HR · 16 May 2018

Small business owners are increasing staff salaries at the fastest rate for over 3 years

increasing salaries
The FSB criticised the impact of universal credit on the self-employed

Small business owners are increasing staff salaries at the fastest rate for three-and-a-half years, new research has found, with many employees seeing pay packets increase by over four per cent.

According to fresh data from the Federation of Small Businesses (FSB), two-thirds of small company owners have increased their salaries over the past year – the highest proportion since the final quarter of 2014.

Also at a 39-month peak is the share of smaller employers awarding staff with a pay increase of at least two per cent (50 per cent). Meanwhile, workers at one in four small firms saw paychecks increase by four per cent or more in the same period.

Smaller employers are also expanding their workforces. Some eight in ten said they have maintained or increased staff headcount since the start of the year, three percentage up from the same quarter in 2016.

The figures arrived as the Office for National Statistics (ONS) confirmed that unemployment levels remained at the joint lowest level since records began in 1975.

Commenting on the figures, FSB chairman, Mike Cherry, said small businesses were playing a “critical” role in keeping the UK jobs market steady.

“It’s great to see that such a big proportion are in a position to take on more staff and up pay levels,” he added.

However, Cherry warned that government needed to go further in ensuring employment opportunities for under-supported groups, such as ex-offenders, young people and those with disabilities.

“The government should confirm plans for a National Insurance holiday for small employers that take on employees from disadvantaged groups, so that every one of us can share the benefits of UK economic growth,”he said.

Cherry also took aim at universal credit and the impact the government’s welfare reforms have had on the self-employed workforce.

“With only one in four sole traders saying that revenues are increasing, the government should reverse the damaging impact that universal credit is having on our self-employed community.

“The system gives sole traders just 12 months to make their firms a success, when all the evidence shows that it takes two to three years to get a viable firm off the ground.

“Universal credit nudges users towards taking a job rather than creating one. By calculating benefits on a monthly rather than a yearly basis, the system rewards those who have consistent incomes. Meanwhile the self-employed, whose earnings vary from week to week, are left to suffer.”

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Praseeda Nair is the editorial director of Business Advice, and its sister publication for growing businesses, Real Business. She's an impassioned advocate for women in leadership, and likes to profile business owners, advisors and experts in the field of entrepreneurship and management.