Jump to MenuJump to Main ContentJump to the SidebarJump to About A&T Business AssociatesJump to How A&T Business Associates are DifferentJump to How A&T Business Associates WorkJump to Our LinksJump to our Industry NewsJump to Legal InformationJump to Viewing OptionsJump to SearchJump to Site MapJump to Contact Page

How SMEs can manage seasonal payroll bump and rising wage demands

It’s that time of year again – many small businesses are employing seasonal staff to cover an expected upturn in trade. But with margins tight and a strong focus on the national minimum wage, footing the larger wage bill won’t be easy. Alternative finance can help.

Many small businesses are recruiting extra employees to help them manage what they hope will be a busy festive period. There’ll be lots of additional workers in factories, offices and kitchens, and on shopfloors. They’ll be on different contracts, putting in essential shifts to help drive sales, and will contribute to a larger than normal payroll.

Whether it’s a bumper sales period or not, every employee has to be paid, at the end of week or month. While large firms are better set up to deal with this seasonal bump, small businesses are under more pressure because they don’t have the same resources.

One factor that small business owners will be acutely aware of is the growing upward pressure on wages. Deloitte’s Chief Economist in the UK has gone on record saying that wage pressures are rising, and employers are reporting recruitment difficulties and shortages of skilled staff. He talks of “a new dawn breaking for pay growth” and says that average earnings are climbing at over 3% a year, the fastest pace since the financial crisis. This is a significant development for SMEs.

In line with this trend, the national minimum wage is due to increase from April 2019. The national living wage rate will rise to £8.21 per hour, which means an annual pay rise of £690 for a full-time workers aged 25 or over. It is estimated that some 2.4 million workers will benefit from the rise. Interestingly and more immediately, the Living Wage Foundation says that the real living wage has risen by 25p to £9 per hour and by 35p to £10.55 per hour in London. The real living wage is voluntary rate, separate from then compulsory national living wage. Again, small business owners will be looking carefully at margins.

The pressure is on small businesses, in particular when they hear that underperforming employees are costing SMEs an average of £39,500 per year. So, how can they afford the seasonal hike in payroll and better safeguard themselves against the trend for rising wage levels? This is where alternative finance comes in.

In the face of prolonged caution from traditional lenders, such as the big high-street banks, services such as invoice finance, asset finance, peer-to-peer lending and crowdfunding are providing small business owners with an alternative means of accessing capital for essential funding, such as ensuring cashflow to manage seasonal hikes in payroll and for investment in recruitment and staff training. This is how a Sussex small business used peer-to-peer lending, through a commercial finance broker that specialises in alternative finance, to raise the capital to expand its capabilities.

New data from the Cambridge Centre for Alternative Finance illustrate the strength of the alternative finance sector and the healthy rate at which it is growing. According to the Centre, the alternative finance market grew by 35% in 2017 to £6.2 billion, with peer-to-peer business lending the main growth driver. Peer-to-peer business lending transaction volume in 2017 was worth £2 billion, an increase of 65% over the previous year.

Christmas is a critical time of year for many small businesses and owners will be very much alert to larger wage bills. To help them manage the seasonal spike in payroll and the longer-term trend in wage demands, they need to be aware of all the funding options available to them, including alternative finance.

Want to know more about what A&T Business Associates can do for your business? Contact Jon Rook-Allden on 01903 602211 or jra@atbusinessassociates.co.uk.

Return to the News Page