Rachel Reeve’s 2024 Autumn Budget introduces measures that significantly impact small and medium-sized enterprises (SMEs) offering physical security services, such as manned guarding. For these businesses, which are heavily reliant on personnel, the increase in Employer's National Insurance (NI) contributions and the minimum wage hike have profound implications on their cost structures and overall operations.
One of the most immediate challenges for SME security firms is the rise in Employer’s National Insurance contributions. As security services like manned guarding are labour-intensive, staff costs make up a considerable portion of these companies' expenses. Currently, Employer’s NI contributions stand at 13.8% for earnings above the secondary threshold of £9,100 per year, but this rate will now increase by 1.25%to 15.05%, and the threshold will drop to £5,000 per year. This dual change means employers will begin paying NI on more of each employee's earnings and at a higher rate, significantly increasing payroll costs. For example, a security guard earning £24,000 per year would now cost an additional £700 annually in NI alone due to both the rate increase and threshold reduction. For many SMEs, particularly those in competitive bidding environments, these additional costs could reduce their ability to remain price-competitive or necessitate passing costs onto clients, which may not always be feasible. Unlike larger companies, SMEs may lack the financial flexibility to absorb these increases, making it essential to find ways to offset this new expense to avoid compromising their financial stability.
Adding to this pressure is the government’s commitment to increase the National Living Wage. From April 2024, the minimum wage for workers aged 23 and over will rise from £10.42 to £11.44 per hour, a 9.8% increase. For SME security firms, where many employees are compensated close to the minimum wage, this shift directly impacts payroll costs. A full-time security officer working 40 hours per week at the new rate would see an annual pay rise of over £2,100, which the employer must cover. In industries with high staff numbers and competitive, often fixed-price contracts, such a hike strains finances, especially for firms bound to long-term agreements without provisions for adjusting prices to meet wage increases.
Despite these challenges, the budget also introduces some potential opportunities for security SMEs. The fuel duty freeze, for instance, is particularly beneficial for companies offering mobile patrol services. These firms, which often rely on vehicle fleets to cover large geographic areas, will see savings on fuel, helping to counterbalance some of the increased labour costs. This freeze is a welcome relief, as fuel expenses have been rising in recent years, impacting the profitability of firms that operate mobile patrols.
Additionally, the increase in the Annual Investment Allowance to £1 million provides businesses with a valuable tax benefit on qualifying purchases, including essential technology and equipment upgrades. This enables security firms to modernize their operations by investing in automated systems, energy-efficient technology, and other innovations without the same financial strain. These advancements can lead to enhanced efficiency, better compliance with regulatory standards, and ultimately, greater competitiveness in a growing market. Energy efficiency incentives also allow firms to cut down on operating costs, especially those with high electricity usage for monitoring equipment or 24/7 operations.
This increase in labour costs puts pressure on SME security companies to re-evaluate budgets and adopt cost-management strategies. To remain competitive, many SMEs can turn to workforce management software, such as Guardhouse, to streamline operations and optimize staffing costs. This software allows companies to automate scheduling, track employee hours accurately, and ensure compliance with labour laws, reducing administrative overhead and minimizing costly errors in payroll. Additionally, advanced reporting tools provide insight into staffing needs, enabling firms to allocate resources more effectively and avoid overstaffing. For instance, using real-time data and analytics, companies can schedule the right number of guards for specific shifts, reducing unnecessary overtime and maximizing labour efficiency. These digital solutions create operational efficiencies that offset rising labour and NI expenses, making workforce management software a valuable tool for maintaining profitability in a challenging economic climate.
Wins from the New Budget:
- Annual Investment Allowance increase: Allows for up to £1 million in tax relief on qualifying purchases, enabling firms to modernize without heavy financial burden.
- Incentives for energy efficiency: Helps security firms reduce operational costs by investing in energy-saving technologies.
- Encouragement to adopt technology: Budget incentives make it more feasible for firms to invest in workforce management and automation software to offset labour expenses.
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Losses from the New Budget:
- Employer’s NI rate rise: An increase from 13.8% to 15.05% for earnings above the threshold, significantly increasing payroll costs.
- Minimum wage increase: A 9.8% rise in the minimum wage, raising costs for security personnel across the board.
- Long-term contract challenges: Fixed-rate contracts make it difficult for firms to adjust pricing to cover increased labour and NI costs.
