Not surprisingly the economy has featured strongly in all of the main party manifestos. There is no denying that we’ve seen promising signs of growth over the last 12 months, but the election has brought with it a degree of uncertainty for the small business community. Therefore it is imperative that any future administration seeks to protect the interests of the small business community and provide a much-needed confidence boost to ensure continued and sustainable growth, regardless of who is in power after May 7th.

Small businesses have played and will continue to play an important role in the ongoing recovery. The fact that they will create over half of all private sector jobs in the next decade means that their views are crucial and are something that politicians and policy makers chose to ignore at their peril.

Fortunately the Forum is pleased to see that the three largest Westminster parties have recognised the importance of the SME community in their manifestos. All are looking to position themselves as small business champions, and were they to take on board the policies our members have highlighted it would mark an important step in this direction.

It is encouraging that the role played by SMEs is being recognised, with across-the-board commitment to crucial policies such as investment in rural broadband, support for apprenticeships and the review of business rates. However, it is clear that our members would like to see clear, practical and realistic policies that can make a real difference to small and medium-sized businesses.

One key area our members would like to see is a renewed commitment to build on the work of the coalition to tackle the ongoing problems facing the UK economy to create an emboldened private sector to drive the economy forward by 2020. Our members feel that policy makers can do this in four main ways; by supporting better finance for business, cutting the cost of compliance, reducing the cost of doing business, and by introducing a range of short- and longer-term measures to support sustainable business growth. A regulator and code of conduct to oversee the relationship between suppliers and retailers, a freeze on business rates and a commitment to faithfully transpose the EU Directive on late payment are just some further key changes our members are calling for.

Other key short term issues our members would like to see tackled in the next two years include:

• Amendments to current legislation to faithfully transpose the EU Directive on late payments

• Removal of the Health and Safety Executive’s Fee for Intervention policy

• A freeze on business rates in the first year and cap at 2% for the remainder of the Parliament. Also moves to make Small Business Rate Relief permanent and automatic, and to carry out an immediate rating assessment with a promise not to subsidise any increase in rates for a business as a consequence

• Removal of the VAT element charged on fuel duty contribution to pump price.

Further down the line there are several key proposals which the Forum would like to see implemented over the term of the next Parliament which would be welcomed by the small business community. These include:

• Setting up an advisory board for the Prompt Payment Code and introducing a robust monitoring system to ensure companies are worth their place on it

• Ensuring the Low Pay Commission gives a two-year National Minimum Wage recommendation to government but avoid further political interference

• Considering excluding small businesses from business rates altogether.

What’s clear is that small businesses will continue to be the engine room of growth in the country’s recovery following one of the worst downturns in living memory. Through providing the right mix of freedom, intervention and support, whichever party is in power following the election can help build on the recovery and ensure sustainable growth for the UK economy.

Read more:
What do SMEs want from the next government?

From day-to-day business functions like accounting and filing taxes to creating new sales channels online, the internet offers smaller businesses endless opportunities to do things smarter and faster.

However the latest innovations such as mobile and cloud technology are not without their risks and small firms are increasingly finding themselves open to cyber threats.

In fact recent government research found that 60 per cent of small businesses reported a security breach in the last 12 months, costing between £65,000 and £115,000.

Worryingly, despite this increase, according to software security experts Kaspersky 82 per cent of smaller firms in the UK still are under the impression that they are not a target for attack because they’re too small or don’t have anything worth stealing. This couldn’t be further from the truth and firms should definitely look to ensure they protect themselves.

What are the risks?

Cyber risks occur at every point where your business uses technology, and not simply computers! Smart phones, tablets, storage devices, email, social media and even phone systems are also susceptible.

Some firms in particular are at considerable risk; for example professional services organisations such as accountants and solicitors who hold significant amounts of sensitive information that is highly attractive to malicious individuals. Companies that operate ecommerce websites, or have a large online marketing presence, may also be attractive targets.

To make things even more complicated, as technologies develop all the time, so do the hidden risks associated with them.

The human factor

As well as the obvious external threats from shadowy cyber criminals, one of the biggest risks for businesses is their own employees.

At least 77 per cent of 1,500 data breaches investigated by insurer Beazley in the first eight months of 2014 had a human element.

Employees can cause both accidental and malicious damage to a business. This can be anything from deleting important files, using a weak password, posting inappropriate material on social media, accidentally sending emails to the wrong recipients or attaching the wrong files, or even leaving their laptop unattended on a train.

Even the smallest slip in best practice can have devastating consequences on revenue and reputation.

So what can you do to protect your business?

Small business owners should start thinking about cyber threats in the same way we automatically think about other security.

We know we have to set the alarm every day, test the smoke alarm, and lock the front door on the way out. We do them without thinking, but we’re still playing catch-up on the cyber equivalents. Small business owners need to consider where they put the locks and alarms in place for their ‘virtual’ properties.

While fixes to external problems, like installing anti-virus software and strengthening passwords, may seem an obvious they are often overlooked. The key is to establish a culture of best practice when it comes to online security starting with educating yourself and your staff in cyber risks.

In particular, it is important to make everyone aware of potential exposures that may reduce the likelihood of common, opportunistic ‘drive by’ incidents, like fraudulent telephone calls from those pretending to be from a bank which are on the rise.

Putting in place acceptable usage policies for IT and social media will also make it clear to employees what is expected of them. By being proactive about cyber security with staff, you will begin to build in security considerations to everyday operations, in turn delivering a more resilient business.

If in doubt get advice

Remember that help is on hand from a variety of sources. The Forum for example provides support to protect you from the growing danger of cyber crime by offering affordable solutions to help you manage the risks in your business. For further information visit www.fpb.org or call 0845 130 1722.

Read more:
Cyber security – is your business at risk?

While the economy may be in significantly better shape than it was when the Coalition came to power, there is still a significant degree of business uncertainty. The forthcoming General Election and the possibility of an EU Referendum are making it difficult for many small businesses to plan ahead.

With further austerity measures on the horizon and deficit reduction remaining a key priority, the Chancellor has little room to manoeuvre. But we have made it clear that there are some key things Mr Osborne should look to do to provide the much-needed confidence boost many small businesses would like to see.

A fairer and simpler tax system
Top of our list of member wants are calls to create a fairer and simpler tax system.

Many small businesses feel that further measures are needed to create a fairer tax system that ensures that ALL businesses pay their fair share.

Suggested changes include:
• Continued steps to close tax loopholes and assessing whether the largest companies in the UK pay a reasonable level of taxation
• The introduction of the compulsory publication of tax records of the leading companies in the UK
• Measures to limit the influence of companies that use artificial tax avoidance methods
• A reversal of the decision to authorise HMRC to directly debit bank accounts of small businesses
• The introduction recommendations from the Office of Tax Simplification
• The introduction of tax incentives for SME exporters.

Better payment practices
Late payment also remains a key concern for small firms, and many want to see further moves to introduce better payment practices, hence our calls to introduce the automatic addition of late payment charges for council invoices, as well as further moves to introduce e-invoicing across the public sector.

Reduced red tape
Despite government’s pledge to reduce red tape, the Forum’s most recent Cost of Compliance Survey revealed that it still costs the UK’s small and medium-sized enterprises (SMEs) £19.1 billion last year.

Therefore the Forum would like to see the Chancellor make further moves to tackle the ongoing regulatory burden many small firms face.

Some of our suggestions include increased support from government bodies to help reduce the administrative time burden for small businesses and financial support for small businesses to offer shared parental leave.

In addition, with many facing new pension costs in the coming months, we also sent a clear message to the Treasury that now is not the time to raise the National Minimum Wage above inflation.

Help to export
As the recovery continues the government continues to see exports as key to future economic growth. However many small firms remained unconvinced of the business benefits and still feel that it remains prohibitively costly and that little incentive is given to encourage SMEs to explore overseas trade possibilities.

Therefore the Forum’s submission continues to press the Treasury to consider introducing tax incentives – along the lines of the research and development credits – to encourage the growth needed to help the UK hit its export target of £1 billion by 2020.

