Rising employment costs are forcing thousands of owner-managers to absorb the bill themselves, squeezing profits, pensions and hiring alike

Surging employment costs and a run of above-inflation increases in the minimum wage have left many small business owners unable to pay themselves a living wage, one of the country’s leading business groups has warned.

The Federation of Small Businesses (FSB) cautioned that thousands of owner-managers are being drawn into a downward spiral of higher costs and shrinking profits that threatens their ability to draw even the most basic income from their firms.

In a submission to the Low Pay Commission (LPC), the independent body that advises ministers on the minimum wage, the FSB said bosses were increasingly forced to cover rising pay and compliance costs out of their own pockets. The pressure, it argued, is fast becoming a permanent feature of the labour market, pushing more proprietors either to close their doors or to make choices that will damage their own retirement.

“It is becoming a major structural issue within small firms where the costs of employment, including the national living wage, employer National Insurance contributions and auto-enrolment, make it harder for a small business owner to make sufficient profit to pay themselves a living wage, let alone to fund a pension,” the submission said.

“This has a negative double effect: fewer roles created and sustained in small businesses, but also fewer small businesses that are economically viable. In effect, this is leading to fewer jobs and fewer small firms.”

The warning chimes with the FSB’s own recent survey data, which showed rising wage costs dragging small business confidence into negative territory as labour became the single biggest barrier to growth. The federation said just 11 per cent of its members would be unaffected by another above-inflation rise in the wage floor.

The national living wage currently requires workers aged 21 and over to be paid £12.71 an hour, while those aged 18 to 20 must receive £10.85. The LPC signalled in March that it was minded to recommend an increase of up to 5 per cent for the national living wage in 2027, with a central estimate of £13.18 representing an above-inflation rise of 3.7 per cent.

The FSB was not alone in sounding the alarm. The Institute of Directors (IoD) used its own submission to urge the LPC to direct the Government to rethink Labour’s manifesto pledge to pay all workers, regardless of age, the same minimum wage. It blamed the recent surge in youth unemployment squarely on policies that have deterred employers from taking on less experienced staff.

“If the Government is serious about tackling the youth employment crisis, it must address the crisis in the cost of youth employment,” the IoD warned.

The institute argued that Labour’s pledge to scrap the youth rate of the minimum wage risked making matters worse, and called on ministers to postpone further increases until employment among young people had recovered to pre-pandemic levels. The minimum wage for younger workers has risen by more than a quarter under Labour, a move that economists, including policymakers at the Bank of England, say has deepened a youth unemployment crisis that has seen the number of young people not in education, employment or training climb towards one million.

A survey by the Recruitment and Employment Confederation found that a quarter of employers would scale back hiring if the wage floor rose to the levels under discussion, which it said pointed to “a potential tipping point for employment decisions”.

“These dynamics are having tangible labour market consequences,” it said. “Entry-level opportunities are being constrained, working hours are being reduced in some sectors, and the impacts are falling disproportionately on young people and labour market entrants, particularly those already at risk of becoming or remaining not in education, employment or training.”

The IoD urged Labour to move away from a scheme that pays employers up to £3,000 to take on young people who are out of work, and instead to pivot towards broader measures aimed at bringing down the overall cost of employment. “Small, one-off incentives tied to significant amounts of bureaucracy will not come close to offsetting the increased costs of employing people brought about by recent Government employment policy,” it said.

Lower minimum wage rates for younger workers have existed since the system was introduced by Labour in 1999. The IoD pressed the LPC and the Government to reconsider plans to scrap what it had described as “discriminatory” age bands until employment among under-24s rises back above the 60 per cent level seen before lockdown.

“The LPC should recommend that the Government pauses the implementation of the equalisation of the youth and main minimum wage rates,” it said. “As described above, the equalisation is having a damaging impact on youth employment prospects at a time when the number of Neets has exceeded one million.” The concern is consistent with wider forecasts that youth unemployment could climb to 17.8 per cent by 2027 as artificial intelligence and tax rises bite into entry-level hiring.

For its part, the FSB called on Labour to increase automatically a small business tax break in line with future minimum wage rises, ensuring that firms with fewer than four employees are left no worse off.

A government spokesman said Labour’s minimum and living wage increases had left Britain’s lowest earners £900 better off.

Jamie Young

Jamie is Senior Reporter at Business Matters, bringing over a decade of experience in UK SME business reporting.
Jamie holds a degree in Business Administration and regularly participates in industry conferences and workshops.

