For small businesses, the coronavirus pandemic has created an environment of severe uncertainty and financial hardship that is constantly changing.

The modern world has never faced a crisis like this before, nor one on this scale, making it difficult for businesses to know what to do to stay afloat. Luckily, there are a number of support options available for SMEs, and more support is being announced all the time.

At the time of writing, some of the most useful and wide-ranging support options are:

 

Coronavirus Business Interruption Loan Scheme (CBILS)

The Coronavirus Business Interruption Loan Scheme is a government initiative which has been set up in tandem with a number of the UK’s biggest banks and lenders. Under the scheme, businesses can apply directly to lenders for loans, overdrafts and other financial products, with a guarantee from the government to the tune of 80% of the cost of the loan in the event that the business cannot pay it back.

 

Key Features

• Up to £5m facility. Businesses are able to borrow up to £5m under the scheme, on repayment terms of up to six years.
• 80% guarantee. Although businesses are 100% liable for the debt, the government will guarantee up to 80% should they not be able to pay it back.
• Limited fees. There is no guarantee fee for SMEs and lenders will pay a fee in order to access the scheme.
• Interest and fees paid by the government for 12 months
• No personal securityrequired. At the discretion of the lender, the scheme may be used for unsecured lending for facilities of £250,000 and under.

 

Eligibility Criteria

To be eligible for the scheme, a business must:

• Be UK-based with an annual turnover of less than £45m
• Provide a borrowing proposal that would be considered viable by the lender if not for the coronavirus pandemic
• Prove to the lender that the loan will help them to survive during the crisis

There are more than 40 accredited lenders signed up to the scheme so far, and businesses should apply to their own bank or lender first, before looking at other lenders.

 

Coronavirus Job Retention Scheme

The Coronavirus Job Retention Scheme is designed to help UK employers who work under a PAYE system to access support that will enable them to pay workers wages. The idea behind the scheme is that employers will be able to retain staff that they otherwise would have had to make redundant due to the coronavirus crisis.

The scheme is designed to benefit employees who have been asked to stop working in order to stop the spread of the virus, but who remain on the payroll (otherwise known as ‘furloughed workers’). HMRC have agreed to pay 80% of an employee’s monthly wage costs, up to a maximum of £2,500 per month, and wages will be backdated to March 1st if applicable.

 

Eligibility Criteria

This scheme applies to all employers in the UK with a PAYE scheme that was started on or before 28 February 2020, including:

• Businesses
• Charities
• Recruitment Agencies
• Public Authorities

 

How To Apply

You need to work out which of your employees you want to retain and designate them ‘furloughed workers’. All employees should be notified of this change as soon as possible, and existing employment law still applies when changing the status of employees.

HMRC are still working on the online portal which will be used to set up and pay these grants. Once it is up and running, you can submit information about your furloughed employees and their earnings here, and HMRC expects the first payments to go out by the end of April.

 

Deferring VAT And Income Tax Payments

The government has agreed to support businesses during this time of financial hardship by deferring VAT payments. At the time of writing this support allows for any VAT payment to HMRC that would ordinarily have been due between 20 March 2020 and 30 June 2020 to be deferrable up until 31 March 2021.

For the self-employed, Income Tax payments due in July 2020 under the Self-Assessment system are now due in January 2021.

 

Eligibility Criteria

All UK businesses are eligible.

 

How To Apply

This is an automatic offer which means that there is nothing that you need to do in order to take advantage of it.

 

Small Business Grant Funding

The government has agreed to provide additional funding to Local Authorities so that they are able to support small businesses in their area. The businesses that will benefit are the smallest businesses, that already pay little or no business rates because of business rates relief, rural rate relief and tapered relief.

Local Authorities can use this funding to provide a one-off grant of £10,000 to eligible businesses to help them to continue to meet their business costs.

 

Eligibility Criteria

In order to access this grant, businesses must:

• Be based in England
• Be in receipt of small business rate relief or rural rate relief as of 11 March 2020
• Be a business that occupies property

 

How To Apply

Your Local Authority will write to you if you are eligible for this grant, with details on how to claim it. If you have any questions about the grant, business rates relief or eligibility, you should contact your Local Authority directly.

