It said a wage freeze would provide a breathing space for many labour intensive small businesses who are experiencing the negative impact of a slowing economy.
The association warned that unless there was a realistic approach to wages in this country, the stream of job losses experienced over the last number of months would become a torrent.
ISME Chief Executive Mark Fielding said: "Irish wage rates have been increasing at over twice the EU average for the last number of years, a situation which is now unsustainable and has resulted in Irish labour costs running at 17% ahead of the Euro area average."
In a direct reference to the upcoming wage talks, Fielding warned: "If demand for wage increases, along the lines of those requested by the Unions are approved in the upcoming partnership talks, you may as well place the 'closing down' signs outside many businesses throughout the Country. We cannot support excessive pay claims at a time when many businesses are struggling to keep their heads above water and thereby maintain their current level of employment.
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"It is absolutely critical that businesses are not hampered by unrealistic wage demands and that the talks on a new national wage agreement will recognise that actual Irish labour costs are out of sync with our competitors representing a real threat to Irish businesses.
"The cost environment, in particular labour costs, is having a devastating impact on the competitiveness of Irish SMEs. Consequently businesses are indicating that for the first time in many years, employment prospects have gone into reverse gear, with many anticipating redundancies over the next number of months."
Fielding also outlined that it would be foolish in the extreme for the Government to ignore the recent warnings from the OECD on wage restraint.
He acknowledged that Inflation is a huge concern, but suggested that it would be folly to increase wages on the basis of inflation as this would lead to a price-wage spiral, which is in nobody's interest.
"The threat of inflation needs to be eradicated and the Government need to ensure that policies are introduced specifically aimed to reduce the headline inflation figure.
"It is absolutely essential that Irish labour costs are brought into line with the Euro Area average. This is vital to the survival of many SME businesses and will introduce a level of cost certainty to ensure that our competitiveness is not completely eroded. This can partly be achieved by introducing a 'wage freeze' over the next 12 months," he concluded.
(VB/JM)
