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It was most certainly not a Budget for businesses and the firms that I’ve spoken to since are scratching their heads at the messaging, which was all about investment and employment, with the impact on their business.
The Institute for Fiscal Studies says the increases in employer National Insurance means that employers will have to pay an additional £900 for each employee on median average earnings (around £33,000 pa).
Some firms have gone public with their thoughts on the matter, and we recently saw huge employers, like Next and Aldi writing to the Chancellor, Rachel Reeves, to warn her of the unintended consequences of the Budget, which is likely to be redundancies and an increase in prices.
After just about getting on top of inflation it seems perverse to try and stoke it again.
So, where’s the good news?
There are still a few chinks of light for businesses who want to cope with the increase in costs, without just resorting to cutting their bottom line and raising prices.
Salary exchange
Salary exchange, or salary sacrifice, for employers is arguably even more attractive now, as the savings are greater. When employees make their pension contributions via salary sacrifice, it reduces their overall salary, so there are fewer employer NI contributions to make. It’s work we’ve been doing for companies for years but despite the benefits, some firms still think it will be an administrative burden.
If it is setup correctly, you shouldn’t notice any additional administration in payroll.
Review benefits
If it has been a few years since you reviewed the terms of your benefit package, now might be the opportune moment. With companies looking to make savings to offset their future NI bill, insurers will be mindful of winning business. A whole of market review could surprise you!
Focus on retention
If employers do become wary of taking on new staff among the increase in financial obligations as well as legislation giving employees many more “day 1” rights, then it makes sense to focus on retaining existing employees. Alongside industry-aligned pay and benefits, one of the biggest growth areas for us has been financial advice for employees, which we deliver through the Financial Planners in Wren Sterling.
Surprisingly few people consult a financial adviser, even in the run-up to retirement and many employees are in their scheme’s default fund. By giving them access to our team of Financial Planners, we’re helping employees take control of their retirement and we’ve helped employees get on the property ladder as well through our Mortgage team as well as communicating the full range of benefits available to them, and that reflects positively on their employer.
