The UK’s national minimum wage for employees over the age of 23 is set to rise once more on the 1st April 2023. Eligible staff will receive £10.42 per hour, an increase from £9.50, following recommendations by the Low Pay Commission. But what does this mean for the average small business, and how can you start to prepare for these changes?
What is the minimum wage for 2023?
From 1st April 2023, all employers are required to meet the National Living Wage for employees over 23 years of age; an increase of 9.7%, this change has the potential to seriously impact many small businesses.
The minimum wage for younger workers is also set to increase:
- Age 21-22: wages increasing from £9.18 to £10.18
- Age 18-20: wages increasing from £6.83 to £7.49
- Age 16-17: wages increasing from £4.81 to £5.28
- Apprentice: wages increasing from £4.81 to £5.28
What impact will the wage increase have on small businesses?
Every UK business is required to pay the correct minimum wage, and records must be kept which prove they’re doing it too. Yet it comes at a time when many small businesses are already feeling the pinch thanks to the current rise in fuel and energy prices. For some small business, another rise like this could further restrict growth in an already difficult climate.
So, what are the challenges these businesses are now facing, and what steps can be taken to meet them head on?
Financial:
A 9.7% increase means the average full-time worker will now be paid almost £150 extra per month and for many small businesses, there’s also going to be increases in associated costs, such as National insurance and annual leave pay, plus an increase in taxes too.
Recruitment:
Small businesses will struggle to compete with larger businesses who are able to pay above the minimum wage. Inevitably leading to more issues when it comes to recruiting and retaining good staff.
Staff satisfaction:
It’s not all bad news! Ultimately, staff satisfaction will improve with the wage rise, and this can only lead to a workforce who feels supported and valued. Regularly reviewing employee wages is a great way to ensure that staff are happy in their role, and will increase productivity too.
How can small businesses minimise the affects?
Take steps now to minus your outgoings in preparation for the wage rise. This can be done by:
- Cutting expenses: Where can you scale back on your operating costs? Can you reduce your office space, or minimise fuel bills with a different supplier? A full analysis of outgoings is essential.
- Consider reducing working hours: If this is an option for your business? It could help to keep costs down. Remember though, that this will be a proper legal procedure- you can’t make contract changes without employee agreement.
- Service changes: Increasing prices is often the last resort for many businesses, but if you communicate clearly your reasons why, you should be able to retain your customers. Before you do this, analyse the competition first to make sure your customers can remain loyal. Streamlining services is also an option if price rises aren’t feasible for your business.
- Have a financial assessment: Knowledge is power, so really understanding your financial position is crucial. You need to know if you can afford the new wages, so now is the time for a full audit. Finance software can be helpful if an advisor is out of budget.