UK
Chancellor Rachel Reeves has delivered her autumn Budget. The impact the changes to the minimum and living wage and employers’ national insurance contributions (NIC) payments will have on the commercial laundry industry is likely to cost businesses £1.5 million, according to the Textile Services Association (TSA). However, small textile care businesses may feel no pain at all.
Reeves announced that the national insurance (NI) rate paid by employers will increase from 13.8% to 15% from 6 April next year. Additionally, the level at which businesses start paying NI on each employee’s salary will drop from £9,100 a year to £5,000. Meanwhile, the National Living Wage and the National Minimum Wage (for 18-20 year olds) would increase in April, rising to £12.21 per hour and £10.00 per hour respectively.
LCN contacted TSA CEO David Stevens for his reaction. “It’s a tough budget for the industry to take when we are still recovering from the unprecedented price increases post Covid,” said Stevens.
“As a sector we are generally supportive of a minimum wage increase and can see the logic of harmonising across the age brackets but it is still a significant increase in cost that we will need to build in from April. 2024
“What is more challenging is the increases to NI and the impact to our sector. We already work on very tight margins so this is bound to affect our costing model and almost certainly will see a requirement to increase prices still further.
‘If we just calculate the impact of the increase in employers’ NI counterbalanced with the uplift in employers allowance it will amount to almost 1% increase on the Laundry cost index model. This will cost the industry an estimated £1.5m,” concluded Stevens.
However, smaller textile care businesses in the retail sector, for example, will find that the rise from £5,000 to £10,500 exemption from paying employers’ NIC under the employment allowance programme cushions the blow of living and minimum wage rises, certainly of they employ no more than a handful of staff. For these businesses the Budget could turn out to be cost neutral, or even beneficial.
The Chancellor said of the change to the employment allowance programme for small busionesses: “This means 865,000 employers [across all small businesses and industries] won’t pay any national insurance at all next year and over one million will pay the same or less than they did previously.
“This will allow a small business to employ the equivalent of four full-time workers on the national living wage without paying any national insurance on their wages,” said the Chancellor.