 

Reclaim Statutory Sick Pay

Emergency legislation has been announced which offers small and medium-sized businesses the opportunity to reclaim Statutory Sick Pay (SSP) which has been paid out for sickness absence due to COVID-19

 

Eligibility Criteria

To benefit from this legislation, businesses must:

• Have fewer than 250 employees as of 28 February 2020
• Have a record of staff absences and payments of SSP. Employees are not required to provide a GP fit note in this instance
• Eligible period commences the day after the regulations on the extension of SSP to those staying at home comes into force.

The refund will cover up to 2 weeks’ SSP per eligible employee who has been off work because of COVID-19. At the time of writing, the scheme is still being developed, so it is worth keeping an eye on the HMRC website for further details of how to apply.

Whilst this is a difficult financial time for all businesses, the government is dedicated to providing as much support and advice as possible to help companies to stay afloat and ensure that businesses can bounce back after the pandemic.

 

Get in touch

We would encourage all businesses that are eligible to apply for the funding they are entitled too as soon as possible. Nobody knows how long this situation will continue so ensuring you have adequate funds in your business should certainly be a priority.

Accessing the Coronavirus Business Interruption Loan Scheme (CBILS) does require a formal application, and depending on your circumstances you may be asked for various pieces of documentation such as business plans, financial forecasts, management account and the like.

The team at An Accounting Gem Limited can help you get this documentation ready for your application and assist you in putting your best foot forward to maximise your chances of success.

Please get in touch on 01473 744 700 or email us at contactus@aag-accountants.co.uk for more information.

Wage push inflation is an idea that economists and governments often use as a reason that it could be difficult to increase minimum wage in a country. But what does it actually mean?

Put simply, the term refers to a situation where a rapid increase in the wages of employees causes the rate of inflation to increase at the same time. It is explained by the fact that when workers’ incomes rise, they will have more disposable income to spend. Once their money enters the economy, the competition for goods increases, and prices rise over time.

 

Understanding Wage Push Inflation

The most common reason for a company to increase its wages is an increase to the national minimum wage, as decided by the government. Many companies also increase the minimum wage of their employees incrementally, meaning that to make back the profit they are losing on raising their wages across the entire company, they have to put up their prices at the same time.

If the government or a company decides to raise wages, this will naturally lead to a spike in consumer spending, as their employees have more money available to spend. A significant increase in the minimum wage could lead to higher growth, and contribute towards inflation due to two factors:

• Higher costs for firms
• More spending by workers

Industry factors may also play a part in wage increases. In industries that are experiencing growth, surging profits and higher demand for products/services, companies might decide to raise their wages in order to make jobs more competitive, and attract more skilled or talented workers. These factors often have a wage push inflation effect on the products and/or services that the company provides.

However, when it comes to growth and inflation, minimum wage, according to many, is the single biggest factor in driving inflation.

 

The Minimum Wage

A minimum wage is the lowest legal remuneration that any employer is allowed to pay their employees in a country. In the UK in 2019, the minimum wage was set at £8.21 per hour for workers over 25, £7.70 for workers aged between 21 and 24, and £6.15 for those aged 18 to 20.

When it comes to economic growth and inflation, the minimum wage has been proven to be a factor that affects both, although economists disagree on the significance of the minimum wage to either. Whilst many experts argue that a raise in the minimum wage will, through wage push inflation, naturally lead to significant economic growth and inflation, history shows that when the UK has seen above inflation increases in the minimum wage, there hasn’t been any negative impact on inflation or unemployment, and there has been almost no noticeable change to economic growth.

In theory, if all workers receive a pay increase, then there should be a rise in consumer spending across the board. Low income workers tend to spend a higher percentage of their extra pay than high earners, a multiplier effect (an increase in overall spending coming from a new injection of cash into the monthly income of a household) that should boost economic growth.

