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UK businesses are being hit by rising employment costs

A new study from the British Chambers of Commerce (BCC) has found that 80% of businesses in the UK have seen their costs rise as a result of employment legislation changes. Changes to the minimum wage, apprenticeship levy and pensions auto-enrolment have seen business costs rise significantly as they move to comply with employment law.

The study from the BCC is their annual workforce study which interviewed 1,400 businesses across the UK to get their opinion on business at the moment. Of the businesses surveyed, 75% said they had seen an increase their costs due to pension auto-enrolment, 50% saw an increase because of the National Living Wage and 20% saw increases due to the apprenticeship levy.

Although, the changes to employment legislation were introduced to improve wages and prospects for workers, the BCC is worried that these higher costs could have a negative impact on employees across many businesses.

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If the National Living Wage rises to £8.75 an hour by 2020 as the BCC predict, this could have an impact on many businesses’ affordability and potentially their viability. Head of business environment and skills at BCC, Jane Gratton, spoke to the BBC regarding the findings; “Higher employment costs impact on the bottom line and reduce the resources available to invest in the business and its people.

“Our survey shows that two-thirds of businesses will need to take action in response to proposed increases in the National Living Wage over the next three years. Firms are most likely to respond by raising prices or adjusting employee pay growth and wider benefits. There comes a point at which rising employment costs can no longer be absorbed through reduced profits.”

Minimum wage increases are especially troubling for bosses as they are set to increase regularly up to 2020 so companies have been finding ways to deal with this such as price rises for products and services (38% of respondents), reducing staff benefits (21%) and scaling back on recruitment (20%).

As businesses are already struggling with inflation, a falling pound and high import costs, the growth in employment costs is going to hit some businesses particularly hard regardless of the fact that many will have planned for these events as they are announced months, or even years, before they are due to come into effect.

So although some businesses may be worried about rising costs initially, these changes to employment legislation are set to continue to ensure that employees across the country are receiving a fair deal for their work.

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