The commercial cleaning industry has in recent times become pivotal in maintaining clean, hygienic workspaces, schools, care homes and many other communal and commercial areas. However, a significant challenge looms in the form of the rising labour cost due to the increase in the national minimum wage.
With the UK’s economic troubles showing no signs of abating, the government has faced pressure to help those on low pay. The main responsibility of this help has been passed on to businesses’ and in April 2024 the UK NMW rise is set to be the most substantial since its introduction.
Whilst employers undoubtedly want to pay their staff a good wage that they can afford to live on, SME’s themselves are also currently bearing the cost of high petrol, gas, electricity, and supplies. For an SME the large NMW rise couldn’t have come at a more challenging time and represents yet another restriction on growth, in a year defined by rapid inflation, rising interest rates and soaring energy costs.
Along with the increase in wage employers have an increase in associated pay costs, including pension and National Insurance contributions and holiday pay. The government did announce that National Insurance contributions would be cut from 12% to 10% on the 6th of January, under the change, tax paid by employers and employees will reduce. However, this saving is counteracted by the fact that as the National Insurance threshold has been frozen and wages have risen more workers will now pay both National Insurance Contributions and into a workplace pension and in turn so will employers.
Contrary to the belief of many, currently most businesses do not pay minimum wage because they want more profit or do not value their employees. It would be more beneficial to a business to pay above NMW wage as they will have better retention of staff therefore less recruitment costs and in general higher pay increases productivity and job satisfaction. No – The huge majority of businesses that employ people on NMW do so because the business model is such that the profit margin is so tight there is simply not the capacity to pay staff a higher wage and keep the business running efficiently.
So what can SME's do?
To remain in business all good SME’S are regularly looking for ways to improve efficiency, cut costs and improve quality of service. If the whole NMW rise costs are passed onto clients, through higher charges, businesses run the risk of the client looking elsewhere for the service. This means that not only does the cleaning company lose the income, but the employee in turn loses their job.
SME’s will need to look at their business through a microscope, swiftly and efficiently, conduct comprehensive in-depth reviews of their operations in all areas of the business, pinpointing potential efficiencies and cost-saving opportunities, and find ways to further enhance the productivity of staff without compromising service quality. A strategic approach to cutting costs in any area possible with the main aim to limit labour costs without resorting to workforce reduction.
The commercial cleaning industry itself by nature is a labour-intensive industry, tasks involved require manual effort and attention to detail. It is recognised that staff constitute the backbone of the cleaning service industry and are an invaluable asset.
Cleaning service providers must now walk a very thin tightrope, striking a delicate balance between wage costs, competitive pricing and maintaining profitability.
