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0113 246 1234

What businesses can do to mitigate the issue of labour shortages

Labour shortages, particularly in industries like hospitality, are presenting challenges for many businesses this year.

Balancing cost control with maintaining service quality and customer relationships is no easy feat.

With recruitment challenges, many businesses are turning to technology to boost efficiency.

The Annual Investment Allowance (AIA) offers a valuable opportunity here.

You can deduct the full cost of eligible equipment, including IT systems and automation tools, from your taxable profits.

Tools such as self-service kiosks and advanced ordering systems can reduce your reliance on manual labour, allowing you to operate more efficiently while potentially lowering your Corporation Tax bill.

The AIA limit is currently set at £1 million, offering plenty of scope to make impactful investments.

Exploring apprenticeships and employment incentives

Apprenticeships are a practical way to tackle staffing needs without adding costs.

Government incentives, such as grants of up to £1,000 for hiring apprentices under 25, make this an attractive option.

The Apprenticeship Levy also provides access to funding for training, allowing you to mould apprentices to fit your business’s specific needs, helping to close skills gaps and reduce future hiring challenges.

Apprenticeships are often more affordable than bringing on experienced hires, and investing in long-term talent through this route can benefit both your business and your workforce.

Boosting retention through tax-free employee benefits

Retaining skilled staff in a competitive market is key.

Tax-free benefits can play a role in boosting employee satisfaction. The trivial benefits exemption allows businesses to provide small perks (up to £50 per employee) without triggering tax or National Insurance.

Regularly recognising employees in this way can promote a positive workplace culture.

Another option is the cycle-to-work scheme, which lets employees purchase bicycles and equipment without tax implications.

This can be a valuable offering given rising transport costs, benefiting both employers and employees by supporting sustainability and health initiatives.

Considerations for hiring overseas workers

Hiring talent from abroad may help fill gaps in your workforce, but there are tax implications to consider.

You will need to ensure compliance with work permits, visas, and correct PAYE and National Insurance contributions.

Offering a relocation allowance, which lets you provide up to £8,000 towards relocation costs tax-free, can make your job offers more attractive to overseas candidates while remaining cost-effective for your business.

Managing VAT and cash flow with agency workers

Bringing in temporary workers through an agency can offer a quick fix when staff are in short supply.

However, bear in mind the VAT on agency fees, which can increase costs.

While VAT is typically reclaimable for VAT-registered businesses, it may affect cash flow, so keeping your accounting systems updated to track VAT accurately is crucial.

Alternatively, we are able to manage this aspect for you.

Don’t forget the Employment Allowance

If eligible, your business can reduce its National Insurance contributions by up to £5,000 each year through the Employment Allowance.

This can help offset the costs of maintaining or expanding your workforce, especially when labour is tight, and margins are under pressure.

For further advice on how to manage your finances during periods of labour shortages, please contact us today.

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