FEATURE
Profits under pressure
The new Employers National Insurance (ErNI) and minimum wage is hitting the cleaning industry’s bottom line hard. CleanLink Software, a UK software provider specifically for site-based and contract cleaning businesses, has explored the impact on one of their long-standing clients, Coastline Services, and the industry as a whole.
Earlier this year the government delivered a huge financial blow to UK industry. The changes to the Employers National Insurance (ErNI) and the increase in minimum wage has delivered a significant hit to businesses’ bottom lines.
According to data supplied by CleanLink, ErNI has doubled on average from 4.5% of a company’s payroll costs to 9% based on how a business is structured. For example, companies with a small workforce working long hours will have high ErNI payroll costs of 8-9%, whilst ErNI contribution rates of 1.2% have been possible with a large part-time workforce mostly earning less than £9k pa.
Within an industry that already operates on very low margins, often less than 10%, such a direct impact on profitability is not sustainable for many businesses. Being able to use the structure of a business to help manage costs has historically been a huge benefit, with this year’s changes this advantage is no longer possible. CleanLink is keenly aware that many of their clients are going through a very difficult time, and earlier this month they sat down with Coastline Contract Services to understand how the changes are impacting both the industry and their business.
Coastline Contract Services is one of the UK’s leading independent commercial cleaning contractors with about 230 employees, based in the Southwest. The business has seen consistent growth supported by continuous investment
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in management, supervision, Health and Safety along with new technologies. Over the years, challenges such as COVID have impacted performance and sometimes shrunk the business in the short term. However, Coastline has weathered the storm extremely well, partly due to the vigilance they apply to their business management processes.
With the announcement of the new ErNI and minimum wage, they explored how they could manage the change, this time with increased prices to clients; unsurprisingly this was not well received.
Coastline Contract Services’ Sylvie Manuell said: “In our industry, clients don’t want to pay more for cleaning. It’s now difficult to supply the same service without raising our costs as we are already seeing the impact of the changes. However, discussing the increase has been a difficult topic with clients. The changes to the ErNI calculation are having a huge impact on both small to medium size companies, and I believe it’s because the Government aren’t thinking about us when they make these changes.
“The bigger companies already get more help from Government due to the threat of high redundancy levels. The reality is that many small businesses going bust is as damaging as a large business, but it’s not as newsworthy.”
Many in the UK cleaning industry believe, like many other industries who employ part time staff, they are not being
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