While an increasing number of UK employers are tightening their belts after the introduction of the National Living Wage and pension auto enrolment, businesses over in the Silicon Valley are taking serious measures to improve profitability and cut excess spending.
Dropbox is one several high profile companies that has recently announced that it will be joining a number of other startups cutting back in an effort to be more profitable.
The company has made several changes to its once lavish perks. From cancelling its free shuttle in San Francisco and its gym washing service to limiting the number of guests allowed to its social events. Now staff can only have 5 guests, whereas previously there were no limits, which was a huge perk given the free bar available on Fridays. Dropbox has told staff that their perks have in total cost the company at least $25,000 a year for each employee, resulting in a total annual bill of $38 million.
Other well-known US companies have also been rolling out company-wide cost cutting initiatives, including staff redundancies, office closures and reduced employee benefits. Much of this has been blamed on the changes in business funding in Silicon Valley. Investors have become more conservative with their money and more focused on profitability.
Here in the UK, it has been widely reported that a number of companies have been cutting back on their staff benefits too, following the introduction of the National Living Wage. The National Living Wage means that people aged 25 or over are now legally entitled to be paid at least £7.20 an hour. From reducing staff discounts and cutting free lunches to cutting overtime and weekend pay, UK employers are claiming that the extra 50 pence an hour, has forced them to make cuts across the business.
Pensions are now costing businesses more after new rules were brought in. Under the Pensions Act 2008, every UK business employing at least one person, must put their staff in a pension scheme and also contribute. Employers who fail to comply face a variety of sanctions. The Pensions Regulator has revealed that in the first three months of this year, it issued 96 ‘escalating penalty notices’, varying from a fine of £50 to £10,000 a day.
Research from insolvency trade body R3, has also revealed that the implications of automatic enrolment and the possibility of the UK leaving the EU, were the leading financial concerns for UK employers in March.