If you’re running a small business, administrative tasks – such as onboarding, payroll and compliance – can often dominate the workday.
According to Xero’s research, the smallest businesses (0-9 employees) spend less than half (46%) of the working week on their core jobs.
The rest of their time is consumed by ‘non-core’ responsibilities such as IT, HR, admin, and finance.
While juggling a host of different responsibilities, employing small business owners in the UK should also be aware of some upcoming changes announced in the Autumn Budget.
New regulations and taxes are set to impact how small businesses pay their staff, amongst other things.
With so much already on their plate, the added challenge of staying across shifting legislation is daunting for owners. However, thanks to digital tools that help small businesses manage their finances and payroll, these new requirements don’t have to be a burden.
What’s changing, and what does it mean for small businesses?
There were a number of changes announced in the Autumn Budget. For example, starting in April 2025, Employer National Insurance Contributions (NICs) will increase by 1.2% to 15% while the level at which employers start to pay National Insurance is dropping to the first £5000 of staff’s wages. Additionally minimum wage rises are planned to support the cost of living.
To support small businesses to continue to employ, there will be an increase in employment allowance from £5000 to £10,500 from April 2025. This means a small employer will be able to take £10,500 off their National Insurance bill for the year, providing some relief against the increased NICs costs.
Another change to be aware of is the new flexible working law that took effect in April 2024. Now, employees can request permanent adjustments to their working terms – including hours, timing, or location – without waiting six months to make a formal request. This shift signals the end of 9-5 workdays and opens the door to flexible working, including remote work, compressed hours, or job sharing. There is also the newly proposed Employment Rights Bill, which could shift things again in a few years’ time – although for now nothing is set in stone and it is up for consultation.
While flexible arrangements may present initial challenges for small business owners, it’s also an opportunity to hold on to good talent, and make sure your people are happy and satisfied with their work environment.
Good payroll software can make it easy for owners to offer and adapt to flexible working. For example, Xero has a working patterns feature which makes it easy to set up bespoke working patterns depending on the business’ needs, apply that pattern to employees and it’s then automatically applied to their pay cycle.
How small businesses can get ready for change
Effective payroll management is more than basic wage calculations and requires in-depth knowledge of the UK tax system and employment laws – a tough ask for the 99.9% of UK businesses that are SMEs. For instance, one crucial aspect is correctly classifying workers – whether they’re full-time employees, workers, freelancers, or contractors – as this determines their tax treatment and payment structure. Getting these classifications wrong can result in serious consequences, both legally and financially, and can be huge risks for small businesses.
Small businesses can take steps to ensure they’re ready:
- Update employee work arrangements: As flexible working becomes more common, keeping accurate, up-to-date information on an employee’s agreed working pattern and arrangements is essential
- Adopt a digital tracking system: Moving away from pen-and-paper or spreadsheet methods will reduce errors and ensure payroll data is accurate and secure, especially as working arrangements become more varied
- Reassess hiring practices: Flexible work laws allow micro-businesses to strategically hire based on demand, enabling them to better align staffing levels with business needs throughout the year.
Ease your workload with digital tools
As the changes for the workplace continue to take shape, small businesses will find themselves looking for ways to make staying compliant that bit easier.
Businesses seeking operational efficiency are increasingly turning to integrated payroll and accounting solutions. By consolidating these functions onto a single platform, small businesses can leverage automation to streamline processes, reduce manual errors, and gain real-time visibility into their financial health.
These connected systems offer compliance tools, which can simplify managing complex regulatory requirements and automate RTI submissions to HMRC. By adopting such systems, businesses can save valuable time and resources while gaining access to actionable insights for data-driven decision-making.
Rather than merely streamlining operations, connected digital tools offer a comprehensive solution. They help businesses maintain compliance, scale operations and enhance the employee experience, freeing up business owners to concentrate on their primary goal: growing their business.
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