Changes announced in the Autumn Budget present a number of challenges to business owners, ones which cannot be ignored and require some careful consideration and planning.
With employers National Insurance Contribution (NIC) rising to 15% (up from 13.8%), and the threshold – the point at which employers begin to pay NI on an individual’s salary – reduced from £9,100 to £5,000, the majority of businesses will face a significant increase in costs, even with an offset coming from an increase in Employment Allowance.
The increase in NICs will also impact class 1A benefits in kind, which is another consideration for businesses providing benefits.
Significant increases to National Minimum Wage, particularly for those aged 20 years and under, will mean from April all employers will pay a minimum of £10 per hour for staff over 18 years. This will hurt a lot of smaller businesses in certain sectors, but will be widely felt across the economy.
How can businesses plan for the incoming changes?
How businesses react and plan could be key to their success. Business owners should start by approaching the issue logically and systematically.
The Budget changes have heightened the importance of forecasting and budget setting. Businesses should be flexing their budgets and ensuring proactive decisions can be made in the lead up to the changes being introduced.
As a starting point, businesses will need to work out the increase in employment costs as a result of the changes. This will vary from business to business depending on staff numbers and pay.
Once businesses have a grasp of the increase in costs, decisions will need to be made as to how they can be mitigated.
Measures to mitigate increased employment costs
Such measures will, no doubt, include sales price increases but as all businesses know, the right value needs to be communicated clearly and concisely to ensure implementation.
Other measures will likely see an impact on current staff wage inflation for those already earning above NMW.
Staff retention and recruitment could also be impacted.
We would encourage you to ensure the mixture of measures remain in line with any strategic plans and that they are not short-term, knee jerk reactions.
An efficient mix of measures will enable the business to navigate this Budget (and those in the future) whilst remaining on course to achieve your short, medium and long-terms strategic goals.
Businesses should also be continually challenging supplier pricing, reducing waste, delivering products/ services in a timely manner and maximising customer relationships, as well as regularly reviewing general costs.
The cost increases can be mitigated, so it is important not to panic and take time to plan. Acting now, you can minimise the impact of the Autumn Budget on the strategic aims of your business.
