Government must do more to help businesses cope with the rising cost of wages, the Federation of Small Businesses (FSB) has argued.
Young workers earning the national minimum wage are set to receive a pay rise of up to £450 a year after the minimum wage was upped to £6.95 an hour from 1 October 2016. However, the FSB warned small businesses could be forced to cut jobs to help meet rising labour costs and urged the Government to extend employment allowance.
FSB national chairman Mike Cherry said: ““Small businesses are reacting to difficult economic conditions with characteristic resilience, but they will need more help if increases to the minimum wage are to be a success and not affect employment levels or investment decisions.
“We call on Ministers to consider a significant uprating of the Employment Allowance from its current £3,000 level. This has already helped to boost pay levels and incentivise job creation, and could be the lifeline many smaller firms need due to fast-rising labour costs.”
A survey from the British Chambers of Commerce (BCC) found a third of the 1,600 firms it questioned had reported increased wage bills since the introduction of the national living wage and that a quarter of those paying higher wages had cut back on recruitment.