The recent Budget has stirred controversy, especially among employers and business owners in sectors like retail and hospitality that rely heavily on minimum wage and part-time roles.

Key Points:

• Service Charge Breakdown:  40-50% of service charge costs are people-related, including roles in cleaning, security, and landscaping, often paid at minimum wage.

• National Living Wage Increase:  From April 2025, the National Living Wage will rise by 6.7%, from £11.44 to £12.21.  This alone could increase service charge costs by 3.4%.

• Employer National Insurance Contributions:  Set to rise from 13.8% to 15%, with the threshold dropping from £9,100 to £5,000, affecting many low-paid and part-time workers.

• Cost Impact:  For each minimum wage worker, the combined impact of wage and NI increases will be around £2,500 per year.  This will significantly affect overall costs as wage differentials are maintained across teams.

• Service Charge Budgets:  Expected to rise from an average of 6% to closer to 10% in 2025.  Delays in issuing budgets are likely as landlords reassess and update calculations in response to the Budget.

• Retail and Hospitality Businesses Brace for Cost Increases:  Occupiers and owners in retail and hospitality must now carefully manage their expenses to survive these unexpected employer cost hikes.  And Landlords can’t assume inflation-busting service charge increases will be accepted.  Serious decisions on cost mitigation are crucial for the coming year.

If you’re concerned about the impact of these increases on your business, talk to one of our cost saving experts to see how we can help by filling out the contact form below.