Average pay rises are to jump to 3.5% according to the DailyMail today. Compulsory pension contributions are breathing down our necks. And the government has announced a rise in minimum wage from October 2015. All in all, staff costs are on the increase putting even more pressure on small businesses.
3.5% doesn’t seem like much. So why should you care? You should care because it’s a lot more money than you think it is.
Example If you have a business with 20 employees, whose average annual salary is £45K plus 20% on-costs like national insurance and pension etc. An increase of 3.5% will cost you roughly £38K a year. Have you got this kind of money spare in your budget?
Keeping up with the current market
If you want to be an attractive company to work for and lure superb talent you need to pay market rate. You can find out if you are under or over paying your staff by looking at industry specific salary surveys. If you are in the marketing communications industry for example and an IPA member, you can participate in their salary survey and receive the results. Not a member? You can gain similar information from Major Players. Otherwise, you can access a salary guide from Reed or from Morgan McKinley. There are literally hundreds online.
Let’s assume you need to follow the trend and increase your employees’ wages in order to stay competitive. Can’t afford it? Don’t panic. You have options.
One path is to increase other benefits besides actual pay. You can increase your employees’ happiness, loyalty and productivity (because happy people are more productive – fact) at virtually no cost. There is an amazing list here on Entrepeneur.com of low-cost perks. ‘Bring your dog to work day’ and ‘movie day’ are fun. I know personally, I would be willing to take a cut in pay if I knew my workplace offered work from home days and flexible hours to enable nursery pick up etc. If you can not offer great wages, then offer quality of life and work life balance. These benefits rank higher on more people’s agendas then you might think. And if they are provided with respect and trust, employees will repay you 10 fold.
Still need to squeeze out the extra pennies for pay rises? Here’s how to find a little extra room.
Headcount assessment. What does everyone in your business do? Do you even know? Do they add value? Become a lean machine by discarding excess weight. Harsh perhaps, but necessary. “Life’s tough kiddo” to quote my Dad.
Subscriptions. How many pretty magazines sit in your reception never to be opened? What do they cost? Are they ALL necessary? And does every single director need their personal copy of the leading industry mag and the FT? Smart companies have a rota. A small piece of paper with a list of names stapled to the front. Tick your name off when you’ve read it and pass it on. That’s of course if you are still reading paper versions. Online subscriptions are better. Have a company login. One subscription which you share. Easy.
Example You have 3 subscriptions to the FT for each of your directors. It’s the full newspaper and online subscription at £13.50 a week. Switch to one shared basic online subscription at £5.35 a week and you have just saved £1,828 a year. Just share the company login. Now do it for all your publications. You can probably easily find £5K.
Switch to cheaper contracts for your electricity and gas. You can use sites like Switch My Business or Energy Helpline . They find you the best deals for your area and your usage. You can save a substantial amount a year.
I suggest taking your overheads budget, and go down the list one by one. Ask yourself, what is this? Is it used? Do we need it? Can we get the same quality for less money?
If you have done all of the above, and you are still struggling to keep your head above water, then you need to take a hard long look at your revenue stream. But that’s another story…..