The British Chambers of Commerce (BCC) has urged Prime Minister Boris Johnson to focus on cutting what it describes as the unsustainable cost of employing people in the UK.

It cites new research (available at https://www.britishchambers.org.uk/media/get/Workforce%20Survey%20-%20Employment%20Costs.pdf), carried out with global job site Indeed, showing that nearly three-quarters (72%) of firms report the cost burden of employment as having increased compared to five years ago, with a third saying it has risen significantly.

While the BCC believes that firms support the principle of policies such as pensions auto-enrolment, the National Living Wage, National Insurance contributions and the Apprenticeship Levy, it points out that the cumulative effect is difficult for many to cope with.

Coupled with the scale of other upfront costs, such as business rates, this causes many firms to implement cost reduction measures and weighs down on their ability to invest, hire and expand their business.

Asked what’s preventing their company from investing more in employee training, for example, over a fifth (22%) blamed other business costs.

BCC Head of People Policy Jane Gratton said: “The cumulative cost of employment has become unsustainable and the Government cannot expect businesses to carry on shouldering this ever-increasing burden.”

Firms are creaking under the combined strain of wage increases, employment taxes, skills levies and a myriad of administrative and reporting responsibilities, she continued, and the costs have not been offset elsewhere.

Against a backdrop of historically high labour shortages, sluggish economic growth and ongoing Brexit uncertainty, the BCC argues that ever-rising employment costs are unsustainable for many firms and has appealed to the new Prime Minister to take action.

Comment by Croner Associate Director Paul Holcroft

The rise in employment costs will likely have affected businesses across the board but some may be feeling it more than others. Smaller companies in particular may therefore welcome this call but, while we wait for future news, I would caution them to be careful not to take cost-cutting too far.

Investing in employees, such as helping them to develop through training opportunities, can be key to the ongoing development of a company, encouraging continued staff retention and potentially combatting any potential skills gap that could arise as a result of Brexit.

Last reviewed 7 August 2019