How does the budget affect my business?

The budget, together with the recent announcements regarding the Employment Rights Bill are causing significant concern for employers in small businesses. Over the past few years, the cost of doing business generally has been increasing due to Covid, Brexit, the War in Ukraine and the attacks in the Middle East.

Today’s budget and recent announcements are seeing additional costs for all employers, including:

• increases in the National Minimum Wage and the Real Living Wage,
• the knock-on effect on employers’ pension contributions
• increases in Employers National Insurance (NI) from 13.8% to 15%, and the lowering of the threshold so that employers start to pay NI once an employee is earning ￡5,000 (was previously ￡9,100).
• statutory sick pay from day one of sickness absence
• earlier entitlements to family leave payments such as maternity and paternity
• greater protections for all employees from day one of employment

There are some positive changes though. These include a doubling of the employment allowance. This currently provides small businesses with ￡5000 a year off their National Insurance contributions. From the next tax year, this increases to ￡10,500. This means that if a small employer has 4 members of staff on the National Living Wage, they won’t have to pay NI.

In the past when rates of pay have seen significant increases, some employees drop their hours. They are either on benefits or get carers allowance. If they earn too much, they lose some or all of their benefits. While the plan is to make work pay, the increase in pay doesn’t compensate for the loss of benefits. While The Chancellor did announce that carers could work 16 hours on the National Living Wage before losing their benefits, there is a fine balancing act and calculations for employees to make and this too impacts on employers and perhaps their willingness to take on staff on benefits in general.

Small business owners are now having to take some really tough decisions.

• Do they hire?
• Do they let staff go now, ahead of increased protections?
• Do they award pay increases?
• Do they put up their costs to their customers?
• And ultimately, is their business model still tenable?

I am definitely HR and not an accountant or an economist, but I am a business owner and like many of our clients, I am trying to calculate how much this budget is really going to cost my business.