With the election looming large it is likely that the emphasis of the government’s final set piece is highly likely to focus on continued concessions for households. We will be watching closely and hope that the Chancellor will not lose sight of the need to provide small firms with a much-needed confidence boost.

Read more:
Forum of Private Business budget wish list

Changes to statutory sick pay, maternity and redundancy pay
From 6th April the statutory sick pay rate increases from £87.55 to £88.45 per week. Maternity pay, ordinary, additional paternity and adoption pay increases from £138.18 to £139.58. The maximum amount of a week’s pay for calculating statutory redundancy pay will also change to £475.

Shared parental leave
Employees who are the parents of children born on or after 5th April 2015 will have the right to request shared parental leave and pay. The new rules work by a couple being allowed to share some of the mother’s entitlement to maternity leave by opting into shared parental leave (SPL). Each eligible parent is able to submit three notices booking periods of leave. Employees can request they alternate the 12 months leave available between them, potentially on a monthly basis.

In addition to this, parents taking SPL will also be able to share up to 20 optional “in touch” (SPLIT) days, in addition to the 10 KIT days women can get on maternity leave.

Standard maternity/adoption and paternity leave and pay will stand, unless parents choose to opt in to SPL instead.

A birth mother must still take at least two weeks leave following the birth of a child. Fathers can also take 2 weeks statutory parental leave and pay in addition to any shared parental leave.

It is advisable to discuss the application in depth with the employee before they formally submit a request as repeated applications will be very time consuming to assess. Employers have no right to reject an application for continuous leave; shared parental leave can only be rejected on a similar basis to the objections to flexible working. You cannot penalise parents for using SPL, or put any pressure on them to cancel or change it.

More rights for surrogate and adoptive parents
Also from 6th April parents taking adoption leave will have the same eligibility requirements and statutory pay as employees taking maternity leave. Surrogate parents will also become eligible for adoption leave.

Parental leave extended to 18
The right to unpaid parental leave will be extended to parents of any child under 18 years.

New compensation limits for employment tribunal costs
The limit for a week’s pay will increase to £475 when calculating compensation for unfair dismissal, making the new maximum compensation amount £78,335.

On the horizon…

changes to managing sickness absence
The new health and work assessment and advisory service is set to start operating in the next few months. It will provide advice and support to help employers with staff members who have sickness absence lasting more than 4 weeks to get them back into work. Following an assessment, employees will be given a return to work plan, which will provide evidence of fitness to work.

Remember that it is a good idea to seek advice ahead of taking any action. As well as providing regular updates, the Forum’s business advice team can give advice on all employment-related issues. For further information visit www.fpb.org or call 0845 130 1722.

Read more:
A guide to the Employment Law Changes

This only serves to highlight the fact that apprenticeships are becoming an increasingly popular career route for school leavers over the past few years.

In an increasingly competitive labour market, apprenticeships play a vital role in equipping young people with the skills they need to succeed in the labour market, helping them get their foot on that all important first rung of the career ladder.

What’s more their popularity looks only set to continue with the school leavers now having to remain in education or training until 18.

Employing an apprentice can be a great way of boosting your business; 96% of employers who take on an apprentice report benefits to their business whilst 72% report improved productivity as a direct result of employing an apprentice.

However like any other employee there are some important things to be clear on when taking on apprentice.

Key things tips to consider when you are considering taking on an apprentice include:

Be clear on pay and hours

An apprentice will normally work a minimum of 30 hours per week and should receive a minimum wage that is determined by their age and programme.

If you take on an apprentice as an employer you must ensure you have an apprenticeship contract drawn up and signed by both parties. Otherwise you will be legally obliged to pay the national minimum wage rate, rather than the £2.68 an hour 2013/14 apprenticeship rate.

As with other members of staff failure to pay the correct minimum wage could result in a fine of £20,000 and being publicly named and shamed.

Details on wage rates for apprentices can be found on the National Apprenticeship Service website.

Be clear on your obligations

It is important to realise that once to choose to take on an apprentice you are committed to provide them with employment for as long as it takes to complete their programme or a minimum of 12 months, whichever is greater, subject to satisfactory performance.

You can only terminate an apprenticeship early in very rare cases and not simply because you are unhappy with their performance. Also, you cannot make an apprentice redundant unless the workplace is closing. If an apprentice has their contract terminated unfairly, they can receive significantly higher than normal damages for wrongful dismissal to compensate them for loss of wages, loss of training and loss of status. If they have the required qualifying service, they can also claim compensation for unfair dismissal.

As with other employees, apprentices must receive a minimum 20 days holiday per year plus bank holidays.

If in doubt get advice

As with all employment matters it is important to seek advice if needs be. The Forum’s business advice team can provide advice on all employment related issues including apprenticeships. For further information visit www.fpb.org

Image: Apprentice via Shutterstock

Read more:
Top things to consider when employing an apprentice

Not a week seems to have gone by when we haven’t seen further revelations of a major business name being questioned about the way it chooses to treat its small businesses suppliers.

British heavyweights including Premier Foods, Mars and drinks giant Diageo are just some of the big names that have been brought to our attention by our members recently, and whose business practices have been called into question.

What is becoming all too clear is that the UK is facing a crisis of trust in big business.

One of the worst economic downturns in living memory has been a challenging time for businesses of all sizes. However, it has also led to many large companies looking to de-risk their business operations by squeezing the small businesses they work with, with tactics ranging from increasing payment terms to introducing schemes to claw back cash from their suppliers.

This is creating an ethical deficit at the heart of UK business, and is something that has the potential to limit the growth and prosperity of the “backbone” of British economy – small businesses. This in turn directly impacts on the pace of the ongoing recovery.

What’s more, this view is not limited to the small business community as the dubious practices of some of UK industry’s major players have come under even greater media scrutiny. The result of a recent ComRes poll the Forum commissioned showed that over three quarters of adults in Britain agree that big businesses are more likely to prioritise profits over high ethical standards. A similar proportion of adults also agree that big businesses have no concern for small business owners in the UK.

The results of the poll sent out a clear message that the crisis of trust in big businesses is something of serious concern. It is also a crisis that many people feel must be addressed by the next government in order to safeguard the UK’s small business community, who are key to ensuring sustainable economic growth.

That’s why the Forum has recently launched its five point Business Ethics Pledge, calling on politicians and influencers to sign up to protect and promote the interests of the small to medium-sized businesses we represent.

In the coming weeks we are also set to re-launch our Hall of Shame that has been instrumental in highlighting the worst payment practices of some of the UK’s most famous names over the past twelve years. We are looking to widen the focus from late payment to challenging large businesses on any practices we feel take advantage of their small business suppliers.

We also want to hear from small businesses up and down the country as to the current situation. You views count and by visiting www.fpb.org/businessethics and filling out the survey you can help shape the ongoing debate. All responses will be treated in the strictest confidence.

There must be a balance between the need to attract the world’s biggest companies to Britain, ensuring we have the best environment for business, and protecting the interests of the UK’s hardworking independent small businesspeople.

The UK’s political parties should be judged at the election on their commitment to put business ethics at the top of the political agenda. Failure to do so could break small businesses, the backbone of the British economy.

Read more:
Business Hall of Shame to relaunch

This trend of supplier bullying is nothing new. In the past two years John Lewis, Halfords and Debenhams are among major high street names that the Forum has exposed as seeking to demand payments or rebates from their suppliers, for a variety of reasons.

Halfords, for example, called on its existing suppliers to invest significant sums of money in the growth of its business, by requesting a rebate outside of already agreed contractual payments whilst suggesting such payments might not be a one-off.

Late payment in supply chains is just one of the many factors increasing the pressure felt by small business suppliers, and has tended to get the lion’s share of attention over the past decade. A key effect of the economic downturn was the move by many large firms to look to make retrospective changes to their payment terms as a way to maximise their own cash flow at the expense of their suppliers. This subsequently led the Forum to highlight this practice through the launch of its Late Payment Hall of Shame. Marks and Spencer – often cited as a beacon of corporate responsibility – was one of our most recent additions following its decision to extend its general merchandise payment terms from 60 to 75 days in line with what it called ‘industry standards’. While the EU responded with a Late Payment Directive allowing firms to charge late payers interest, very few have looked to do this in practice, for fear of losing future business.

