By Daniel Hunter

Research from the Federation of Small Businesses (FSB) has found that half (49%) of small businesses with employees on the National Minimum Wage have either increased wages in the last 12 months or are considering raising pay. The data shows less than a quarter (23%) of small firms have any staff on minimum wage, down from 27 per cent in 2012.

The FSB also found that 49 per cent of small firms already pay all their staff at or above the Living Wage. The FSB believes the Living Wage is a positive aspirational goal but thinks it should not be imposed on businesses, either through legislation or through other means such as public procurement contract terms that will only reduce competition and harm smallest firms.

FSB research shows that most small business owners will look to increase wages where they can afford to do so, and share the benefits of growth where possible. However, not all firms are currently in a position to absorb the costs of pay rises. Those in traditionally low paid sectors such as retail or hospitality, or where recovery has not fully taken hold are still struggling.

These encouraging findings come off the back of further positive results from the FSB’s Small Business Index published last week. It reported 15 per cent of small firms have increased their staff numbers in the third quarter of 2013. This is the highest figure reported since the Index began in 2010 and reflects recent improvements in business confidence.

The FSB will discuss small businesses’ contribution to the labour market at the Labour Party Conference in Brighton. Alongside IPPR, the Institute for Public Policy Research, the FSB will be asking Chuka Umunna MP, what a future Labour Government would do to support small businesses to employ more people. The session will give particular focus to helping the young, disadvantaged and long term unemployed back into employment.

“With confidence returning to small businesses after a period of wage restraint, our research shows our members are looking to pass on any extra profits to their staff, including those on low pay," John Allan, National Chairman, Federation of Small Businesses, said.

“Our findings also show that small businesses are already playing their part in the economic recovery by employing more staff and paying them more where possible. Small businesses are competing for good quality staff in the labour market and pay and benefits are a big part of this.

“However, even with the beginnings of an economic recovery, small businesses in some sectors still face rising business rates and utility bills. This means that not all firms are in a position to raise salaries and policymakers therefore need to be prudent when legislating on pay.

“Any future Government will want to explore other ways to enable firms to pay more. This should start by coming up with a long-term enterprise policy to help create the optimal environment to do business and boost economic growth. Our education and skills system has to be better linked to the needs of the business community. This in turn will help small firms create jobs and further boost salaries.”

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