However, by the same token, when minimum wages are raised there is more competition for work, as companies are forced to pay more and hire less, and thus there should be more unemployment as a result. People who are unemployed will spend much less, thus balancing out the effect of rising wages amongst the low earners.

 

Does A Minimum Wage Raise Actually Cause Inflation?

The best way to assess the real threat of a minimum wage hike on inflation is to estimate how it would, by necessity, raise businesses’ costs.

Whilst many businesses will raise prices, it is important to note that there are other ways to adjust costs, such as raising employee productivity, or laying off unnecessary staff members. However, say a business were to simply raise the prices in response to a minimum wage hike. In this case research suggests that a 10% minimum wage hike will generate a cost increase of less than 1/10 of 1% of their sales revenue. This amount is worked out based on three factors:

1. Mandated raises – the raise that employers must provide to all staff members to ensure that they are being paid the legal minimum wage
2. ‘Ripple-effect’ raises – the raises that employers must give throughout the company to ensure the wage hierarchy is maintained for employees with already higher wages and authority
3. Higher payroll taxes – a higher wage means paying more employer tax

The average business, wanting to cover the cost increase from a 10% minimum wage raise through higher prices, would only need to raise their wages by less than 0.1%. In real terms, this would take a £100 item up to £100.10

 

Is Wage Push Inflation A Myth?

Whilst some experts believe that higher wages lead to higher prices and thus inflation, economists are beginning to understand that this could well be a myth. In fact, many economists now argue that wage and price increases are actually a reflection of inflation, rather than the cause of it.

Whilst both wages and prices tend to rise at the same time, it is actually prices that lead wages, as opposed to the other way around

The best way to understand this is with an example.

Say an entrepreneur creates a new product. After a short time, word gets out about his company, and very soon his products are selling out faster than he and his small team of staff can make them.

He can’t keep making them on his own if he wants to keep up with demand, so what is his next port of call? The first step to take would be to raise his prices whilst he sells his (now limited) existing supply. This may mean that demand slows down and he can return to the way that things were, but he may also think about pushing his staff to increase their output, and accept that by paying overtime that productivity will increase enough to cover this extra cost. If demand is still too high, then he will have to think about adding staff members.

By contrast, if the world were to run as wage push inflation assumes that it does, the entrepreneur would respond to increased demand by paying workers more, in the hopes of attracting more workers, then raising the prices in order to balance profit margins.

 

Get In Touch

Are you thinking about increasing your wages in the hope of attracting a more talented and capable work force? Do you think this will boost your business profile and sales enough to compensate for the extra cost?

No course of action in business has a guaranteed end result, but by employing talented and experienced financial professionals to create accurate projections and forecasts, you can reduce the risk of failure and be in a position to make an informed decision on what are the best next steps for your business.

The team at An Accounting Gem can help you with this, as well as all your other accounting requirements, and can be reached by calling 01473 744 700 orvia email at contactus@aag-accountants.co.uk.

 

An exit strategy is the preparation made by a business owner to leave their company on a permanent or semi-permanent basis. Departure from a business is normally followed by succession (passing the business onto a family member), a disposal (through a sale or a merger), or the permanent closure of the company.

 

Succession Planning And The Protection Of Value

A succession-focused exit strategy is about the protection of value. After working on your business for many years, maintaining the value and the viability of the company you’ve built up is important for both financial and personal reasons.

Many businesses are family-owned and -managed businesses. The hope for many exiting entrepreneurs is that the younger members of their family will lead the company eventually.

Once you have resolved that you do want to pass your business on to family members, you then need to plan how to do it. You can never start to soon in your preparation but we would advice that a handover period takes a minimum of 18 months to complete.

You need to consider your own role in the business – if you want one. If you want to no longer be involved in the decision-making process, you need to plan which family member will do what and provide them with the appropriate training and mentorship on their new responsibilities.

If you still want to be involved but at an arm’s length, you and other family members need to know whether your pronouncements are either advisory or binding on the company. In other words, are you going to be a backseat passenger reading out the directions the driver has given you or are you going to insist that your own route is taken regardless of the feelings and knowledge of the driver?