The government is all too aware of the increasing concern among the small business community about the unethical business practices being adopted by some of the nation’s big hitters and is making moves to tackle the issues. On late payment, it is pushing for greater transparency with measures to introduce the compulsory reporting of maximum and minimum payment terms in the Small Business and Enterprise Bill, as well as considering ways in which to tighten up the Prompt Payment Code. In addition, the Department of Business, Innovation and Skills is considering possible moves to make in light of the Premier Foods story.

However it is all too apparent that further action will be needed in order to tackle an issue that has become of increasing concern to many of our members, and the solution will not be found/achieved overnight.

Retailers may deliver jobs, cheap clothing, food and low inflation, but this should not be at the expense of consumer choice, a sustainable supply chain and to the detriment of small businesses who created 65 per cent of jobs though the recent economic recovery.

Small businesses are the backbone of the British economy; and as such their interests must be represented and articulated. With a general election on the horizon, it is now time to put even greater pressure on the political classes to scrutinise the unscrupulous practices of big business. Business ethics must now be placed at the top of the political agenda.

To that end we look forward to launching a wide reaching campaign ahead of the election that seeks to hold the future government to account on business ethics, and stimulate a rethink of the relationship between big and small business for the good of the UK economy.

We will be calling on responsible corporates operating in the UK to show their support for this cause – together forming a partnership that will showcase the best of British business and cut out a culture of abuse that risks damaging the long term competiveness of UK plc.

Image: Ethics via Shutterstock

Read more:
Ethics in business

By choosing to do just one of these actions this year, you could make a real difference to your business – and your bottom line.

1. If you haven’t already, start marketing …

All too often marketing is seen as a dirty word for small business owners, but it’s really just making sure that what you have to sell matches the needs of customers and then communicating the benefits to them.

2. Improve your customer service

If you do nothing else this year, look at your customer service. There’s no better marketing than word of mouth. People buy from people and nothing encourages positive recommendations more than excellent customer service. It can also ensure repeat custom, so make it a core value of your business and make sure all of your staff know what standard is expected of them. Use mystery shoppers to highlight any problems and training to resolve them if necessary.

3. Start a blog

Show customers the human side of your business by keeping a blog. Benefits to your business can include:

• Credibility in your marketplace – become an instant ‘industry expert’
• A quick and easy way to get more content on your website
• Improved search engine rankings for commonly searched terms relating to your business – blogs are also easily indexed by search engines such as Google
• Build relationships with potential customers and clients
• A way for people to identify with you personally

4. Get to know your local journalist or radio DJ

If you operate on a local level, getting in the local press is a great way of raising your businesses profile. Your local journalist or radio DJ really should be your best friend, so let them know that your business exists. If you don’t know who they are, find out and introduce yourself.

5. Get networking

Wherever potential customers or referrers meet, be there. You usually have to pay a fee to attend networking events, but the number and quality of contacts you make will often justify this small cost.

If you’re already a seasoned networker, why not step it up a gear this year and offer to give a free talk to a group.

6. Start a newsletter

Sending a regular email newsletter is a quick and cost-effective way of staying in touch with your existing and prospective customers, letting them know about new products and services and giving them special discounts.

7. Analyse your competitors and your market

You may remember doing this when you started your business, but how often have you done it since? Regularly assessing your competitors and the market will help you to discover the things customers are demanding, and what your competitors are – or aren’t – delivering. You should also survey your customers regularly to find out what they want.

8. Start using social media

If you haven’t already, promote your business by getting involved in social media sites like LinkedIn, Facebook and Twitter. Not all social media channels will be suitable for your business, so just choose the one that is best for you and where you know your target market is active.

You could join online business forums, start a Facebook page for your business or join a LinkedIn networking group like the Forum’s.

Put a little bit of regular time aside a week to read posts and reply with relevant comments so that it doesn’t start to interfere with your work.

9. Review your website

How many people are coming to your website? How many people read your blog? If your answer is “I don’t know”, then you should. How can you know whether you’re getting the best out of your website if you don’t know how it’s performing?

Put yourself in the customers’ shoes and test your website as if you’ve never visited it before. Is it easy to find out more information or to buy from you? How does it compare to your competitors’ sites? Is your content out of date? You may find that many problems can be fixed easily and inexpensively. For more information read our guide to making your website work for your business.

10. Do something different

Marketing doesn’t have to be boring. Use your imagination and have fun with it: dress up, give away free samples in the street or do something positive for your community to make you really stand out. Just make sure you stay within the law and that it’s appropriate for your line of business.

Remember small steps can be really effective in raising awareness and that there are plenty of resources available to provide inspiration and ideas including further hints and tips on the Forum’s website www.fpb.org

Read more:
10 ways to kick start your marketing campaign

According to the latest statistics from the Health & Safety Executive, employee absenteeism cost UK businesses £ 14.2 billion last year.

Jo Bostock, Business Adviser at the Forum of Private Business, suggests employers should have effective absence monitoring procedures in place such as the Bradford Factor to nip workplace absences in the bud at the onset. “Sickie season is a potential challenge and it is a good idea for firms to look at how they can prepare.” Jo observed.

Her top tips to tackling absence in the sickness season include:

Plan ahead
Line managers can look at planning in advance of the sickness season. They should review/implement rules and procedures. This may include monitoring processes such as the Bradford Factor. Systems such as this need to be implemented formally before businesses can begin using them. Also make sure your absence reporting procedures are up to date, so that where these are not followed appropriate action can be taken.

Keep clear records
The first step you should take in controlling absence is to maintain records of all employees’ absences and lateness. The records should be kept in a form which makes analysis of the data relatively simple. This will help you observe and monitor each individual’s absence levels so that any unacceptable levels of sickness can be highlighted and effective steps taken to tackle any underlying issues.

Be clear on the different types of absence
There are three types of sickness absence:
Short-term absence – the occasional day(s) off here and there with minor ailments. This can be frequent days of absence or, alternatively, irregular sickness absence.
Long-term absence – where an employee is absent from work for an extended period of time with a prolonged illness or disability.

Unauthorised absence – short periods of absence – an occasional day off here and there with a minor ailment – where the employee has failed to notify the company.

Be clear on the rules around sickness pay
When it comes to sick pay, employees are not legally entitled to receive payment for periods of unauthorised absence or lateness. However, for sickness absence, an employee is entitled by law to receive Statutory Sick Pay (SSP) or, alternatively, company sick pay, if you provide this contractual benefit. It is entirely at your discretion whether you provide anything above SSP. An employee is entitled to SSP once they have been absent from work due to sickness for a period of four continuous days or more – technically known as a Period of Incapacity to Work (PIW). All days count towards this, including weekends and bank holidays if the employee normally works these. No payment is due for the first three days, which are known as ‘waiting days’. Periods of sickness fewer than eight weeks apart are linked as one PIW for payment of SSP. So if an employee is sick for a second time during an eight-week period, and the total absence is four days or more, SSP should be paid from the first day of the second absence.

The maximum number of weeks for which an employee is entitled to receive SSP is 28 weeks in any PIW. SSP is payable at the current statutory rate and is to be treated as part of an employee’s normal earnings. It is, therefore, subject to tax and National Insurance deductions. There are exemptions to those who are entitled to receive SSP. Further advice on SSP and current rates can be found at www.gov.uk.

Also don’t forget that as an employer you are legally required to maintain records of SSP payments for a period of at least three years after the end of the tax year to which they relate.

Remind employees about their annual leave allowance
The beginning of the year is also a good opportunity to remind staff of how much annual leave they have taken or need to take to make their allocation. If employees have a significant amount of time left it may be a good idea to encourage staff to book time off. It is advisable to have something written into the contract of employment as to what happens to any unused leave at the end of the year.

