One in four companies have no plan to deal with these rising costs while many business owners are unsure how to drive continued growth, shows a recent survey as rising wages, increased statutory payments and soaring Employer National Insurance Contributions (NICs) threaten to create a financial storm.
With NICs climbing from 13.8 per cent to 15 per cent and a sharp drop in the secondary threshold, the pressure on employers is mounting fast.
A recent survey of 2,000 UK businesses conducted by online printing company instantprint reveals that one in four companies have no plan to deal with these rising costs and even more worrying, 43 per cent of business owners admit they’re unsure how to drive continued growth in this new landscape.
Rising payroll costs due to National Living Wage rises to £11.44 per hour is expected to create an annual increase of £1,872 per employee.
Another concern is around reduced profitability as the combination of higher wages, increased NICs, and rising statutory payments is eating into margins.
Some businesses fear redundancies as a way to manage the spiralling wage bill while financial uncertainty is causing many business owners to put expansion plans on ice.
Many (27 per cent) businesses are being forced to raise prices but at the risk of alienating their customers.
For a small business with 10 employees on the National Minimum Wage, the additional cost looks like this:
- Wage increases: £18,720 more per year.
- Employer NICs: £7,903.60 more per year.
- Statutory payments: Increased sick pay, maternity, and other statutory payments add even more pressure.
Despite the dire situation, businesses are adapting fast, shows the survey. While 28 per cent are adjusting operations by streamlining processes and outsourcing non-core activities, 22 per cent are passing costs to customers while 29 per cent are planning to cut expenses or improving efficiency.
While many are renegotiating B2B supplier contracts and eliminating waste, some are also reucing staff hours or adjusting compensation structures.
Almost 20 per cent of business owners are investing in automation with AI and technology being used to reduce payroll costs.
“As businesses navigate ongoing challenges, the focus is shifting towards smarter, more agile ways of working,” says Laura Mucklow, head of instantprint.
“Whether expanding your services, exploring new revenue streams or investing in smarter ways of working, taking the time to have a critical review of business operations ahead of the changes is going to be key to survival.”
