How Companies Can Prioritise Their Budgets in 2022
1.The cost-of-living crisis is impossible to ignore. Where should companies be thinking about pay-rises? And what should these be conditional on? Seniority? Experience? Should it be across the board, or on a case-by-case basis?
For any pay rises, the balance is sometimes ultimately between pay and job security. If a company isn’t making a profit or doesn’t have the cash to cover pay rises, this will impact their ability to provide pay increases, with the focus being placed on retention over pay. Irrespective of a company’s financial performance, the employer-employee relationship is mutually beneficial; if workers (at all levels) feel comfortable in their home life, they’ll perform better at work, and this includes personal financial stability. While fair pay should always be the focus, whether it is across the board or case-by-case will depend on the circumstances.
Companies could also take a longer-term view, committing to pay rises based on training and progression, as whilst pay rises may feel less feasible in the shorter-term, a more skilled and engaged workforce is likely to lead to more sustainable performance in the longer-term.
If pay rises remain infeasible for a company, targeted cost-of-living support may be a better option. By offering support to those who need it, whether through monetary support, or providing confidential advice and education, will provide a level of financial support to those who most need it within the business.
2. When it comes to training and retraining, what are the best investments a company can make? Are there any obvious cutbacks?
Training and development of people is at the heart of the British psyche and is what makes us so competitive in the global economy. Therefore, training should still remain high on the agenda despite budgets becoming increasingly stretched. Looking to the medium-to-long term will help to focus which training investments are the best. The continual development and career enhancement of staff is mutually inclusive to the entire business and its customers, so investing in training that helps to achieve any longer-term goals will help to build a stronger business through the economic cycles.
3. What do you recommend are the three most important considerations for any budget and why?
Under current economic conditions, ‘iterations’, ‘cash’, and ‘sharing’ should be at the top of businesses’ radars.
Whilst having an expected budget plan is the norm for many businesses, with the economic volatility experienced recently, having both upside and downside iterations and planning the implementation and impact of these will help businesses to be more resilient.
Cash is always important for a business, no matter the budget iteration. Even during a high growth iteration, cash will be needed to pay suppliers, staff, rent etc, so it’s important to have enough cash to plan for any budget iteration. Cash is equally as important when more cash is needed under a lower growth iteration.
Finally, sharing any budgets with stakeholders is vitally important, ensuring everyone is on board with plans. Employees, shareholder, customers, suppliers, and lenders all play crucial roles in supporting the business, so including them in budget discussions will help to create a cohesive plan and help prevent anything being missed.
4. Depending on what they are, can perks and benefits ever be a substitute for salary? If so, which ones are wise investments?
Paying a fair and competitive salary is crucial for any business, and whilst rewards can’t directly substitute salary, they can work to complement it. Rewards can help to build on salaries and align any business goals with individual and team performance. Particularly in the case of encouraging effective teamwork, aligning rewards with the right moral behaviours and attitudes can ensure a good balance of outcomes for all.
All comments to be attributed to Paul Fraser, Executive Director at Cynergy Business Finance
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