If you run a small business, administrative tasks (such as onboarding, payroll, and compliance) can often dominate the workday.
According The Xero investigationSmaller companies (0 to 9 employees) spend less than half (46%) of the work week on their main jobs.
The rest of your time is consumed by “non-essential” responsibilities, such as IT, HR, administration, and finance.
While juggling a number of different responsibilities, employing small business owners in the UK should also be aware of some of the upcoming changes announced in the Autumn Budget.
New regulations and taxes will affect, among other things, how small businesses pay their staff.
With so much going on, the added challenge of keeping up despite changing legislation is daunting for homeowners. 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 is changing and what does it mean for small businesses?
A series of changes were announced in the fall budget. For example, from April 2025, employers’ national insurance contributions (NICs) will increase by between 1.2% and 15%, while the level at which employers start paying national insurance will be reduced. to the first £5,000 of staff salaries. Additionally, minimum wage increases are planned to support the cost of living.
To help small businesses remain employed, there will be an increase in the employment benefit from £5000 to £10,500 from April 2025. This means a small employer will be able to deduct £10,500 from their National Insurance bill over the year , providing some relief against rising NIC costs.
Another change to note is the new flexible working law that came into force in April 2024. Employees can now request permanent adjustments to their working conditions (including hours, hours or location) without waiting six months to make a request. formal. This shift marks the end of the 9-5 workday and opens the door to flexible working, including remote work, compressed hours or job sharing. There is also the new Employment Rights Bill, which could change things again in a few years’ time, although for now nothing is final and it is subject to consultation.
While flexible arrangements can present initial challenges for small business owners, they are also an opportunity to retain good talent and ensure your people are happy and satisfied with their work environment.
Good payroll software can make it easier for owners to offer and accommodate flexible working. For example, Xero has a work patterns feature that makes it easy to set up custom work patterns based on your business needs, apply that pattern to employees, and then automatically apply it to their pay cycle.
How small businesses can prepare for change
Effective payroll management is more than basic salary calculations and requires in-depth knowledge of the UK tax system and employment laws, a difficult task for the 99.9% of UK companies that are SMEs. For example, a crucial aspect is correctly classifying workers (whether they are full-time employees, workers, freelancers or contractors), as this determines their tax treatment and payment structure. Making these incorrect classifications can have serious consequences, both legal and financial, and can pose enormous risks to small businesses.
Small businesses can take steps to ensure they are prepared:
- Update employee work arrangements: As flexible working becomes more common, it is essential to maintain accurate and up-to-date information about the working patterns and arrangements agreed with an employee.
- 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 work arrangements become more varied.
- Reevaluate hiring practices: Flexible labor laws allow microbusinesses to hire strategically based on demand, allowing them to better align staffing levels with business needs throughout the year.
Ease your workload with digital tools
As changes in the workplace continue to take shape, small businesses will be looking for ways to make compliance a little easier.
Companies seeking operational efficiency are increasingly turning to integrated accounting and payroll solutions. By consolidating these functions into 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 that can simplify the management of complex regulatory requirements and automate RTI submissions to HMRC. By adopting these systems, companies can save valuable time and resources while gaining access to useful information for data-driven decision making.
Rather than simply simplifying operations, connected digital tools offer a comprehensive solution. They help businesses maintain compliance, scale operations, and improve the employee experience, freeing business owners to focus on their primary goal: growing their business.