In October 2024, the Chancellor Rachel Reeves announced a range of taxation measures designed to help the exchequer raise funds without violating the government’s manifesto pledge to avoid raising income tax, VAT, or employee’s National Insurance Contributions.
Among the measures was a change in both the rate and the thresholds for employer’s NICs, which, along with rises in the minimum wage, have put major pressure on industries which rely on low-paid, entry-level workers. Retail and hospitality face a particular struggle to make the numbers add up – and this might require strategy and cost management.
Understanding the Shifting Landscape of Employment Costs
We’ve already mentioned two major factors helping to drive up the cost of staffing. Alongside the minimum wage and NIC hikes, we might consider increased energy costs, which can sometimes scale with staffing, and general wage inflation, which has been high in recent years.
Retail and hospitality businesses might face particular pressures in the form of high staff turnover, which introduces additional costs. When an experienced member of staff leaves, resources must be expended recruiting and training a replacement. In these industries, seasonal cycles of demand mean that recruitment is an ongoing issue. You’ll always need more hands on deck when Christmas rolls around.
Optimising Workforce Efficiency
When workers become more costly to hire, it becomes more important than ever that we get the best possible productivity from each one. This might mean putting extra resources into training and development, so that workers have exactly the skills they need to thrive. Providing a pathway for personal development might also help to drive down your staff turnover rates, and the additional costs that come with them.
It’s also worth thinking about how non-human labour might be brought in to help get the best from your human workers. This might mean using technology to automate certain tasks, and to identify new ways of doing things. In hospitality and retail, there will always be a place for real human beings – but with the help of AI, those human beings might be able to do their jobs more effectively.
Reviewing Compensation and Benefits Strategies
By compensating your workers well, and providing them with the perks that they really crave, you’ll stand a better chance of retaining them. In doing this, you’ll want to think about non-financial incentives, like flexible working time, and the ability to work remotely where possible.
Financial Planning and Cost Control
If you’re going to keep your costs under control, you’ll need to have an idea of what those costs actually are, and how they might be managed. You might look to drive down your overheads by investing in new energy-related technologies, like heat pumps and LED light bulbs. Using the right digital tools might also help you to review and manage staffing-related expenses. An NIC cost calculator, for example, might help you to plan your workforce.
Strategic Staffing and Recruitment
The market for labour is extremely competitive. You’ll need to offer the right perks and the right remuneration – but you’ll also need to think about how you identify and reach out to the talent you need. This is where a competent, efficient recruitment strategy can be pivotal.
