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UK SMEs brace for rise in employee costs

As today marks ’Freedom Day’, employers expect to face a flurry of extra costs such as an increase in employee salaries and expenses.

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While ‘Freedom Day’ will see more restrictions ease, such as the scrapping of social distancing and work from home guidance ending, which no doubt many people are looking forward to, UK SMEs are also bracing themselves for a rise in costs.

 

According to Equals Money, around a third are expecting the cost of employee salaries (37%), expenses (32%), office supplies (30%) and IT equipment (30%) to increase.

 

Due to the easing of restrictions, including masks no longer being mandatory, it is expected that those working in an office environment will now return to the workplace.

 

In the survey of 1,050 SMEs, 91% stated that they have had to pay large and unexpected costs during the pandemic.

 

It also discovered that a third of respondents have had to spend more than expected on IT equipment (33%) employee salaries (31%), and employees’ expenses (28%). Other significant expenses included office supplies (25%) and professional fees (22%).

 

Ian Strafford-Taylor, chief executive officer (CEO) of Equals Money, shared that while many are looking forward to returning to normal, there will be pros and cons for businesses.

 

“Reopening businesses without restrictions will surely help many in terms of sales, but it will also necessarily mean increased costs, particularly with furlough contributions soon doubling to 20% for employers,” he said.

 

“The jobs market is also opening back up, which could mean spending more on hiring or counter offers.”

 

In addition to a changing work environment, SMEs will also need to get to grips with a shifting international economic landscape and an increase of prices. Since the Brexit deal came into effect in January, three quarters of those surveyed cited that foreign suppliers have increased prices, while 33% said they had witnessed a spike of more than 10%.

 

Strafford-Taylor added: “Leaders of the UK’s SMEs have had to be extremely resilient over the last year, with lockdowns and Brexit impacting cash flow.

 

“The key to a healthy cash flow is the ability to plan and predict spending, and that insight comes from pre-existing spending data. For SMEs, having expense management systems and currency trading advice is key to keeping costs as low, and predictable, as possible.”

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