When not reporting on the latest business developments, Jamie is passionate about mentoring up-and-coming journalists and entrepreneurs to inspire the next generation of business leaders.

Joe has worked in the financial services industry since 1992 in various capacities, including Operations Manager, Compliance Manager, Registered Representative and Portfolio Manager. From 1997 to 2006, when he founded Alhambra Investment Management, Mr. Calhoun was a Director of Investments at Oppenheimer & Co. Mr. Calhoun holds the Series 63 (Uniform Securities Agent State Law) and 65 (Uniform Investment Advisor Law) securities licenses. He has previously taken and passed the Series 7 (General Securities Representative) and Series 9/10 (General Securities Sales Supervisor) securities exams.
Joe proudly served in the U.S. Navy’s nuclear submarine service for 8 years (1983-1990) and was awarded several commendations including the Navy Achievement Medal in 1987. He studied engineering at the University of South Carolina and is a graduate of the U.S. Navy’s Nuclear Propulsion School. He founded Alhambra Investment Management as a registered investment advisory to address the needs of the individual investor. His market commentaries are widely read and published at various online outlets. He has appeared on Larry Kudlow’s program on CNBC and various radio programs. He is also an editor of the website RealClearMarkets.com.

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If approved at the AGM, the dividend will be paid to eligible shareholders within 30 days. The company has also set Friday, August 14, 2026 as the record date for determining eligibility for the payout.

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HAL is India’s premier aerospace and defence company. It operates under the administrative control of the Ministry of Defence and plays a crucial role in the design, development, manufacture, repair, and overhaul of aircraft, helicopters, engines, and related systems.

The company is a key supplier to the Indian Armed Forces and has been at the forefront of India’s defence indigenisation efforts.

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Over the past three months, HAL shares have gained 20.63%, while rising 0.63% in the last one month. However, the stock is down 11.62% over the past year and 17.77% over the last two years.
In Q4 results, the company reported a consolidated net profit of Rs 4,196 crore for the March-ended quarter, marking a 6% year-on-year (YoY) rise from the Rs 3,977 crore profit reported in the year-ago periodThe defence major’s revenue from operations rose 2% YoY to Rs 13,942 crore in Q4FY26, from Rs 13,700 crore reported in the corresponding quarter of the previous financial year.

For the full financial year 2026, the company reported a nearly 9% rise in net profit to Rs 9,116 crore, compared with Rs 8,364 crore in FY25. The company’s revenue grew around 7% to Rs 33,089 crore in FY26 from Rs 30,981 crore in the previous financial year.

The PSU’s net profit more than doubled from Rs 1,867 crore reported in the third quarter of FY26. Revenue from operations surged over 81% quarter-on-quarter (QoQ) from Rs 7,699 crore in the December quarter.

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Hindustan Aeronautics Limited’s earnings per share (EPS) rose nearly 6% to Rs 62.57 during the fourth quarter and more than 9% to Rs 135.71 for the financial year ended March 31, 2026. Its overall net worth, meanwhile, jumped 17% to Rs 40,862 crore in FY26.

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Instagram is rolling out additional ways for users to directly influence the content they see, as the Meta-owned platform continues to expand its “Your Algorithm” feature across more sections of the app.

In a recent post, Instagram head Adam Mosseri highlighted several experimental ideas aimed at making algorithm customization more accessible and integrated into everyday use. The updates build on efforts launched last year to give users greater visibility into and control over the topics the platform’s recommendation systems associate with their accounts.

“We want to evolve Your Algorithm from a setting to something that feels central to your experience on Instagram,” Mosseri said. He added, “Some of this is testing now, some is coming soon, some might not work.”

The feature, initially introduced for Reels, allows users to review topics Instagram believes they are interested in, add new ones they want to see more of, and remove those they prefer less. It has since expanded to the Explore page and, more recently, the main feed.

Mosseri’s latest examples demonstrate potential new access points. One concept involves pulling down on the home feed to surface the Your Algorithm menu for quick adjustments. Another envisions swiping up from a Reel to prompt similar customization options. A third shows simple buttons beneath individual Reels, letting users signal whether they want to see more content like it.

These tests reflect a broader push by Instagram to increase user agency in an era where algorithmic recommendations dominate feeds. Mosseri has emphasized that people who spend significant time on the platform should have meaningful control over their experience.

The expansion to the main feed, announced earlier in June, marked a notable step. Users can now see and tweak the topics the system links to their interests across major surfaces including Reels, Explore and Feed.

