On Wednesday, Chancellor Jeremy Hunt announced his long-awaited Spring Budget, which saw corporation tax increase from 19% to 25% - one of the largest corporation tax increases in history.
This increase comes to the dismay of many business owners who are already facing the pressures of high interest rates and inflation.
Other points announced in the budget include working parents being entitled to 30 hours a week of free childcare and increasing the tax-free allowance for pensions from £40,000 to £60,000.
Spectators have pointed to the fact that, although corporation tax might seem like it impacts primarily business founders, a high tax economy is likely to increase prices of goods and services, while lowering wages and increasing the possibility of layoffs.
In a recent survey from Pleo, it was found that 95% of UK SME business founders say the cost-of-living crisis is negatively impacting their business’ workplace culture, 61% having halted staff bonuses and socials.
With rising pressure on founders and senior management teams, increased economic strain caused by the corporation tax hike poses a potential threat to workplace cultures.
Healthy workplace culture is something that needs to be cultivated and consciously maintained. Many founders argue that the best cultures are the ones that are intentionally crafted. As business founders and management teams focus more on navigating the cost-of-living crisis, workplace culture may become neglected.
Beyond this, a business under economic strain is more likely to cut expenses, particularly at employee-level. As a result, the newly introduced tax increases which will see founders and management teams pay even closer attention to cashflow, could signify trouble for the way a company navigates itself internally.
The Mountain of Lost Benefits: Making Employee Benefits Matter
It’s clear that benefits and rewards are essential to your people, but they must be fit for purpose, easily accessible, and incorporate financial, mental, and physical wellbeing support.
However, only 11% of employees make the most of their workplace benefits and rewards.
When your people don’t engage with the benefits you make available, continuing to offer them may become unsustainable. The cost-of-doing-business crisis rages on – putting pressure on profitability. It’s more important than ever for employee benefits to be cost-effective and deliver an ROI.
In our new e-Book, we explore:
The importance of benefits and rewards
The reasons behind low uptake
Solutions to boost engagement
Indeed, increased tax for founders could be felt most significantly by employees. Entrepreneurs have taken to LinkedIn to share their opinion on what increased corporation tax could mean for businesses and employees.
One business founder, Elvis Eckhardt, says that increased corporation tax could lead to discouraging foreign investment and entrepreneurship, incentivising tax avoidance, and lowering wages. He said: “Higher corporation tax could also result in lower wages for workers.
This could occur if businesses choose to offset the higher tax costs by reducing their workforce, lowering salaries or wages, or reducing benefits for employees.”
