Let’s start this blog off by just pointing out some of the changes that the 2024 Autumn Budget has introduced:
- National Minimum Wage Increase: A substantial rise will occur, with adult wages (21+) increasing to £12.21 per hour from April 2025. Younger workers and apprentices will also see wage increases, aimed at supporting the “genuine living wage” initiative by the Labour government.
- Employer National Insurance (NI): While no direct tax increases for employees were promised, the government is raising NI contributions for employers. This move leads to higher operational costs for businesses, particularly impacting payroll expenses.
- Business Rates: Rising after a previous freeze of 75% to now 40%, impacting our sector heavily.
Now let’s get straight to the point: this budget is a disaster for independent businesses!
Particularly for the hospitality sector, where independent operators are already navigating razor-thin margins.
These changes threaten to gut an industry that has barely had a moment to recover since the pandemic, hitting us with a hike in National Insurance, an increase in business rates, huge Minimum wage increases, and this is before their push on the removal of zero-hour contracts—an absolute lifeline in this industry.
Zero-hour contracts are essential in hospitality for both workers and employers. Many of us need flexibility to cope with the volatile nature of demand, and employees count on the option to pick up extra hours.
Now, they’re effectively gutting this flexibility and tacking on NIC increases, all while calling it “necessary.” The numbers are gut-wrenching: a £2,500 per employee cost increase on top of everything else. For small businesses, that’s beyond absurd; it’s unaffordable.
Nigel Farage has stated that “Any business employing 5 or more people has today been hammered” and claims that “Nobody on the front bench has ever worked in private business”
He is absolutely right, this government are making several changes to the budget and yet have never even run independent companies, they have no right to make decisions on things they know nothing about.
Let’s look at the National Wage Increase
With the increase in the National Living Wage from £11.44 to £12.21, businesses are facing a 6.73% rise in wage costs, which can significantly impact their financial stability.
Let’s break this down for a business employing 50 full-time staff, all working 40 hours a week.
Financial Breakdown:
- Weekly Increase per Employee:
- Previous hourly rate: £11.44
- New hourly rate: £12.21
- Difference: £12.21 – £11.44 = £0.77 increase per hour
- Weekly, Monthly, and Annual Costs per Employee:
- Weekly increase per employee: £0.77 x 40 hours = £30.80
- Monthly (4 weeks) increase per employee: £30.80 x 4 = £123.20
- Annual increase per employee: £123.20 x 12 = £1,478.40
- Total Annual Increase for 15 Full-Time Employees:
- Total annual increase: £1,478.40 x 15 = £22,176
This annual increase in labour costs is no small change. Independent businesses are already grappling with rising costs from increased business rates and national insurance contributions, and this additional burden could push many to the brink, as often for the director, this is basically their wage out the window!
Another major struggle is the impact of the increased business rates. How are independent businesses supposed to bear yet another financial burden? Many venues simply don’t have the cash flow to absorb these increases.
With the rates rising in line with a 6.7% inflation hike, the standard business rates multiplier will jump to 54.6p—the steepest increase in decades.
This means that many businesses will have to reallocate resources just to keep up with property tax increases, leaving fewer funds for staff wages, supplies, or other operational need
We’ll be left with no choice but to cut back on hiring, reduce hours, or worst case, close down altogether.
The reality is that these policies could rob communities of local gems, venues that have been built with blood, sweat, and tears—places that bring heart and soul to our towns and cities.
This budget shows a fundamental lack of understanding of what it takes to run a business. It’s clear that no one who’s had to make payroll or worry about rent hikes is at the table here.
At a time when support is needed most, we’re being shown the door.
This budget prioritises worker pay increases, but at a cost that will strain small business owners and their ability to sustain or grow their operations effectively.
If you love hospitality and are eager to improve our industry, then come along to our next conference The Art of Hospitality that talks all things hospitality, hosted in January! Big conversations start somewhere! Learn more and get your tickets here
https://www.tickettailor.com/events/thehospitalityheroltd/1247485?