23 September 2013

Small businesses plan to increase wages

Small businesses are seen as a barometer for the rest of the UK economy, so plans to increase wages could indicate that business growth is starting to speed up.

According to research carried out by the Federation of Small Businesses (FSB), half of small businesses are planning to increase staff wages over the next year or have already granted pay rises in the last 12 months. Some bosses are even intending to raise salaries by as much as 10%.

Small businesses are seen as a barometer for the rest of the UK economy, so it is thought this survey suggests that business growth is starting to speed up. For the last five years wages have either stayed at the same level or fallen.

Minimum wage rise warning

The Government is considering raising the national minimum wage, which would force many employers to pay more to their staff. Business Secretary Vince Cable says the minimum wage should go up so employees can benefit from the improving economic conditions.

However, the CBI warns any increase could make life difficult for businesses, particularly start-ups or small companies with limited resources.

John Cridland, the CBI’s Director-General, claims the move could put jobs at risk and raise business costs for companies already finding it difficult to survive.

He says: “A large minimum wage rise now would be a hollow victory if companies could not remain competitive and went under. We can only move away from falling wages with a return to sustainable growth.

“So the focus must be on doing all we can to create jobs and support the infant recovery. Our flexible labour market has saved jobs and we should not wish it away.”

John Allan, National Chairman for the FSB, says small businesses are keen to pass on any increases in profit to their employees, which is sure to boost staff morale.

He says: “With confidence returning to small businesses after a period of wage restraint, our research shows our members are looking to pass on any extra profits to their staff, including those on low pay.”

But he adds that many very small businesses simply cannot afford to raise wages as they are struggling to pay increasing business rates and utility bills.

The FSB quizzed 200,000 of its members in the poll, which also reveals half of all small businesses already pay their staff the living wage or more. The living wage is a voluntary benchmark and is based on the amount someone needs to earn to cover the basic costs of living.