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Have You Raised Prices To Pay For Minimum Wage Increases?

Have You Raised Prices To Pay For Minimum Wage Increases?

I was listening to a report on the radio last week on my way into work that said two fifths, or 40%, of businesses have either sacked staff or raised prices to be able to pay their staff the current national minimum and living wage rates.

As it stands right now, the national minimum wage for over-25’s stands at £7.50 per hour. By 2020 the Government wants this to be £9 per hour. If you’re an employee this should be good news. If you run a business this may only add to your growing list of concerns about rising prices.

There is a balance to be struck here. No one wants to deny anybody improvements in living standards and the ability to live a more comfortable life. But, if businesses, particularly SME’s in our industry, continue to be hit with increases here, there and everywhere, we will find that some of these companies might just shut their doors due to the inability to turn a profit, ultimately costing more than one person their jobs.

So, window folk, have you had to raise your prices in order to pay for higher wages? Or have you even gone as far as to lay people off in order to pay the rest of your staff more?

The battle for business

By the sounds of it, if 40% of companies have either raised their prices or laid people off, I would bet that there will be some window companies who have done the same. And it’s a difficult decision to take.

Laying people off is the worst thing you can do as a business owner. No owner wants to do it unless they absolutely have to. Therefore, raising prices to pay for things like the living wage is the lesser of two evils. Not that this isn’t without risks. You raise prices too much and you risk losing business to competitors who can do it cheaper.

Problem is, someone has to pay for the wages, and all other costs businesses have to cover, and as much as the activists among you won’t like to hear this, it involves the company actually making a decent amount of money. I heard a politician say the other day that businesses should make a little less profit so they can raise wages. That raised my eyebrow. I wonder how many SME’s that politician had actually spoken to in order to come to the conclusion that lots of small businesses are sitting on fat profit margins right now in order to just shell out some extra cash for everyone. None, I would wager.

Fact is, there is a balance to be struck, and the end user, the home owner in our case, has to take up some of the slack. Businesses aren’t banks made from money trees, they have to cover their costs, and that means charging a home owner enough to cover all the overheads they have.

Have you raised prices recently? Feel free to get the conversation going via the comments section below.

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Prices will have to rise further

At our place, I am happy to say that all our employed staff are well over £10 per hour. We are lucky enough to be a small business which owns the land and buildings we operate in, so we don’t have things like rents to pay. So those sorts of overheads are limited. We also work hard to maintain a decent profit margin on every contract we sign up.

However, I know that not everyone is in our position. And for some, it’s going to get pretty tough. There are all sorts of costs that are going up at the same time. The minimum wage is to go up to £9 per hour in three years time. Jeremy Corbyn has said if he wins power it will be £10. Not sure how many small businesses will cope with that. Business rates for many are shooting up. Ours is doubling next year, some are being hit even worse. There is then the mandatory pension contributions from businesses to employees, unless employees choose to opt out, which most shouldn’t. And these are costs out of the control of business. Add to the mix materials prices going up from fabricators and inflation starting to squeeze consumer spending power, installers have a bit of a dilemma coming up.

The answer is simple: raise prices. Even if you’re a big business in the window industry, you have to make money. We’re not in it for the charity. We have money to make, people to keep in jobs, investors and shareholders to keep happy. If we allow any sort of rising costs to eat away margin, that’s just bad business. We should be looking at ways to manage incremental increases in prices to home owners in such a way that doesn’t shock a whole swathe of them to keep a hold of their money.

We have to. There is no other choice the way I see it. As businesses we can look at ways to make things more efficient and save a few quid that way, but that isn’t an endless path. We can’t even shed staff to save money that way and up the pay of others. Our industry is already well understaffed in so many areas already, this isn’t an option.

As I said, there is a balance to be struck. 40% of companies are already having to make tough choices just to be able to afford to pay people the minimum wage, and both the Government and opposition want that to rise significantly in the coming few years. What do you do as a business? Raise prices? Cut staff? Let it eat into the profit margin? None are good options. All thoughts and views welcome via the comments section below.

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By | 2017-08-15T00:32:59+00:00 August 15th, 2017|Categories: business|

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