2026 has been an unpredictable year so far for both the economy and the weather.
One thing that may not come as a surprise to business owners is that employment costs are rising and further changes from the Employment Rights Act are on the horizon.
Balancing the books while keeping the team happy may prove challenging, so discovering the power of commercial finance could be key in the coming months.
Are businesses under more pressure with employment costs than before?
Economic instability across the world has left businesses with greater cash flow challenges that have not been helped by recent reforms to employment costs.
The changes to employer National Insurance Contributions (NICs) blew past the Treasury’s predicted £24 billion addition to tax bills and ended up being £28 billion – something that employers had warned about.
At the same time, changes to Statutory Sick Pay (SSP) brought about by the Employment Rights Act have resulted in the need for more dynamic payroll processing, as more employees get access to SSP than before.
Another annual increase to the National Living Wage (NLW) and the National Minimum Wage (NMW) has placed a further strain on businesses when revenue is struggling to keep pace.
If employment costs more, are employees happier?
The frustration for many employers is that these increased costs are not having a noticeable impact on employee morale.
Wages have broadly stagnated in terms of their real-world value since the 2008 financial crisis and increases to the NLW and NMW have resulted in the gap between minimum wage and graduate salary falling significantly, resulting in a situation where some graduates do not even earn more than the bare minimum.
This has led to a spate of people acting their wage – the art of putting in the precise amount of effort an employee feels their salary matches.
Similar to quiet quitting, where someone does the bare minimum because they hate their job but cannot leave, this mindset has become quite popular on social media.
So too has the notion that the current situation should be viewed as the jobpocalypse, as factors like AI adoption have seen vacancies fall even as the unemployment rate sits at 4.9 per cent.
This lack of choice may keep employees locked in place, even as they become a drain on productivity.
How can commercial finance help with employment costs?
If employees feel that they are undervalued, then the upcoming changes brought in by the Employment Rights Act may make things difficult for employers.
It will not be long before trade unions are given greater access to the workplace, a position that will likely see them advocate for higher rates of compensation.
Alongside this, the Employment Rights Act also requires businesses to tackle the Gender Pay Gap with a clear plan by 2027.
This will likely involve reviewing pay and increasing wages, but could see some employees feel overlooked if they do not benefit from the adjustments.
To balance all of these conflicting challenges, commercial finance may be the key and this requires expert support to implement effectively.
Our team are on hand to unlock the full power of your finances with a confident approach to budgeting and financial forecasting.
We can help you determine the impact of proposed pay increases while also managing the payroll processing for you so that compliance does not become an issue.
There are other compensation options for employees, so we can help you to understand your options and find the best strategy for your business.
Having clarity of your commercial finances is vital for keeping employees happy and staying legally compliant.
Get in touch with our team to take back control of your employment expenses.
