How to avoid a wage spiral in your business

Demands for higher pay are spreading. How should small business owners react?

TUC demonstration for higher wages
But how much can your employer afford?
(Image credit: © Tolga Akmen/Anadolu Agency/Getty Images)

Demands for pay rises may be the last thing small businesses feeling the squeeze want to grapple with. But just as their own costs are soaring – research from the Federation of Small Businesses shows that 82% are worried about inflation – so too are those of their staff. Employees facing a cost-of-living crisis will naturally hope that their employers will be generous.

The danger of a confrontation is very real, as the growing number of wage disputes across the public sector underlines. And while many employers may not need to think about pay rises until later in the year – if salaries work on a calendar-year basis, say – they should be prepared; inflation is forecast to remain high for the foreseeable future.

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David Prosser
Business Columnist

David Prosser is a regular MoneyWeek columnist, writing on small business and entrepreneurship, as well as pensions and other forms of tax-efficient savings and investments. David has been a financial journalist for almost 30 years, specialising initially in personal finance, and then in broader business coverage. He has worked for national newspaper groups including The Financial Times, The Guardian and Observer, Express Newspapers and, most recently, The Independent, where he served for more than three years as business editor.