You’ll also need to consider whether you still wish to draw an income from the business and how much. If you take out too much, this could bring about negative consequences for both your company cash flow and your successors’ ability to pay themselves more in the future. If you take out too little, what has the point been in working for so many decades only to be a poor retiree?

Other aspects to consider could include:

• leaving your company on your own schedule
• choosing a strategic direction for your company before you leave
• removing entirely or mitigating any capital gains tax liability
• inheritance tax considerations
• ensuring jobs to your current employees

In many ways, succession planning is the most complicated and emotionally-fraught exit you can choose because of the need to preserve the valuable relationships you have with the people who will in charge of the company you’ve worked so hard to build.

 

How To Exit A Business By Selling

There are two main ways to exit via the transfer of company shares, namely:

• mergers – a merger usually brings your company and another together within one new organisation (a NewCo). You’ll have to negotiate your level of active involvement in the NewCo, any ongoing income you can drawdown, and consideration for the value of the shares you’ll be “selling”.
• acquisition – your business is sold to another company, potentially a private equity firm or to another firm, and you receive a pay-out for the sale of the issued shares in the company.

The sale of a company is ferociously complicated and that complexity only increases for higher-turnover businesses. You should start the preparation you need to take your company to market at least 12 months before you start inviting others to bid for ownership.

You should ensure that, during both the negotiation and buying stages, that the following information is kept up to date:

• financial accounts
• legal issues and contracts
• litigation and employee disputes
• utilised debt

Once the initial negotiation is complete and a price has been agreed, expect the buyers and their solicitors to take every opportunity to denigrate as many aspects of your business as possible in order to secure a price discount. While you may be on friendly terms with your buyers, their solicitors are paid to secure your buyer the best possible deal so do not expect your interactions with them to be particularly cordial.

In addition to engaging us during and after the sale to provide financial information to your buyer and their solicitors, you’ll also need to take advice on taxation following disposal – please contact us for more.

Once the negotiations have concluded, you should budget 4-6 months for due diligence and the drawing up of the final sales and purchase agreement to occur.

 

Exit Strategy Support At Accounting Gem

Taking the decision to leave your business is an emotional decision. How you leave your business is a big financial decision whose consequences will dictate the quality of your life after you’re no longer a (major) part of the business you’ve created, nurtured, and grown.

Therefore, you need to have access to accountants and solicitors who are experienced in the sale of businesses or the handover of businesses to the next generation during this time. This is especially so if you wish to retire permanently and live off either the proceeds of the sale or the drawings from the company from which you’ve stepped back.

Your Accounting Gem partner is here to guide you through the entire process of exiting your business but please remember that it’s important to start your exit planning as soon as possible. Whichever method you choose to exit, the likelihood is that you’ll still be in situ for the next two years and you have to maintain the health and profitability of your business in the face of the multiple distractions that exit planning will present to you. Get in touch with us on 01473 744 700 or email us on contactus@aag-accountants.co.uk.

If you’re a business in the UK, hiring staff can be a big decision. Before taking on employees – whether on a full-time, part-time or self-employed basis – it’s important you have a good reason for adding to your workforce and understand the legal responsibilities that comes with employing new members of staff.

 

What Are The Different Types Of UK Employment Contracts?

With the time, costs and legal obligations that comes with it, taking on a new member of staff can be a big commitment. However, there are a number of different ways to employ a new worker – and hiring someone doesn’t necessarily mean offering a full-time, permanent contract.

Depending on the type and size of your business – as well as your recruitment requirements – there are a variety of ways you can hire members of staff. If you’re an office-based business offering services to clients around the clock then recruiting a worker on a full-time basis may be the most cost-effective option, whereas if you run a seasonal photography studio and require extra workers on a project-by-project basis, then working with a freelancer will likely suit you better.

Before deciding on which type of employment contract to offer any new member of staff, make sure you think carefully about the role of the worker, what they’ll be doing for your business and how often you’ll require their services – you don’t want to be left struggling to meet deadlines with too few employees, or paying over the odds for workers who aren’t really needed.

