As we know the “cost of living crisis” refers to a situation where the prices of essential goods and services, such as food, energy, and housing, increase faster than people’s incomes, leading to a decline in real disposable income.
Whilst everyone is affected, low-income households are particularly vulnerable, struggling to afford necessities like food and energy. However, Morgan McKinley UK reveals that 56% of British professionals plan to actively search for a new job in the next six months.
HR will pay a significant role in encouraging an openness among their employees who are facing financial difficulties. This is achieved by acknowledging the shame around financial stress and removing the barriers that make asking for help hard. Not every employee is going to want to talk about money but if they do, they should feel safe doing so.
According to PayFit’s findings, more than a third (37%) of UK workers reported needing a pay rise to better manage their financial goals. However, candidates are factoring more than salary when considering moving to their next role. Benefits package and workplace flexibility are still a major consideration when moving to a new employer. Despite a strong desire for flexible working arrangements, 45% of organisations are requiring employees to be in the office for more than three days a week.
Businesses are having to restructure and, in many cases, freeze salaries in this financial year although 63% will pay more for “hard to fill” roles.
No matter how this is dressed up, businesses are juggling many factors to achieve profit for example.
- Increase minimum wage.
- Increased national insurance.
- Unstable global economy
- Business tariffs
For small businesses the impact of impact of the minimum wage and NI increases is significant and multifaceted.
Increased wage costs
The most immediate and obvious impact is the increase in wage costs. For businesses with a high proportion of minimum wage workers, this can lead to a substantial rise in overall labour expenses. SMEs may need to reassess their budgets and financial projections to accommodate these higher wage bills.
Pressure on profit margins
With increased wage costs, businesses may see their profit margins squeezed. This can be particularly challenging for SMEs operating in competitive industries with thin profit margins. Owners may need to explore ways to increase revenue or reduce other expenses to maintain profitability.
Potential for reduced hours or staffing
Some businesses may respond to higher wage costs by reducing employee hours or cutting staff numbers. This could potentially impact productivity and customer service, so it is a decision that requires careful consideration.
Pricing adjustments
To offset increased labour costs, some businesses may choose to raise prices. However, this strategy needs to be balanced against the risk of losing customers to competitors or reducing overall sales volume.
Investment in technology and automation
The wage increase may accelerate the trend towards automation and technology adoption. Businesses might invest in labour-saving technologies to reduce their reliance on human workers and manage costs in the long term.
Changes to business models
Some SMEs may need to reassess their entire business model. This could involve diversifying product lines, exploring new markets, or adjusting operating hours to optimise labour costs.
Summary
I am a great believer in “every cloud has a silver lining”. I know within my own business financial challenges have forced me as a business leader to make some difficult decisions but ultimately to accelerate the implementation of technology, innovation and overall productivity to achieve the same results