Surviving the Recession: How to cut Business Costs Without Losing Staff

Amid the worst spell of inflation in over 40 years, the Bank of England recently announced that the UK is officially in a recession. This, paired with a rising cost of living and ongoing energy crisis, signals trying times ahead for households and businesses alike.

To steady the ship in turbulent waters, businesses will need to tighten their purses. But the last thing organisations will want to do is to lay staff off, particularly as employees will rely on their salaries to manage the rising cost of living themselves.

So, how can businesses navigate the recession without letting people go?

1.    Optimise SaaS Spend

The average business now has 288 different SaaS apps in use. But the more apps a business has, the more likely they are to have duplicate or redundant apps, something that can be costing them significantly. In fact, a report by Vertice found that 90% of companies are overpaying for their SaaS solutions.

With this in mind, optimising your SaaS spend could be an easy way of making valuable savings. In order to so, companies need to:

• Audit their SaaS stack: Only when businesses have full visibility over their SaaS stack and contracts can they identify apps that can be removed or contracts that can be renegotiated.
• Renegotiate contracts: By renegotiating SaaS contracts with vendors, organisations can potentially get less expensive terms, particularly if they go for longer term contracts.
• Regularly review SaaS usage and performance: Optimising a company’s SaaS spend is an ongoing process, and businesses need to regularly review their SaaS usage to identify cost-cutting opportunities.

2.    Look into tax Reliefs

Tax reliefs allow businesses to reduce the amount of tax they owe to the government. There are various types that companies can take advantage of, including:

Tax Credits

Business tax credits are effectively subsidies that enable organisations to deduce an amount from the taxes they owe. As tax experts Adsum explain: “They are one of the best business loan alternatives around, as you get to advance some money that’s already coming your way, but without the laborious process of applying to HMRC and waiting for them to pay you.” Different types of tax credits include research and development (R&D) credits and Creative Industries tax reliefs (CITRs).

Annual Investment Allowance (AIA)

Annual Investment Allowance (AIA) is a form of tax deduction incentivising UK companies to invest in plant and machinery (essentially most tangible capital assets used by businesses). It allows enterprises to deduct the cost of certain business assets and related costs when working out their taxable profits. Examples include assets that you use in your business (like cars), parts of a building considered integral, and costs of demolishing plant and machinery.

Allowable Business Expenses

Companies can claim tax relief on various business expenses through allowable business expenses. These include everything from office and travel costs, to advertising and marketing expenses, to training course costs. For limited companies, these expenses can be deducted from their profits before tax by reporting the costs as a company benefit.

3.    Hire More Efficiently

While businesses won’t be in a rush to hire new employees in the current economic climate, staff turnover is inevitable, and they can certainly save money by replacing employees more efficiently. This prevents them from having to make staff cuts elsewhere.

For example, by promoting from within, companies don’t need to hire entirely new candidates and pay out whole new salaries. While they’ll usually have to give the existing employee a pay rise, this pales in comparison to the costs of a new hire which often includes recruitment expenditure and training.

Similarly, businesses should consider whether a contractor or part-time employee can do a job instead of a full-time staff member. With such staff members working fewer hours, companies won’t need to pay them as much. For contractors specifically, businesses can also avoid spending on things like payroll tax, sick pay and national insurance contributions.