 

Fixed-Term Contract Employees

A worker who is on a fixed-term contract – for example, if they’re working for a set amount of time until a specific project is completed – has the same rights as a permanent member of staff. The main advantage of hiring an employee on a fixed-term basis is your obligations to them only last as long as the length of the contract, meaning you can hire workers as and when you need them.

You may take on an employee on a fixed-term basis to cover a seasonal spike in business or if you’re launching a new product or service and require an extra pair of hands.

 

Permanent Employees

A permanent employee can be hired on either a part-time or full-time basis. As an employer you are required to adhere to a full range of legal obligations to your workers, including sick pay and holiday entitlement.

Permanent employees are usually hired on an ongoing employment contract, and the advantages of hiring them includes predictability, loyalty and regularity in the workforce. The disadvantages of entering into a permanent contract for an employer includes increased management time, the strict adherence to legal obligations and a lack of flexibility.

 

Zero Hours Contract Employees

The main advantage of hiring a zero hours contract employee is the flexibility involved. A zero hours contract means that you can call on your workers as and when you need them, without meeting the legal obligations or costs associated with a permanent employee contract.

However, while a zero hours contract may be more cost-effective, it’s a two-way street, meaning the employee is not obliged to work a set number of hours per week. Depending on the type of industry you’re working in, zero hours contract employees can provide a flexible solution to your staffing needs.

 

Temporary Agency Staff

A large number of start-up businesses begin their recruitment process by hiring temporary staff supplied by an employment agency. As these type of workers are often available at short notice and you don’t have a great deal of legal obligations to them, temporary agency staff offer a relatively low-risk way of bolstering your workforce.

However, as you’ll be paying commission and fees to an employment agency, it is a more expensive option that hiring full or part-time workers directly. Although things such as National Insurance Contributions will typically be handled by the agency, you are still obliged to provide things such as a basic level of pay, an appropriate amount of rest breaks and a safe work environment for your workers.

 

Freelancers, Contractors and Consultants

With an estimated 2 million workers, the freelance economy makes up a significant part of the UK workforce. As an employer, many businesses use freelancers, contractors and consultants to help complete specific projects as and when they’re needed. Professional service companies, meanwhile, typically call on consultants to help meet client needs on a seasonal basis. As the freelancer, contractor or consultant is self-employed, your legal obligations as a business are minimal.

However, in order to meet HMRC requirements, it’s important to check the legal status of any freelance worker you go into business with. The definition of ‘self-employed’ usually relies on the work that the freelancer is doing for you and where they carry out the work. As a responsible employer, you should check the employment status of anyone who works for you and we’d recommended drafting a contract with any self-employed staff you hire.

 

How To Resolve Workplace Disputes

A healthy and positive working environment is crucial for any productive and successful business. If problems within the workforce are not resolved in a timely manner, disputes can quickly escalate. As a business owner, make sure that you have suitable procedures and policies in place to resolve any workplace issues. For more information on how to maintain a healthy working environment visit Acas (Advisory, Conciliation and Arbitration Service).

 

Are You Considering Hiring Staff For Your UK Business?

An Accounting Gem can guide you through the process – including the pros and cons – of staff recruitment.

We pride ourselves on our open door policy. If you have a problem – we’ll make you our priority until it’s fixed! We work with individuals, sole traders and limited companies in Ipswich, Suffolk and Essex.

Speak with our friendly and knowledgeable team today by calling 01473 744 700 or email us at contactus@aag-accountants.co.uk and we’ll be in touch.

Mental health issues in the workplace can cause employees to suffer from feelings of nervousness, unease and anxiety, leading to a significant impact on their ability to work effectively. As an employer, mental ill health within your workforce can lead to lower productivity levels, increased absences and potentially staff conflict. As a result, raising awareness of mental health at work should be one of your priorities as a UK business.

In the UK, one in four people suffer from a mental health condition. Work-related stress is increasingly cited as a cause of anxiety and depression – leading to both physical and psychological damage and affecting how we think, feel and behave.

Regardless of whether work is causing mental health issues or employees are predisposed to a condition, employers in the UK have a legal responsibility to their employees.

