Businesses Counting the Costs of Employment Legislation

Almost four in every five businesses around the UK have seen their costs increase as a result of employment legislation introduced in recent years.

According to the British Chambers of Commerce (BCC), the introduction of an apprenticeship levy, a higher minimum wage and rules obliging employers to auto-enrol their staff onto pension schemes resulted in increased operating costs for a sizeable majority of businesses.

The BCC polled 1,400 businesses for its annual workplace survey and found that 75 per cent say their costs have increased as a result of pension auto-enrolment rules, with a quarter saying that the resulting increases have been “significant”.

Meanwhile, half of respondents to the BCC’s survey said that legislation linked to the National Living Wage has added to their cost expectations and 20 per cent said the same of the apprenticeship levy.

The concern for the BCC is that increasing costs for businesses will leave employers less able to invest in their workforces or for the future.

The organisation has also suggested that many employers, particularly those in manufacturing industries, will respond to rising costs by seeking to find new ways of employing fewer people and making better use of “technology and automation”.

“Businesses are under increasing pressure from the burden of employment costs, and this will influence the choices they make and outcomes for employees,” said Jane Gratton, head of business environment and skills at the BCC.

“Higher employment costs impact on the bottom line and reduce the resources available to invest in the business and its people.

“There comes a point at which rising employment costs can no longer be absorbed through reduced profits.”

The businesses responding to the BCC’s research were SMEs in 96 per cent of cases, with 29 per cent operating within the manufacturing sector and 71 per cent being from the services sector.

Recently released figures from the Office for National Statistics (ONS) showed that there were more people employed across the UK in the three months to June 2017 than has ever been the case before.

According to the ONS, the national unemployment rate was at 4.4 per cent, a 42-year low, at the end of June.

However, official figures also show that the average wage of a British worker is rising at a slower pace than inflation, which means that the value of their take home pay is effectively decreasing.