Since the Autumn Statement, employers have been bracing themselves for the increased employment costs coming into place in April:
- Companies to pay National Insurance at 15% on salaries above £5,000 (up from 13.8% on salaries above £9,100)
- Legal minimum wage rates increase, and the National Living Wage for those who are 21 years + becomes £12.21 per hour.
Payroll is the biggest cost for many SMEs, so these changes could increase business costs significantly for some impacting their cash flow and profits. Increased costs can’t always be easily absorbed by the business or passed onto the customer.
From the conversations we are having, businesses need to look at where they can save budget in order to accommodate the changes in April and manage cash flow positively. Understandably business owners want to proactively explore options and gain an element of control where these increased costs cannot be ignored.
With that in mind, the team at Accounting Clarkes have five practical cost saving tips for you to explore today.
- Increase pension contributions for tax purposes
Speak to a payroll specialist about the option to increase employer pension contributions, which won’t be subject to employer and employee National Insurance (NI). This option expands the bands for which NI is applied and reduces the tax liabilities for the employer.
- Investigate other salary sacrifice benefits
Like the pension contributions, an employee sacrificing part of their salary for a benefit lowers their gross salary, in turn reducing the National Insurance Contributions (NIC) you make as an employer. Even if you have explored these options before, remember that individuals’ circumstances change over time and revisiting them might identify a new need like childcare vouchers or gym membership.
- Review other employee benefits
As well as salary sacrifice benefits, what other non-monetary employee benefits could you explore with your teams? Some may opt for additional time off in lieu of a pay rise. Others may welcome training opportunities to boost their professional development. Ask your employees what they would like – it could turn into a great tax saving!
- Review other costs
We like to think that all business owners regularly review their budget and forecasts and therefore supplier costs to make sure they remain competitive. When there is such a prominent change to employment costs, the earlier you can review and identify potential areas of the business to save money, the better. Changing suppliers or negotiating better terms can take time. Don’t be put off if you haven’t started, but make it a priority to look at and scrutinise all your business costs.
- Consider working with freelancers as opposed to employees
Your business may be at a pivotal point of growth and prior to the Autumn Statement announcement, you might have been gearing for growth and planning to employ more staff. If your business needs more people but the increased employment costs make it unsustainable, consider bringing in the resources you need via freelancers or agencies. You’ll be able to scale up (or down) as required.
Make decisions informed by the numbers.
Every business owner will have to make difficult decisions from time to time. Decisions don’t have to be difficult if you’re led by the facts and the numbers. As your accountant, we don’t leave you with doubt and questions. We’re here to help you better understand the figures in your business and to help you make key decisions with evidence.
If the upcoming changes in April are causing you stress and you’re struggling with decision-making, come and talk with our friendly team. Call 01252 612484 to discover how working with Accounting Clarkes is different.