Explore flexibility where possible
Where possible you could also look at allowing staff to work from home by prior arrangement, as this could also help in reducing the potential for increased sickness absences.

If in doubt seek advice

The Forum of Private Business offers advice on a range of issues including managing sickness absence. For further information visit www.fpb.org.

Image: Sickness via Shutterstock

Read more:
Managing Sickness Absence

Every pound saved that goes straight to your bottom line, and, unlike a sale worth the same amount, incurs no additional costs.

So if you’re looking to grow cost cutting is actually one area where you can make a big impact, quickly, and here are some tips to help get you started.

1. Get back to basics
All too often it can be tempting to jump in and start cutting costs. But let’s start with revisiting your business plan. What are your business goals? What key business functions do you need to maintain to achieve them? Is your cash flow healthy? Do you know where your profits come from and which your most important supply chains are?

2. Know your costs and contracts
You should always know how much you have going out, as well as coming in. Assess your costs and identify where you can make savings. If you don’t know where to start, there are specialists who can do this for you.

3. Look for efficiency savings
Once you know where you’re spending most of your resources, pay close attention to these areas. Are they essential purchases and activities or somewhere you’re wasting time and money? Are you getting good return on investment? Do you have a lot of wastage?

4. Shop around for the best deals
There are good deals to be had out there, if you know where to look. Knowing your contract renewal dates is key, as this may dictate when you can switch supplier. Save yourself time and get increased buying power by joining a buying group and use brokers to help you get the best deal.

5. Stress test your business
Costs rise every year so you need to plan for what you’ll do when prices rise again. For example, new pensions regulations will see the cost of employment increase in the next few years and a rise in interest rates will see the cost of borrowing go up from next year. Take advice and plan early.

6. Tighten up your credit control procedures
Cash is king in any business, so making sure you’re paid on time is key to success.

7. Explore alternative sources of finance
Confidence in banks to lend to small firms may be at an all time low, but there are alternatives out there to get the funding you need to grow. From invoice finance, peer-to-peer lending and angel investment, there is a type of finance for every stage of business.

Don’t forget that business organisations such as the Forum are also a great source of advice and information on how to cut costs and keep cash flowing.

Read more:
Seven steps to grow your business in 2015

While you may think that many firms are set to benefit from the consumer upswing around the festive season, the latest research from promotional goods firm Stay Sourced suggests that businesses as well as households are continuing to feel the pinch. Only 22% of businesses surveyed are buying their employees a Christmas gift and 62% of companies admitted to not having a Christmas party in recent years.

In recent times the Christmas party has been one of the major causalities of small business cost cuts, however allowing your staff to celebrate can be a good way of rewarding them for their hard work throughout the year.

Rewarding your staff does not have to cost a fortune but can speak volumes and go a long way to boosting staff morale and thanking them for their hard work. It can also encourage communication, motivate staff and reward them at a time when other perks, such as pay rises and bonuses, just aren’t an option.

Here are ten cost-effective ideas to reward your staff and help boost morale at Christmas this year.

1. Ask your staff

If you’ve had to cut the Christmas party budget, explain this to your staff at the earliest possible opportunity, most of them will understand that times are still tough for the businesses. Also ask them for ideas of what they’d like to do that don’t cost much money. Most people will be impressed that you’ve even asked. Once you have a few good ideas, put them to a vote.

2. Host a low key event

Your Christmas party doesn’t have to be an expensive affair with a three course meal and a free bar. Nor do you have to rent out a venue, if you have the space to do it in your own premises and it is an appropriate venue. Host an informal get together with a few nibbles and invite staff to bring along some food and refreshments.

3. Make your own entertainment

For free entertainment that gets everyone talking, you could hold a festive quiz and donate a present as the prize for the winner. Be creative with the budget you have and – most importantly – have fun!

4. Go for lunch

Who says that the Christmas get-together has to be in the evening? Rather than the Christmas party and an evening meal, you could take staff out for lunch at a local pub or restaurant. It’s cheaper than a traditional party, but your staff will still get a treat.

5. Check out the best deals

If you want to take your staff out for a meal or drinks, be sure to look for the best price. You can use group deal websites to source big discounts for staff nights out.

6. Say thanks

Sometimes, showing staff that you recognise their hard work can mean more than any gift or monetary bonus. Take the time to go round your place of work and talk to every member of staff. Talk to them about their plans for the holidays and thank them personally for their hard work. It doesn’t cost a fortune but speaks volumes!

7. Recognise exceptional work

Make people feel valued by giving awards for exceptional work in your organisation, for example, the person who’s made the most sales or the most punctual time keeper.

8. Secret Santa

Arrange – or allow staff to arrange – a Secret Santa, where participants each buy a present for one other member of staff. This means employees can get into the festive spirit without spending a fortune.

9. Wind down

If it won’t affect productivity too much, you could allow staff to go home a couple of hours early on the last day before the Christmas holidays, especially if this time would usually have been taken up by the Christmas party.

10. Deck the halls

Allow staff to get into the festive spirit by decorating the office with Christmas decorations. These don’t have to be provided by you – unless you’re feeling generous – but you could invite people to bring their own in.

We all know that Christmas is as costly as you choose to make it, but simple things can mean just as much to your employees as expensive parties and lavish gestures.

Read more:
Saying thank you this christmas

Rolls Royce and Lloyds Bank are just some of the most significant players to announce major job cuts.

Redundancy is a difficult for companies of all sizes but can be particularly challenging for small business owners, who rarely have an HR person to manage the redundancy process.

Small business owners in many cases will have worked personally with the staff they are having to consider for redundancy, often building up personal friendships, relationships and sometimes resentments along the way.

Redundancy can be a straightforward process if handled correctly but it is so easy to get it wrong, leading to accusations of unfair dismissal, which can prove costly, so it’s important to get the right advice and take the right steps in handling the redundancy process.

Key things you need to consider include:

Voluntary redundancies

Once you’ve made the decision that you have no choice but to make redundancies, you can initially request volunteers for redundancy before starting a compulsory selection process. However, you should reserve the right to reject applications for voluntary redundancy if that would mean losing valuable skills.

Being clear and fair on the selection process

If you are making compulsory redundancies, you must identify employees for “the pool of selection”, applying selection criteria to make a fair selection of those who will be made redundant. This is usually done by a scoring system. If you are subject to a claim of unfair dismissal, a tribunal will consider this pool of selection and the criteria applied to consider whether these were fair. It’s essential that you get the selection and consultation process right as lack of fair and meaningful consultation is the number one cause of unfair dismissal claims relating to redundancy.

Considering alternative employment options

As part of a consultation process, you must consider the possibility of alternative employment. If you’re in the position of being able to offer the redundant employee with an alternative position, the employee should be allowed to try the alternative job on a trial basis for a period of four weeks, whilst still keeping their entitlement to a redundancy payment.

The right to appeal

Once the decision to dismiss by reason of redundancy has been notified, the affected employee should be given the right to appeal against the decision. The decision and the right to an appeal should be confirmed in writing.

Be clear on the employee’s pay entitlements

An employee who is made redundant qualifies for a redundancy payment, provided that his or her length of service is two years or more.

In addition, an employee who is not required to work his or her notice will receive pay in lieu of notice according to his or her length of service.

The amount you need to pay a redundant employee is based on statutory redundancy payment and length of service, unless you provide a contractual redundancy payment scheme, but can also include:

• Pay in lieu of notice
• Unused accrued holiday entitlement
• Final monies earned, including bonuses and commission payable.

The decision to make someone is a very difficult for most employers. Making sure that you get the right advice and follow the correct redundancy policies and procedures will at least help to ensure that you are fulfilling your obligations as a responsible employer. It will also protect your business from both potential tribunal claims and the reputational damage of an unfair dismissal claim.

The Forum of Private Business can provide detailed advice and support on redundancy situations and other business issues. For further information, visit www.fpb.org or call 0845 130 1722.