What Is The Impact Of Mental Health In The Workplace?

According to official government statistics, the cost of mental ill health to UK employers is between £33 billion and £42 billion each year. 15% of workers consider themselves to have a mental health problem, with this figure rising to 27% in staff under the age of 18.

Nearly half of workers suffering from mental health problems have indicated that they have considered resigning from a job because it has had an adverse effect on their mental wellbeing, while almost 40% of sufferers are more likely to enter a conflict with their teammates.

In 2019, research by the Chartered Institute of Personnel and Development study found that mental ill health in the workplace has an even bigger impact on UK businesses, with their findings indicating that:

• 80% of workers suffering from mental health issues find it difficult to concentrate
• 50% are less patient with customers and clients
• 60% take a longer amount of time to complete tasks
• 57% find it more difficult to multitask

Encouraging positive mental health among your workforce is therefore vitally important for any business looking to improve productivity levels in the workplace.

 

How Can Employers Improve Mental Health At Work?

As a business owner and employer you undoubtedly have a lot on your plate, and we understand that you may feel you don’t have the necessary time or resources to dedicate to mental health in the workplace.

However, there are a number of simple measures you can take to boost the mental wellbeing of your workforce and reap the benefits of improved productivity for your business in the process.

It goes without saying that staff who feel happy and content at work are more likely to perform well in their duties, have strong attendance levels and be actively engaged with the aims and objectives of the business.

However, everyone is different and, as such, it can be difficult to create a positive working environment that meets the wants and needs of the entire workforce.

It is important that business owners are able to identify any signs of mental ill health in their staff and provide the appropriate levels of support and guidance where necessary.

Check out our top tips for improving mental health in the workplace below:

 

Offer your employees flexible eating options

We all know the old adage, ‘you are what you eat’. Well, it’s true! What we eat and drink at work can affect how we feel, both mentally and physically. And these changes can affect how well employees perform on the job. Encourage your employees to maintain a healthy routine of eating at work – healthy meals and regular water breaks are essential for maintaining energy levels throughout the working day. It may seem counterproductive as an employer but encourage your workers to get away from their desks when they’re on their lunch break. Taking a walk or enjoying a change of scenery is proven to reduce stress and revitalise the mind.

 

Encourage a positive work/life balance

Maintaining a positive work/life balance is essential for both employee and employer. If staff feel happy at work, are able to leave on time, and are able to relax when they’re at home without feeling pressured to check their company emails or do that one extra piece of work, then wellbeing levels will undoubtedly rise – leaving to less absences and increased productivity. Encourage your employees to listen to their bodies and gain enough rest. After all, our mental health and concentration at work is proven to suffer if we don’t have enough sleep and relaxation.

 

Allow your employees to take regular breaks

A change of scenery is proven to be good not only for mental health and wellbeing, but also for productivity. Whether it’s offering employees a five minute break after each hour of work, encouraging them to work in different environments throughout the course of the day, offering an extended lunch break outside of the office, or rewarding your employees with a team bonding exercise away from the workplace, it’s important to give your staff the flexibility to recharge their batteries by taking a break.

 

Talk about mental health matters with your team

Despite improving awareness levels, mental health is still considered a taboo subject with many people. It’s important to remove this stigma by encouraging workers to open up about their feelings and responding in an empathetic and caring manner. As an employer, nobody expects you to be a mental health expert, which is why investing in management training may be a good solution for introducing mental health awareness into the workplace.

 

Keep your mental health resources up to date

Even if you’re a proactive employer in terms of raising awareness and offering support for mental health in the workplace, just like in other areas of business it’s important to stay on top of any changes in research and legislation. Make sure that you regularly audit your mental health policies and keep them up to date with practical advice that your employees can use to maximise their productivity and happiness at work.

 

Are You A Business Owner Looking To Improve Your Staff’s Mental Health?

An Accounting Gem can guide you through all the options available to you and your staff about improving mental health in your workplace. Speak with our friendly and knowledgeable team today by calling 01473 744 700 or email us at contactus@aag-accountants.co.uk