An increase in the National Living and Minimum Wage and rising workplace pension contributions could create the perfect storm for small businesses next April, according to multi-award-winning Midlands accountancy firm Salhan Accountants.
The firms, which has offices in central Birmingham, Droitwich and London, is encouraging small businesses owners to prepare themselves for the changes ahead, which will see the National Living Wage (NLW), in particular, rise by 4.9 per cent.
Announced at the Chancellor’s Autumn Budget, the increase in the UK’s statutory wages will see companies pay £8.21 to those on the NLW – up from £7.83.
Meanwhile, those paid the National Minimum Wage (NMW) aged 21 to 24 will see their pay boosted to £7.70 an hour, which is 32p more than they currently receive.
Apprentices will also see their wages rise by 20p to £3.90 and 18 to 20 years old will receive £6.15 an hour from the same date.
This rise in wages will be timed alongside the next rise in contributions under workplace pension arrangements, which will see eligible employees receive an additional one per cent from their employer, while their own contributions increase to five per cent.
Despite many employees welcoming the change, Dr Anjulika Salhan, Director at Salhan Accountants said: “For employers this means that they will not only be paying employees more, but this additional pay will also be affected by the increase in workplace pension contributions, which means that they will effectively be hit with higher payroll bills twice in a single month.
“For those companies that employ a large number of people on the NLW and NMW, this could have a significant impact on their business’s cashflow at a time when the UK will already be coming to terms with the fallout of Brexit – whatever that may be.”
She said that it was essential that companies explore how they could reduce costs and build up surpluses to ensure that they didn’t find themselves in distress.
“While every business owner wants to see their staff paid fairly, increases such as these could lead to some businesses who are already in distress being left with little decision but to make redundancies and explore insolvency options, which is a scenario that few would welcome,” added Anjulika.
Salhan Accountants is already supporting businesses with their payroll and pensions arrangements and said that its doors are open to any businesses who are concerned about the changes ahead.
