In April, significant financial changes for employers have come into effect. A rise in wage costs is putting pressure on some businesses’ margins, smaller businesses in particular. If you’re concerned about how these changes are going to affect you, you aren’t alone. Below, we’ll detail some of the strategies you can make use of to help you and ensure you don’t fall into a situation where you can’t afford to pay staff.
Why Are Wage Costs Rising?
The rise in wage costs has occurred because of two recent policy changes:
The National Minimum Wage and National Living Wage Have Increased
The government has raised the NMW and NLW starting on the 1st of April this year, and has opened up the full wage to people over 21 rather than those 23 and over as it was previously.
The hourly National Minimum Wage (National Living Wage for those aged 21 and above) is now:
- £12.21 for those aged 21 and over
- £10.00 for those aged 18-20
- £7.55 for those under 18
- £7.55 for apprentices
The rise in minimum wage has been rolled out to protect employees amid the ongoing cost-of-living pressures, but it will have a significant impact on employers’ wage costs.
Rise In Employer National Insurance Contributions
Employer National Insurance Contributions have also gone up to 15%. The threshold at which employers must start paying National Insurance has also dropped from £9.100 to £5000. These changes further increase the financial burden across the board, from apprentices to full-time employees. It’s an unavoidable extra cost for businesses.
How To Manage Rising Wage Costs Without Cutting Staff
Because of these changes, many employers are now strategising to maintain their business’s profits while also supporting and retaining their valuable employees. If you find yourself in this possible, stay calm as there are several things you can do to manage rising wage costs without cutting staff and compromising your service quality, including:
Review Your Pricing
It might be time for a reappraisal of your pricing strategy if you aren’t in a position to easily weather these changes in your wage costs. Sometimes, it’s inevitable that some of these costs will need to be passed on to the consumer. Keep the changes as modest as possible and communicate them clearly to minimise backlash.
Optimise Your Staff Schedule
Making the most of the time you’re paying your employees for is important for maintaining efficiency in the business. Make use of scheduling software and review shift patterns to make sure that the deployment of your staff is as efficient as possible. Avoid overstaffing in periods you know are going to be fairly quiet, and make sure there’s plenty of hands on deck during commonly busy periods.
Invest In The Tools You Need To Boost Productivity
Arming yourself with the correct tools might have a significant up-front cost at times, but they can save you precious hours to help you get the most value out of your employees’ time. Inventory management systems, booking frameworks, and the automation of certain tasks can all help you to maximise efficiency in the face of rising wage costs.
Focus On Team Training
Investing time in team training has numerous benefits for the business. Increasing the knowledge and skills you have within the business helps to drive success and customer satisfaction, as well as give you flexibility with scheduling conflicts and absences. There’s also an employee morale element, where offering training shows that you are invested in their development and value as an employee.
Look Into Available Support
Make sure you’ve due diligence and looked into any support you can get to help you out with the impact of wage costs going up. Take advantage of any tax breaks and reliefs you can get. Smaller businesses, for example, may qualify for Employment Allowance, which can cut down your National Insurance Contribution by up to £5,000 a year.
These tips should be useful to you in weathering the effects of the minimum wage rise and place your business in a stronger position for the future. By adjusting how you operate and supporting the development of your team, you can continue to grow sustainably.
If you’re unsure of how these changes will affect your business and you’re worried that it might put you into serious financial jeopardy, give us a call. We specialise in saving businesses in distress, and our team will be able to properly advise you on your next steps.