Image: Redundancy via Shutterstock

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What to consider before making redundancies

In recent weeks we have seen the issue of broadband and mobile coverage hit the headlines. The coverage of the mobile issue in particular has highlighted some interesting differences in the positions of different political parties; given the practicalities of getting operators to invest large sums of money, should the next government prioritise faster speed or wider coverage and just how should it go about enforcing that?

Just over a year ago the Labour Party stole the headlines with the energy ‘price freeze’, a neat policy which, despite your view on its practicalities, fitted in nicely with their cost of living narrative. If wage growth is sufficiently outstripping inflation by the next election it may be the cost of living ‘crisis’ dies down, but the policy on energy utility companies will remain in the Labour Party’s manifesto.

Aware of the positive feedback this generated, the Coalition seems to have turned its sights to mobile operators to generate similar headlines. Personal use of mobiles has gone from the luxury to the mainstream in the past two decades. For small businesses in particular they are increasingly essential for reaching new – and servicing existing – customers.

Mindful therefore of its importance, the government is looking to eradicate areas where there is poor – or no – mobile coverage. The former was the subject of a recent consultation whilst the latter is targeted through the government’s own Mobile Infrastructure Project.

The rationale for intervention is that mobile operators lack economic incentives to invest in areas which would be loss leading. Areas of little coverage tend to be rural, sparsely populated and with little existing infrastructure, so new masts with little new business would lose companies significant sums.

What the mobile companies have done instead is prioritise investment in faster speeds attuned to the greatest population coverage. So whilst a small retail business in the Scottish Highlands might need to wave a phone in the air for a basic signal, similar businesses in an urban area will be surfing the web on superfast 4G.

This heart of this debate lies around how to increase both coverage and speed at the same time.
The government’s preferred route seems to be to order the mobile operators to share infrastructure – the concept of national roaming – without conceding anything that might cost the Treasury. But take a step back and it’s not clear what that would achieve. Why would any company unilaterally invest in an area where they had no coverage, if their competitors could then use that infrastructure for free?

National roaming could become a form of state intervention but the long-term problems would outweigh the some short-term benefits. The opinion of the operators, who strongly oppose national roaming, is based on the simple fact that they bought spectrum based on coverage targets they have since met, so why should they spend – and lose – money investing beyond such requirements. The government is well aware of this – more ambitious obligations on spectrum would have meant proportionately less money fetched at auction for the Treasury.

The answer for future spectrum sales (such as 5G) seems clear enough – to attach more ambitious coverage obligations to it – but extending current spectrum to rural, small businesses is less clear. Look at the way the mobile market has worked in the past and it doesn’t take a scientist – or DCMS policy official – to work out mandating more expenditure from mobile operators will require further concessions to incentivise them.

How and where those incentives are found will be the subject of debate over the coming months and beyond the election. All main parties want to drive high speed mobile connections to boost GDP but will need to find a way of encouraging such connections to reach as wide an audience as possible.
The mobile operators insist they are spending money to widen the geographic coverage they offer. Such improvements do come at a cost and they have long asked for government reforms to make that process easier and faster. To all intents, I am sure a deal is possible.

So, despite the spotlight currently being on rural coverage for businesses it seems clear that overall mobile coverage will continue to expand and improve. The Forum of Private Business is working hard to ensure operators do extend their coverage obligations but are realistic that to do so requires appropriate government support.

Phil Orford MBE is Chief Executive of the Forum of Private Business

Image: Tech via Shutterstock

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Private led investment v state intervention

Next week (10-14th November 2014) is the sixth annual National Export Week, a campaign to bring together public and private sector organisations to boost the UK’s exports.

The Government is all too aware of the importance of overseas trade for future economic growth, setting an ambitious target of doubling current figures to £1 trillion by 2020. Exporting is not for everyone, but if this is inspiring you to look to overseas markets to growing your revenue and profit, remember to do your homework! Below are some important things to consider before you venture overseas.

Research is key!
Before you commit to exporting you need to honestly assess your company’s export potential – both in terms of the business and the product or service you are looking to sell.
Detailed market research is essential to identifying and evaluating the target market. UKTI for example, can provide focused business advice and helps you assess whether there is a market for your goods.

Plan, plan and plan again
After the research, comes the export plan defining how you will enter the new market.
Some important things to think about include:

• A clear marketing strategy that incorporates international trade development and the necessary financial resources needed.
• Resource – Do you have the right people in place to develop the new export markets and adequate knowledge of the requirements of your chosen market – e.g. modifying packaging to meet local regulations and standards?
• Making sure you are fully up to speed with export payment mechanisms and export finance.
• Careful consideration of Selling and distribution in overseas markets. How will you organise your sales presence in export markets through direct selling, a strategic partner, a distributor, a sales agent, or your own local office?
• How will you market your products? You’ll need to appreciate the traditions, culture and legislation of the countries you are trading with to exploit your exporting efforts and customise your marketing efforts accordingly.
• An understanding of legal obligations as an exporter. You’ll need to familiarise yourself with the VAT rules administered by HM Revenue & Customs (HMRC).

With exporting identified as an important driver in the UK economic recovery it is definitely worth considering. Careful research and planning may appear time consuming in the beginning but are vital in avoiding any potential problems further down the line.

Remember that help also available from a variety of sources, including business organisations such as the Forum. For further information and advice on exporting visit www.fpb.org/exporting

Image: Exports via Shutterstock

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Top Tips for would be SME exporters

Bank lending data backs this view, with successive reports on the Funding for Lending Scheme showing a net retraction in lending to small businesses, even after tweaks to try and make it even more beneficial to lend to that cohort of business.

Of course, it is not all the government’s fault. There are other parties who have contributed to the statistics, including businesses themselves, some of whom have been repaying rather than borrowing more over the last few years.

This ‘net depositor’ phenomenon is compounded by the fact that many businesses are proving very reluctant to switch banks. Although there is no easy breakdown of figures from the Payments Council, their data on bank switching (since the 7-day switch guarantee was introduced) suggests very few businesses are moving away from the major banks in their account provision. In fact, when businesses do move, the Forum’s own data suggests they move to another of the big four.

However, central to this problem remains the main lending institutions of the country some of whom, despite being part-owned by the country, continue to take actions that will only serve to reduce their lending exposure to small businesses further.

Take the closure of bank branches, which continues apace amongst three of the big four banks. Only Lloyds, which has a moratorium on closures for a few more months, has resisted cutting down their branches and therefore limit the opportunities for businesses to have face to face interaction with their bank managers. Despite pressure from groups such as the Campaign for Community Banking and perfectly reasonable policy solutions that could be adopted to help stem the loss of branches, they continue to decline.

So it is that the Forum of Private Business has reached the conclusion that we simply have to move on beyond these major lending institutions and do all we can to encourage existing and new small businesses away from the major banking sector, instead ensuring they are catered for by a more competitive challenger bank sector, as well as the rapidly growing peer-to-peer sector. There are a number of ways of doing this.

The Small Business Bill currently before Parliament is one example. It contains a measure that will see businesses automatically matched to an alternative lender but only once a bank has refused the business finance. The Forum has stressed that such a referral should be offered before the business is refused, both in order to protect credit reports but also to stop a risk of disincentivising entrepreneurs seeking the finance. We would much rather see businesses offered a referral at first stage, with the bank at the very most doing a soft check to give an indication of whether it will fund.

Another issue the Treasury is currently considering is to what sort of platform a business should be referred. Given the wide variety of lenders out there, they understandably want to guard against an individual business being overwhelmed with offers of finance from multiple lenders. The main banks are also arguing their case to be part of the referral platform as well, meaning a business turned down for lending by RBS might be matched with Lloyds. Although we recognise the most important outcome is that a business gets the funding it needs, it sort of defeats the object if that funding simply comes from another large operation.

For years, our members have been telling us that trust remains a big issue in seeking finance from non-bank lenders. Although the lending figures coming out of Funding Circle, Platform Black and the like have been immensely impressive, only time – and a clean record – can demonstrate to businesses that have this fear factor that such outfits are robust and trustworthy. Regulation has already helped that confidence, as has significant government investment through them as part of the Business Finance Partnership.

