Businesses need to urgently plan for their future with huge increases to staff costs set to significantly impact their operations, a senior accountant has urged.
From April 6, employers’ National Insurance contributions for each employee will increase from 13.8% to 15% along with significant rises in the National Minimum Wage rates to kick in from April 1.
The threshold for when employers need to start contributing employers’ National Insurance will also reduce from £9,100 to £5,000 on April 6. This alone is set to cost businesses £615 for each applicable employee.
Lindsay Farrer, a Managing Partner at Saint & Co.
The changes will have a huge impact on businesses big and small across the UK with research from the British Chambers of Commerce revealing that, from 1,200 companies surveyed, 82% feel that they will be impacted negatively by the rises. A total of 58% said they will freeze or cancel recruitment plans as a result, with 54% saying it will lead to price increases to their consumers.
Lindsay Farrer, a managing partner at chartered accountants Saint & Co, has issued a plea to businesses to make sure they are financially prepared for such fundamental changes to existing staff costs.
She said: “As a matter of priority, businesses need to analyse their current staff costs, how much more the increases will impact their finances and plan accordingly for the future.
“Many have already done so and had their numbers crunched, but time is running out for those who haven’t prepared as these changes will be soon upon us and they will have huge ramifications for most.
“For somebody on National Minimum Wage who works 40 hours a week, an employer will have to pay £2,461.36 per employee because of the incoming changes, and this is a significant hike in staff costs.
“As a result, some of our clients have told us that they have had to rethink their growth plans as they can no longer afford to invest in new machinery or recruit extra staff. It is crucial for businesses to know exactly how much these changes will cost them.
“Will businesses be able to raise their prices to customers in what is already a competitive market? Will they be able to employ new staff when their current employment costs are going to rise significantly? There is a lot for businesses to consider from next month onwards.”
In addition to the 1.2% increase in Employers’ National Insurance contributions, the National Minimum Wage rates will rise as follows:
- Those aged 21 and over: From £11.44ph to £12.21ph (increase of 6.7%)
- Those aged between 18 and 20: From £8.60ph to £10ph (increase of 16.3%)
- Those aged between 16 and 17: From £6.40ph to £7.55ph (increase of 18%).
Employers also need to be aware that, from April 6, statutory sick pay will increase to £118.75 per week (up from £116.75), and statutory maternity, paternity, adoption and shared parental pay will increase to £187.16 per week (up from £184.03).
Businesses will also need to prepare for the likely scenario that those currently paid above the National Minimum Wage may want similar increases in their pay.
Lindsay said: “For businesses with larger workforces, the extra costs are into their millions so it’s little wonder that companies are up in arms. Even for smaller businesses, the increases will have a huge impact on their financial performance.
“The National Minimum Wage increases have been a year-on-year significant rise for many years which has become a huge cost to businesses and now more than ever businesses are feeling the impact. For many businesses, staff costs are their largest cost and another large again puts extra pressure on employers.
“The time is ticking so get in touch with your accountants without delay.”
Headquartered in Carlisle, Saint & Co has nine offices across Cumbria and Dumfries & Galloway and employs more than 120 members of staff.
