New research from FRS Recruitment has shown just how concerned Irish businesses are about the financial impact of pension auto-enrolment in 2026. With the State’s new My Future Fund scheme due to begin on 1 January, more than 75% of employers believe the changes will reduce their profitability next year. For many organisations, the projected increase in employee-related costs is not minor; the average business expects to absorb around €25,000 in additional expenses as employer contributions begin and gradually rise over the coming decade.
These rising costs are prompting companies to rethink their strategies ahead of implementation. Many report that they are already considering price increases, hiring freezes or delays, cuts to planned investment, or a shift in how they manage staffing levels. At a time where margins are already squeezed by inflation, energy costs and wage pressures, auto-enrolment is landing at a difficult time, and businesses are responding by looking for ways to offset the financial burden.
The structure of My Future Fund plays a significant role in this concern. Under the scheme, employees aged 23 to 60 earning more than €20,000 a year will be automatically enrolled unless they are already contributing to a workplace or personal pension. Contributions will start at 1.5% each from the employee and the employer, rising in stages every three years until both reach 6% by year ten. While this gradual phase-in is designed to soften the impact, employers still face a newly rising cost base from day one, with increasing obligations as time passes.
Although administration has been designed to be handled centrally by the new National Automatic Enrolment Retirement Savings Authority (NAERSA), easing the operational burden, the financial impact remains very real. For labour-intensive sectors in particular, the cumulative effect of higher payroll costs is likely to be substantial. Many businesses that rely on tight pricing models or highly competitive tenders may have limited room to absorb these costs without affecting their profitability or market position.
The timing also matters. Some employers already face year-on-year wage increases and are still recovering from earlier shocks in the economy. Adding compulsory pension contributions creates another upward cost pressure; one that cannot be negotiated or delayed. For businesses that compete on price, even a small rise in operating costs can force difficult decisions: pass the increase on to customers, or reduce internal spending to maintain viability.
For employees, the scheme will be welcomed by many, as auto-enrolment aims to tackle Ireland’s long-standing pension coverage gap and increase the number of workers saving for retirement. However, the same research shows that workers are looking for more guidance from their employers on how the scheme works and what it means for them. This adds another layer of responsibility for companies already navigating the financial implications.
Auto-enrolment should ultimately raise national pension participation and improve long-term retirement outcomes, but its introduction comes with unavoidable short-term challenges for business owners. Profitability in 2026 may well be tested as My Future Fund begins, and organisations that prepare early – by reviewing cost structures, workforce planning, and their existing pension arrangements – will be in the strongest position to navigate the transition.