Instagram’s algorithm relies on numerous signals, with watch time, likes and shares emerging as particularly influential factors according to previous statements from Mosseri. The company uses machine learning to predict engagement, but the Your Algorithm tool aims to make those predictions more transparent and adjustable.

Topics currently form the core of the customization options, but Instagram plans to broaden the feature. Future iterations could support preferences for specific people, moods or vibes, and different content types.

This evolution comes amid ongoing user feedback about feed relevance. Many express frustration that recommended content often overshadows posts from accounts they follow. Popular comments on Mosseri’s announcements frequently echo calls for prioritizing followed accounts.

Instagram has acknowledged the tension between personalized recommendations and chronological feeds from connections. Recommendations now drive much of the platform’s growth, particularly through Reels, while still blending content from followed users.

The platform reached over 3 billion monthly active users in recent years, highlighting the scale at which these algorithmic decisions affect global audiences. For creators, the changes could influence visibility, as content aligned with user-selected topics may perform better in recommendations.

Experts note that giving users more direct input could help address concerns about filter bubbles and echo chambers. By allowing explicit topic adjustments, Instagram hopes to balance discovery of new content with relevance to stated preferences.

However, challenges remain in implementation. Algorithms must interpret user signals accurately without creating overly narrow experiences. Testing phases allow the company to gather data on what works before wider deployment.

Mosseri has shared philosophical thoughts on the matter, framing it as part of a larger effort toward transparency and user empowerment in social media. He has reviewed his own algorithm settings and encouraged others to do the same.

For everyday users, these tools could simplify managing overwhelming feeds. Instead of relying solely on implicit signals like past likes and views, people can make declarative choices about interests ranging from hobbies and news to entertainment categories.

The feature’s rollout has been gradual, starting with Reels before broader integration. This phased approach helps Instagram refine the interface based on real usage patterns.

As social platforms face scrutiny over content moderation, mental health impacts and information flow, features like Your Algorithm represent attempts to shift some control back to individuals. Similar tools exist on other services, but Instagram’s integration across multiple surfaces stands out.

Creators and marketers are watching closely. Content that matches actively chosen topics stands a better chance of surfacing, even for non-followers. This encourages more focused, high-quality production rather than generic posts.

Instagram continues to iterate on ranking systems. Watch time remains a top signal, underscoring the importance of engaging, vertical-format videos that hold attention.

The latest tests for in-the-moment customization, such as quick “more of this” or “less of that” signals during browsing, could make adjustments feel seamless rather than buried in settings menus.

User reactions vary. While some welcome greater control, others prioritize simplicity and question whether deeper tweaks will truly change their experience. The most common request remains stronger emphasis on content from followed accounts in primary feeds.

Instagram has not announced exact timelines for all proposed features, consistent with Mosseri’s note about ongoing experimentation. Some elements may never launch if testing reveals issues.

This focus on algorithm transparency aligns with Mosseri’s history of sharing insights into how Instagram ranks content across different surfaces. He has previously detailed factors for Feed, Reels, Explore and Stories.

For businesses and influencers, understanding these shifts is crucial. Adjusting strategies to align with user-selected interests could boost reach, while ignoring them might limit exposure in recommendation-driven sections.

Parents and younger users may also benefit from clearer controls, though Instagram maintains separate safeguards for teen accounts.

As the platform evolves, the balance between algorithmic curation and user direction will likely remain a key area of development. Mosseri has indicated this is just the beginning of efforts to make Instagram more responsive to individual needs.

In practice, accessing Your Algorithm currently involves navigating to relevant sections or checking account settings. With new tests, it could become as intuitive as interacting with any post or swipe gesture.

The feature does not alter content moderation policies or introduce new restrictions. It focuses purely on personalization of recommendations.

Industry observers see this as part of a competitive response to user demands for better feed quality across social apps. As attention economies intensify, platforms investing in perceived control may retain users longer.

Instagram’s parent company Meta has emphasized responsible AI development, which extends to recommendation systems. Large language models reportedly help translate complex ranking data into understandable topic labels for users.

Looking ahead, expansions beyond topics could include vibe-based preferences, such as uplifting content or specific aesthetics, further personalizing the experience.

Users interested in trying current options can check their settings or look for prompts in Reels and Explore. As tests progress, more may appear in the main feed.

The developments underscore Instagram’s ongoing commitment to refining its core product amid a crowded digital landscape. By listening to feedback and experimenting with access methods, the company aims to make its powerful algorithms feel more collaborative than opaque.