So, to conclude, what are the main parties offering to help boost lending beyond the main banks following the general election? Arguably, the most interesting suggestion comes from the Labour Party, which is looking to bring over to the UK a similar system to the German Sparkassen model, that is to say a more local lending model. That would surely require, as a first policy measure, immediate intervention to prevent branch sell off. It is estimated that such banks account for more than a third of the German banking industry and has the potential to be a big, positive disrupter of the current system.

Whatever does happen at the election and whichever party or parties assume power, The Forum is urging them to take firm and wide-ranging action to convince small businesses away from their dependency on the big four banks.

Read more:
Time to move beyond the traditional banks

The Forum’s latest Cost of Doing Business report, released at the beginning of this month, showed that while annual inflation has continued to fall from 2.7 per cent to 1.6 per cent prices have continued to rise faster for micro, small and medium-sized employers at 4.7 per cent. Energy, marketing and staff topped the list as having the most significant impact on cost rises.

The research also revealed that a staggering 63 per cent of businesses have seen costs grow in the last 12 months, and for 51 per cent this meant that they couldn’t grow their business in the way they wanted to.

Rising business costs undoubtedly squeeze small firms’ profit margins and mean there’s less cash available to spend on the growth and development that is so essential as the recovery continues to gather pace.

So how can you combat rising costs, whilst still managing to grow your profits?

When you think of business growth, cutting your costs isn’t the first tactic that springs to mind. It’s all too easy to focus on the ‘sexier’ sides of the business such as sales and marketing, but business costs in essence are just the other side of the same coin.

Every pound saved that goes straight to your bottom line, and, unlike a sale worth the same amount, incurs no additional costs.

So if you’re looking to grow cost cutting is actually one area where you can make a big impact, quickly, and here are some tips to help get you started.

1. Get back to basics
All too often it can be tempting to jump in and start cutting costs. But let’s start with revisiting your business plan. What are your business goals? What key business functions do you need to maintain to achieve them? Is your cash flow healthy? Do you know where your profits come from and which your most important supply chains are?

2. Know your costs and contracts
You should always know how much you have going out, as well as coming in. Assess your costs and identify where you can make savings. If you don’t know where to start, there are specialists who can do this for you.

3. Look for efficiency savings
Once you know where you’re spending most of your resources, pay close attention to these areas. Are they essential purchases and activities or somewhere you’re wasting time and money? Are you getting good return on investment? Do you have a lot of wastage?

4. Shop around for the best deals
There are good deals to be had out there, if you know where to look. Knowing your contract renewal dates is key, as this may dictate when you can switch supplier. Save yourself time and get increased buying power by joining a buying group and use brokers to help you get the best deal.

5. Stress test your business
Costs rise every year so you need to plan for what you’ll do when prices rise again. For example, new pensions regulations will see the cost of employment increase in the next few years and a rise in interest rates will see the cost of borrowing go up from next year. Take advice and plan early.

6. Tighten up your credit control procedures
Cash is king in any business, so making sure you’re paid on time is key to success.

7. Explore alternative sources of finance
Confidence in banks to lend to small firms may be at an all time low, but there are alternatives out there to get the funding you need to grow. From invoice finance, peer-to-peer lending and angel investment, there is a type of finance for every stage of business.

Don’t forget that business organisations such as the Forum are also a great source of advice and information on how to cut costs and keep cash flowing. The Forum’s website is also an invaluable source of money saving tips and ideas on everything from telecoms to utilities.

Read more:
Seven steps to reduce your costs and grow your business

The Forum’s latest Cost of Doing Business survey, carried out among its members, shows firms are still feeling the squeeze despite signs that the economic recovery continues to gather momentum.

The results showed that 63 per cent of businesses have seen an overall increase in their business costs. 70 per cent of businesses reported an increase in energy costs, 65% in transport costs, 76 per cent a rise in marketing costs, and 65 per cent a rise in staff costs.

The report also identified that 38 per cent of small business owners admitted to being unable to pass any rising costs onto customers, forcing them to cut their own costs to keep prices static. Just 3 per cent were able to pass on costs in full.

Phil Orford MBE, the Forum’s Chief Executive, said: “The major reasons for increases in prices are predominantly down to transport and energy prices rising. The economic outlook continues to improve but costs still remain an issue for our members and a key focus of our lobbying and support services.

“This is a timely reminder that despite all the talk of a need for above-inflation wage rises businesses continue to feel the strain of rising costs. With the auto enrolment of staff into pension schemes just around the corner, the affordability of significant wage rises coupled with increased pension contributions will be called into doubt.”

While annual inflation has continued to fall from 2.7 per cent to 1.6 per cent the research also found that prices have continued to rise faster for micro, small and medium-sized employers at 4.7 per cent, although this is less than the 6 per cent figure reported by the Forum last year in research into business costs, suggesting things are slowly improving.

81 per cent of firms indicated that rising business costs have been detrimental to their business. 73 per cent have had cash flow issues as a result and it has had detrimental effect on 51 per cent of firms when looking to invest. 51 per cent also reported that it has been detrimental to employment levels and 63 per cent felt that it had inhibited their plans for growth.

Despite the recent positive news on the economy, rising business costs could continue to restrict the ability of many SMEs to take full advantage of the signs of recovery, with an overwhelming 82 per cent of business owners quizzed expecting prices to continue to increase, and 16 per cent expecting a significant increase.

The most frequently cited exacerbating factors were customers paying late and competitors offering products below cost price. Excessive administrative demands forced on businesses by the government, banks and customers meant that 35 per cent of businesses have not been able to focus on business activities.

Read more:
Business costs rising 3.1% ahead of inflation

The latest revision of GDP suggests we came out of recession nine months earlier than previously thought, in the third quarter of 2013. Since then, growth in the economy has been positive, though slow. Businesses are growing in confidence and whilst in the main they are limiting their growth ambitions to domestic, not international sales, that optimism should mean even better growth over the coming years.

The political narrative is not switching towards wage growth, which has lagged behind inflation. Official figures reveal that excluding bonuses, wage growth grew by 0.6 per cent, well below inflation. This puts more credence to the ‘cost of living’ debate, though it remains the case that measures to mitigate the impact of less valuable incomes shouldn’t be found by putting further costs on businesses.

So why are wage rises stalling? Here are some theories.

Rather than increase wages, businesses have chosen to employ more staff. Unemployment is down to less than 7 per cent and whilst youth unemployment remains a significant issue, the overall levels of employment – and self employment – are extremely encouraging. In particular, the rapid rise in self-employment is likely to lead to lower average wages, given the time and personal investment it often takes to get new ventures of the ground.

The recovery remains fragile and businesses are hedging their bets. Growth is sluggish and businesses are yet to be making the kind of profits to justify a dramatic rise in wages. Aligned to this is the fact that many are having to make investments they have put off during the recession, for instance in new vehicles, machinery or buildings. That takes a huge chunk of finances and wages are being left to stagnate a little as a result. Should there be further issues that cause the economy to go back into recession, higher wages introduced now could be unaffordable a little further down the line. Given the imminent increases expected in interest rate levels, businesses will also have one eye on any debt costs they have over the coming years.

External costs of doing business remain high and continue to rise, meaning wages can’t yet be substantially increased. Forum research backs this argument. Our annual ‘Cost of Doing Business’ survey has shown repeatedly that businesses have tried to absorb cost rises rather than pass them on to their customers. The Forum’s 2013 survey revealed over 90% of members have seen an overall increase in their costs and at 6.0%, prices have risen far faster for micro, small and medium-sized employers than for the rest of UK society. As a result, wage growth has suffered.

Perhaps the truth lies in a combination of all three. What is certain is that the issue of wage growth isn’t likely to resolve itself in the short term, certainly within the smaller end of businesses. That’s because many are anticipating the impact of auto-enrolling their staff into pension schemes for the first time. Whilst it will be illegal to present employees with an ‘either or’ scenario, that’s to say, either have a wage rise or receive a pension, it is highly likely that businesses would not choose to implement both, especially if they are still uncertain about their growth over the coming years.

