s rural areas, cities and towns, with a major focus on Ireland’s transport infrastructure and North West regions. The €116bn 2040 programme project is expected a be a major boost in winning the war for executive talent.

Summary

If tax breaks, solutions to accommodation problems, and the opening of more international schools fail to occur, does it mean that businesses will have to offer higher wages? Perhaps it might, but there is also a risk of that strategy impacting their ability to manage sustained growth. 

With Ireland being ranked the eighth highest city out of 29 for its inclusive development as an advanced economy, according to the World Economic Forum’s Inclusive Development Index 2018 report, they’ll need to find sustainable ways to continue attracting the right talent without going into the red.

Marc Morrow
Business Manager, Page Executive
T:  +353 1 961 9265
M: +353 87 211 4746