Can You Really Afford That Pay Rise?

Be generous. But don’t be stupid.

Let’s start with the obvious: most business owners want to look after their team.
You know what it’s like to have good people — the ones who show up, handle problems, and give a damn. When they stick around, your life gets easier.

So when they ask about pay rises — or even when they don’t — you feel the pressure.
You want to do the right thing. Keep them happy. Reward loyalty. Be a decent boss.

But here’s the line I’d ask you not to cross:

This Isn’t About Greed. It’s About Reality.

According to recent data, only 27% of small businesses plan to give pay rises in the next 12 months.
Not because they’re tight-fisted. Because they’ve done the maths.

You see, a £2,000 pay rise isn’t just £2,000.
Factor in National Insurance, pension, holiday pay, and you’re nudging closer to £2,400–£2,600.

And if you give it across the board? That’s tens of thousands in payroll costs — every year. Forever.

Why It Feels Harder Right Now

• The cost of living is still high — so staff expect more
• The job market is jittery — so you want to keep your best people
• The media narrative says “employers must do more”
• You don’t want to be seen as the one falling behind

But here’s the brutal truth: You can’t pay people with sentiment.
Wages are a fixed cost. If your revenue drops and your payroll doesn’t flex with it — you’re in trouble.

What To Do Instead

1. Check your margins.
   Don’t guess. Actually run the numbers. What does a 5% increase across all salaries look like? Can you sustain that with your current sales?
2. Talk honestly to your team.
   They’re adults. Explain the financial position. Share what’s possible, not just what’s ideal.
3. Look at non-cash value.
   Flexible hours. Training. Extra holidays. Remote options.
   For many people, these are worth more than a few quid a month.
4. Don’t ignore the floor.
   Minimum wage rises are coming in April. Even if you’re above it now, the gap is narrowing — and you’ll need to react.

A Word on Expectations

If you raise pay this year, you set a precedent.
Staff will expect more next year. That’s fine — if your business is growing. Dangerous, if it’s not.

Also: be careful of bracket creep.
Push someone into a higher tax band, and their take-home pay might not feel like a rise at all.
Cue resentment, confusion, and “I thought I was getting more” conversations.

My Advice? Be Clear, Not Clever

You don’t need to compete with Google or the NHS.
But you do need a plan. That might mean:

• Staggered rises based on performance
• One-off bonuses linked to profit
• A formal review every 12 months, not knee-jerk decisions

And if the answer this year is “not yet” — say so with honesty and a path forward.

Final Word

Paying your staff fairly is good business.
But stretching your business to unsustainable levels just to “look generous” isn’t leadership — it’s self-sabotage.

Your team doesn’t need empty promises. They need a business that stays open, pays on time, and tells the truth.