To put the impact of wages in context, take the current argument that businesses should be striving towards a Living Wage. Raising the National Minimum Wage to a Living Wage isn’t just an increase of £1.34 an hour. It is an increase in employer and employee national insurance, an increase in pension contributions and an increase in the cost of other employment benefits. For a typical micro business employing nine full time members of staff that’s an increase of £23,500 a year (£43,700 for London businesses), before the additional impact on NI, pensions and employee benefits are taken into account.

That’s a huge cost increase and underlines one of the causes of slow wage growth to date. Given recent years, caution amongst smaller businesses is to be welcomed and whilst, like others, we want to see wage growth over the coming years, we urge all policy makers to be wary of the wider economic costs being faced by businesses in their arguments. The costs of living and the costs of doing businesses are inherently intertwined.

Alexander Jackman is Head of Policy at the Forum of Private Business. The Forum of Private Business is a not for profit membership organisation support small, private sector employers across the UK.

Read more:
Is it time for a wage increase?

As the summer holiday season draws to a close, the inevitable back-to-school feeling grips even the biggest kids among us as we prepare to get back to work and buckle down to business.

As small businesses owners start to get back up to speed after what is traditionally a quiet time for most businesses, one important area to catch up on is the planned changes to employment rules and regulations, many of which comes in at the start of October. This might tend to be at the bottom of your priorities, but failing to get up to speed with any changes could prove costly.

Below is a guide to the key changes that you should be aware of in the next few weeks and what should be on your radar for the coming months.

Summary of the key regulation changes for the second half of 2014

National minimum wage changes (October 2014)

From 1st October, the national minimum wage rates go up.

The new rates are:

• Aged 21 and over – increase from £6.31 to £6.50 per hour
• Aged 18 to 20 – increase from £5.03 to £5.13 per hour
• Aged 16 to 17 – increase from £3.72 to £3.79 per hour
• Apprenticeship rate – increase from £2.68 to £2.73 per hour.

Remember that the government has raised the penalties for non-payment with a £20,000 penalty in place for businesses that don’t pay the correct rates and the embarrassment of being publicly named and shamed!

Shared parental leave and antenatal appointments from October

The big change coming in from October is the right to shared parental leave following the birth of a child on or after 1st April 2015. From October, fathers will also have the right to take unpaid leave to attend two antenatal appointments.

Commission during holiday
One potential law change that has been making its way in through the European Court of Justice (ECJ) means that you will have to include average commission payments in an employee’s holiday pay.

This case involved an employee whose salary was part basic and part commission but his holiday leave entitlement was calculated only on his basic salary.

The ECJ found that not including commission when calculating holiday pay could deter the employee from actually taking annual leave, which goes against the objective of the Working Time Directive.

This is now back with the Employment Tribunal to determine how the Working Time Regulations should be determined following this decision. Whilst the final outcome is still in the balance it does seem likely that employees who earn additional amounts through overtime and commission will have to have their holiday pay averaged out.

Employers may therefore review their annual leave arrangements to ensure that commission or other relevant variable payments are factored into holiday pay calculations. You may also want to look at existing pay structures, contracts and commission policies to consider if these need reviewing in light of recent developments.

Sickness and absence – advice service

The government announced the launch a new Health and Work Service with the aim of getting employees on long-term sickness back to their jobs. This followed the recommendations of a task force assigned to look at ways to tackle the issue. The agency will launch in autumn but will be fully operational by April 2015.

Another recommendation that the government has introduced from this year is the scrapping of the Percentage Threshold Scheme. This was quietly removed from April this year and previously allowed employers to claim back a percentage of SSP for employees on long term sick leave. The deadline for any PTS claims for the 2013/14 financial year is 1st April 2016.

Things to keep on your radar

• Pensions
You may be sick of hearing about it, but the pensions auto enrolment wagon just keeps rolling on, with less than 12-months to go for businesses with 30-49 employees. So if you’ve not already, you need to find out your staging date and what to do next.

• Flexible working
During the summer, changes came in that mean all employees now have the right to make flexible working requests. If you are not up to speed already it is worth making sure that you know how to handle such requests and in what timescales.

• Food labelling regulations

If you run a business that prepares and serves food, you need to be aware of new allergen labelling laws coming in from December.

Remember that it is a good idea to seek advice ahead of taking any action. As well as providing regular updates, the Forum’s business advice team can give advice on all employment-related issues. For further information visit www.fpb.org or call 0845 130 1722.

Image: Employment via Shutterstock

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Employment law crib sheet

With stress levels rising in workplaces over the last few years, it’s no wonder that music is seen as a perfect solution to ease the tension and lift staff morale.

Recent research by London-based performing rights societies Phonographic Performance Ltd (PPL) and the Performing Rights Society (PRS) for Music found that 62 per cent of employers positively believe they can influence the behaviour of employees through playing music, while 87 per cent of employees agree that music improves staff morale.

But before you reach for that DAB switch or press play on your Spotify playlist, remember that when it comes to playing music in the workplace, those same licensing companies represent the artists and composers of the music so require you to pay for the privilege!

The price tag for playing music at work can be hefty, and it’s long been a bone of contention for small business owners. Many think that by purchasing the music (including Spotify membership, Soundtrack your brand etc) they are covered. However, this may not be the case as you will also need a music licence from PPL PRS.

Who are PPL PRS?

PPL PRS are a joint venture between the UK’s two music licensing societies, PRS for Music and PPL.

Previously, businesses and organisations had to obtain separate music licences from both organisations in order to play or perform music on their premises. However, they have now come together to form PPL PRS Ltd and launch a single licence known as, TheMusicLicence.

So, what’s the difference between PPL and PRS? Why do I need to be covered both?

PPL PRS collect licence fees from UK businesses and organisations on behalf of their parent companies, PPL and PRS for Music.

PPL then distributes these music licence fees for the use of recorded music on behalf of record companies and performers, while PRS for Music distributes music licence fees for the use of musical compositions and lyrics on behalf of songwriters, composers and publishers.

If you are using music in your business, it is likely that this music will belong to both the PPL and the PRS repertoire, which is why you are required to be covered for both.

What does TheMusicLicence cover and how much does it cost?

TheMusicLicence covers you to legally play or perform the vast majority of commercially available music for employees or customers in your business through the radio, TV, other digital devices and live performances. This usually includes the use of ‘on hold music’.

The cost will depend on factors such as business type, the size of the area in your business that music can be heard in and how recorded music is used. To find out more go to www.pplprs.com.

What’s the worst that can happen if I don’t get TheMusicLicence?

If you play music in your business or want to include it in your product, you need clearance to do so from the owners of that music. If you do not obtain clearance for your use of copyright music, you could face legal action for copyright infringement and may become liable to pay damages and costs. The rates and/or charges applicable are entirely dependent on the nature of usage of the music and type of location where it is broadcast.

Are there alternatives to paying for TheMusicLicence?

There is an option to buy royalty free music to use, for example, on your hold music. And there are even royalty free radio stations, but whether these are to your taste – or any cheaper than a licence for your business would be – it’s really down to personal opinion.

And finally…

PPL PRS work to strict codes of conduct, meaning that they shouldn’t treat businesses unfairly. Usually you should be notified of a visit from one of their agents, and the first visit will only be an introduction rather than a pressured visit.

One particular bugbear businesses report is receiving calls from PRS for Music asking whether they play music in the workplace. If they answer ‘Yes’, they are then advised that they are liable to pay a licence fee and often this is backdated. As other members of staff may be answering the phones, you may wish to brief them not to answer any questions and to refer any such calls to yourself so you can deal with them. The Forum believes that companies should be given a choice about whether to continue playing music their workplace prior to further charges.

