Business owners paying themselves less to absorb rising costs

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    shutterstock.com/YURALAITS ALBERT

    With operating costs spiralling, small business owners are absorbing inflationary pressure by paying themselves less.

    Real average wage earnings (AWE) fell in the 3 months to May 2017 when compared with the same period in 2016, according to the latest figures from the office of national statistics (ONS).

    Total pay fell by 0.7%, compared with a decrease of 0.3% in the 3 months to April 2017.

    This is the largest 3-month average year-on-year decrease seen in real average wage earnings (AWE) since the 3 months to August 2014. Nominal AWE (total pay) grew by 1.8% in the 3 months to May 2017, while the CPIH increased by 2.7% in the year to May 2017 (from 2.6% in April 2017).

    In the same 3-month period, real AWE (regular pay) fell by 0.5%, compared with a decrease of 0.6% in the 3 months to April 2017. The nominal AWE (regular pay) rose by 2.0% in the 3 months to May 2017.

    Commenting on the report, Mike Cherry, National Chairman at the Federation of Small Businesses (FSB), told Business Link: “With operating costs now at their highest in four years, small business employees are absorbing inflationary pressure by paying themselves less. Many will also be responding with further price increases, leaving all concerned with weakened discretionary spending power. Our consumer-facing members say they’re really starting to feel the impacts of decreasing demand.

    ”The new ‘dependent contractor’ status unveiled in the Taylor Review, if done right, should bring new wage policies for those unfairly treated in the gig economy, whilst also protecting the genuinely self–employed. But Ministers must not be allowed to widen the net on a whim without robust Parliamentary oversight.”