Small businesses turn to benefits as pay increases become unaffordable
Small Business Data

Small businesses turn to benefits as pay increases become unaffordable

According to recent Intuit QuickBooks payroll data, employees of almost 500,000 small businesses in the US, Canada, and the UK have received big pay increases over the past 12 months, but inflation has risen faster. We wanted to understand more about this trend, so QuickBooks commissioned a survey of 2,250 small business decision-makers in the US, UK, and Canada.

The Intuit QuickBooks Pay and Benefits Survey 2022* found that in the past 12 months, small business employees in the US, Canada, and UK have been proactively asking for pay increases due to inflation. Many small business owners have listened, but are struggling to keep up with pay demands. In the next 12 months, will small businesses be able to increase pay to meet demand? 

Pay increases rose in the last 12 months

Two-thirds (66%) of small businesses surveyed in the three countries say they have given larger than usual pay increases in the last twelve months. In the UK, 51% of small businesses said they gave significantly larger pay increases.

Overall, more than half of the small businesses surveyed (58%) have given one-off bonuses due to inflation. Notably, 70% of UK small businesses said they gave employees a one-time bonus, compared to 58% in the US and 40% in Canada.

Inflation outpaces pay raises

Employees have not been shy about telling employers what they need and why. Almost nine out of 10 (88%) mentioned inflation when asking for pay increases this year. And 68% of small businesses expect pay demands to get more frequent over the next 12 months.

Despite this communication between small businesses and their employees, recent QuickBooks Payroll data shows pay raises have not kept pace with inflation. Increased labor costs are a big concern for small businesses. More than three in five (63%) small businesses with current job openings said it has been “very” or “somewhat” hard to fill them.

As a result of these hiring challenges, 79% of small businesses are already turning to contractors or gig workers to fill the hiring gap.

Small businesses see more jobs ahead, but not more pay raises

Small businesses say they see more job openings ahead. More than two-thirds (69%) say their business will have “significantly” or “somewhat” more job openings ahead than in the last 12 months. These businesses said strong business growth and a softer jobs market were factors driving an increase in job openings.

However, it is unlikely that pay will continue to rise at the same pace. Three-quarters (75%) of small businesses in the US, UK and Canada, say they have increased pay “as far as we can go” and that “anything higher is currently unaffordable.” Looking ahead, this suggests pay is unlikely to continue rising as fast as it has been over the past 12 months—especially in the UK.

As a result, 49% of small businesses surveyed expect that it will become harder to retain good employees in the next 12 months. In the UK, 40% of respondents say it will be significantly harder to retain good employees.

Benefits backlash

More than half (58%) of the small businesses surveyed say they are expanding employee benefits alongside larger than usual pay increases.

The extra benefits are not only to attract and retain workers but to try to slow the pace of wage increases. Benefits include more time off, flexible work options, and better health benefits.

But, due to inflation, benefits are currently less attractive to some employees than an increase in pay. Of those employers who did expand benefits instead of increasing pay, 72% reported some backlash.

A closer look: Hiring woes in the UK

In many cases, small businesses in the UK face much greater challenges than in the US and Canada. Almost nine out of 10 (88%) of UK small businesses say they have been trying to hire employees this year, more than in the US or Canada. Yet more than two-thirds of employers surveyed in the UK (69%) say it’s harder to hire because applicants lack the necessary skills, and their demands for pay and benefits are too high. Notably, 62% of UK small businesses surveyed said applicants didn’t show up on the first day of work, compared to about 30% of applicants in the US or Canada. 

Two in five (40%) of UK small businesses think it will get significantly harder to retain good employees over the next 12 months, compared to just 12% in the US and 17% in Canada.

Labor cost pressures may also be greater in the UK. More than half (54%) of UK small businesses surveyed “strongly agree” they have already increased pay as far as they can, compared to just 32% in Canada and 37% in the US.


* Intuit QuickBooks Pay and Benefits Survey 2022

Intuit QuickBooks commissioned an online survey in September 2022 of 2,250 small business owners and decision-makers (comprising payroll, accounting, and human resources (HR) professionals) in the US, UK, and Canada. Of these, 66% were small business owners (1,488), 21% were human resources professionals (474), and 13% were payroll and accounting professionals (288). All respondents were 18+ years of age. There were 1,000 respondents from the US, 500 respondents from Canada, and 750 respondents from the UK. Small businesses are defined as having less than 100 employees. Percentages have been rounded to the nearest decimal place, so some charts or statistics shown here may not add up to 100% but 99% or 101% instead. Responses were collected in an online survey using Pollfish audience pools and partner networks with double opt-ins, random device engagement sampling, and post-stratification to ensure accurate targeting and results. Respondents received remuneration.


This content, report and materials are for informational purposes only and should not be considered legal, accounting, financial, investment, or tax advice, or a substitute for obtaining such advice specific to your business. Additional information and exceptions may apply. Applicable laws may vary by state or locality. No assurance is given that the information is comprehensive in its coverage or that it is suitable in dealing with a customer’s particular situation. Intuit Inc., or its affiliates do not have any responsibility for updating or revising any information presented herein. Accordingly, the information provided should not be relied upon as a substitute for independent research. Intuit Inc., or its affiliates do not warrant that the material contained herein will continue to be accurate nor that it is completely free of errors when published. Readers should verify statements before relying on them.

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