Recent changes to the National Living Wage mean that employers are legally mandated to pay employees £1.02 more per hour than in 2023 - a 9.8% increase year on year and the third highest real terms increase in history.
With one in five UK businesses reporting a decrease in turnover throughout March, according to official figures from the ONS, maintaining accurate payroll forecasts is vital to avoid having to suddenly cut staff hours later in the year.
For labour-intensive sectors like hospitality, production, manufacturing and care homes, employers will need to carefully monitor their staff hours and expenses in the coming months - or risk making difficult decisions.
Payroll may seem like something that can be left to its own devices under ‘business as usual’, but this is far from the truth. In the current challenging economic climate, we’re all finding that things cost more - including our employees.
Almost a quarter of UK businesses (24%) admitted to shouldering the burden of increased costs in 2024 - and yet nearly half (49%) have no plans to raise their prices. While this is a noble sentiment that customers will surely appreciate, businesses shouldn’t be afraid to make decisive choices to protect their bottom lines.
For employers that typically pay employees an hourly wage, such as hotels, restaurants, care homes and manufacturing facilities, it is vital to take higher wages into account in your monthly payroll forecasts and cross-reference these against your projections for the fiscal quarter.
I’d suggest comparing monthly labour costs against your year-to-date payroll expenses to give you a fuller, more accurate picture of what you can expect to pay in the months ahead.
Similarly, it could be especially advantageous to run a regular report comparing the projected hours worked by employees and their actual accrued hours; you may find surprising patterns that you hadn’t yet made allowances for, such as department-specific overtime requirements or seasonal adjustments in line with bank holiday dates or the school holidays.
None of us take the decision to increase our prices lightly, but in a climate of climbing costs, businesses mustn’t risk undercharging for essential services - especially with supplies and staff costing businesses more and more.
Even with inflation easing, food prices for many vital items continue to rise. For those working in the hospitality sector in particular, it is critical to consider sensible price rises to your goods and services in line with inflation.
Of course, to avoid customer backlash, it is best to do this in as competitive a manner as possible to avoid pricing yourself out of the market - but with a little market research into your competitors, your expected outgoings and your forecasted income, this is not only achievable but advised.
With legislative reforms such as proposed changes to company size classifications and increases to Companies House fees, keeping track of your payroll expenses should be something that companies firmly prioritise in 2024, or risk running into significant problems further down the line.
If you’re concerned about the rising cost of payroll and want to speak to an expert to ensure your financial forecasts are as accurate and impactful as possible. Get in touch with our team today. For a helpful reference guide for tax rates in 2024, download our free guide.