Also remember that business organisations, such as the Forum are more than happy to provide further advice on this and other issues and can feedback any issues a particular company may have had with either PPL PRS. The policy team has also successfully resolved disputes businesses have had with them

Read more:
A need-to-know guide on music in the workplace

As businesses start to get their head around new rights on flexible working and shared parental leave. One thing they can be sure of is that these changes won’t be the last…

Whitehall will already preparing further changes and regardless of the colour of the next government, a Bill in next year’s Queen’s Speech will undoubtedly include proposed changes around employment law.

Lobbying against changes to certain elements of employment law, such as parental leave, is a tricky one for small businesses. No business wants to be pitched against changes that can be seen to benefit society.

However, businesses’ main objection is to the constant changes that are seemingly introduced to this area of law. For example, parental leave has changed about every 18 months on average since 2004. Each change necessitates one of two things for a business, either making sure staff are up to speed with the new rules, or deciding to outsource HR. Both come with a cost. And that’s before the cost of replacing staff for their absence, training and so on.

The present government has made commitments to keeping regulatory costs to the minimum. From the outset they made a pledge to be the first deregulatory government in history. So how much their new regulations cost matters a great deal to them. It follows therefore that all government policy comes with an impact assessment that needs to be validated. This is done by a respectable and respected body called the Regulatory Policy Committee (RPC).

However The Forum of Private Business can tell you from first-hand experience that the RPC creates a sizeable number of large documents that weigh up the costs of regulations on business. These are then released in twice yearly Statements of New Regulation in which there is a meticulous attention to costs. This is to show that by the end of the Coalition’s term there will have reduced the overall cost of regulation.

And yet year-on-year Forum of Private Business members identify an increase in the cost of compliance, amounting on average to some £14,800 per small business. So, by the time of the general election 2015, small businesses will say the cost of compliance will have increased.

So how do these two figures co-exist? There are a number of possibilities. The government would say it’s partly down to down to perception. The annual Business Perceptions Survey carried out suggests that much of the regulatory burden is perceived and not actually experienced in practice. They also point out that the deregulatory targets do not include legislation coming in from Europe. That too is a fair argument.

The Forum of Private Business counters by pointing out some of the ‘outs’ of deregulation concern outdated pieces of legislation not used by the majority of businesses.

There is also the odd case of an impact assessment quite dramatically undervaluing the ‘in’ of a new piece of regulation. Whilst it doesn’t happen often, when it does go wrong it can be quite dramatic. For instance, it is largely accepted by industry experts that the government undervalued the ‘in’ of auto enrolling staff into pensions by a factor of 10. Prior to Real Time Information being launched in April 2013, HMRC anticipated the cost to small business at £120m, while the Forum research puts the figure at more than double that at £311m.

Taking into account all the points above there is a much simpler truth to explain the differences in viewpoint. The truth is probably down to the constant changing of regulations in the main areas of employment law and taxation.

The example above of a business spending money to be compliant with new regulations is something that happens every time those regulations are changed. Forum research showed the amount firms are paying to external contractors was the major contributory factor in the rise increasing by 6%, twice as fast as the internal costs to the business.

What small businesses require from regulation is clarity, consistency and certainty. That is the test the Forum of Private Business applies to all new regulations. Until any government commits to changing the law less frequently, the business cost will continue to rise.

Alexander Jackman is Head of Policy at the Forum of Private Business, a not for profit membership organisation which supports small, private sector employers across the UK.

Read more:
Measuring the costs of compliance: the mismatch between government and business on regulation

With its recent member survey showing the average micro, small and medium-sized employer in 2014 has seen an above inflationary rise of £713 in their annual compliance bill, Jo Eccles, business adviser at the Forum of Private Business, provides some practical advice how to cut your annual compliance bill.

The fact that business costs are on the rise, probably comes as no surprise to most small business owners. External costs accounted most for the increase in the annual compliance bill for small firms, which at 6 per cent is well above the current rate of inflation and twice as much as internal costs. On closer inspection much of these increases were associated with the need to implement Real Time Information (RTI) to existing pay roll provision, following the 12 month extension for small businesses.

And while RTI may now be up and running, it is no time for small firms to sit back and rest on their laurels, as the small firms now focus their attention on the cost of pensions auto-enrolment, which by its very nature is going to be hugely more expensive than RTI to set-up, deliver, and also maintain.

Staying ahead of the changes to rules and regulations is something that cannot be ignored and the consequences and prove even more costly. However, there are a few useful tips to help you save money while staying on the right side of the law.

1. Be prepared (and prepare early)

When it comes to getting ready for law changes, particularly the big ones like auto enrolment, it pays to prepare well in advance. While you cannot escape the inevitable costs that will be involved you can keep these down and reduce the impact on your business if you do your homework and budget carefully.

Getting the right software in place is just one area where you could make real savings, as many major payroll package providers will include updates for big changes such as RTI and auto enrolment as standard.

2. Keep up to date

Surprisingly when questioned, it was time and not money that is the main impact red tape for our members. If staying up to date with the latest changes is the main issue for you, it pays to identify one or two trusted sources of information that will ensure that you are aware of all the law changes and key dates well before they happen.

3. Take advice then act!

With the average employment tribunal costs in the region of £9,000 and health and safety penalty £16,730 it pays to seek advice to ensure to stay on the right side of the law. You should also ensure that whatever source you decide to go with is insured to protect you should the worst happen.

4. It pays to shop around!

Outsourced compliance services are just like any other service you decide to buy in – you can always look for a better deal. Quite often you may find that you can find combined packages that provide employment law, health and safety and contract advice with the extra piece of mind of insurance cover. These could be a lot more cost effective than looking to pay a combination of lawyers and individual consultants.

5. Delegate

If you are single handedly running your own business and managing all your legal compliance, then the time may have come to share some of that responsibility with others in your organisation. You may want to appoint a Health and Safety Officer or someone in charge of HR. Delegating doesn’t mean you are no longer responsible, but it could free up some of your valuable time for you to concentrate on what you do business – growing you business.

Remember that business organisations, such as the Forum can provide further advice on this and a whole range of small business issues. For further information visit www.fpb.org

Read more:
5 Top Tips to help cut the cost of compliance for your small business

The proposals – announced in the Budget in March 2014 – will give HMRC inspectors the power to recover funds from the self employed and small businesses, where it is deemed they have sufficient money to pay the outstanding debt, with relevant safeguards in place.

While the measures do include the need to assess the 12-month debtor history in the decision, the Forum argues that the proposals could be seen as unfairly targeting small firms. They also fail to take into account unexpected costs often facing small businesses such as stock or new investment, which can be considerable and above the allowed £5,000 cash safety net outlined in the plans.

Commenting on the plans, Alexander Jackman, Head of Policy at the Forum of Private Business, said: “Our members are unequivocal in their condemnation of tax avoidance and the tax evasion practices that have received significant coverage in the media, in particular the practices of large corporates.

“However, many of our members already feel that they are unfairly targeted by HMRC and these proposals do little to dispel this commonly held belief. The smaller scope of their operations means many small business owners feel much more vulnerable to investigations than larger firms with more complex tax arrangements.

“Small firms are only just recovering from the increased regulatory burden of Real Time Information on their accounts and this is only set to increase with the introduction of pensions auto enrolment. As a result this makes them extremely wary of any plans to give additional powers to the taxman.

“The sheer variances of cash flow in different types of businesses and the limited resources available to effectively implement these proposals are also a real concern. These proposals, if introduced, could leave many of our members feeling that they are being unfairly targeted and government should seriously reconsider.”

Read more:
Forum calls on government to scrap plans for new HMRC debt recovery powers

National small business organisation, the Forum of Private Business, is urging small firms to make sure they put adequate measures in place to protect themselves against this ever-growing threat.

Jo Eccles, business adviser at the Forum of Private Business, says: “Recent research suggests that cyber crime costs small businesses around £800 million every year with little chance of recovery, while telephone hacking can cost as much as £30,000 over just a two-day period, making it all the more important to ensure your businesses is protected.

“What’s more, failure to put adequate measures in place could see you facing fines of as much as £500,000 for cyber breach and data loss under UK and EU legislation such as the Data Protection Act. Other potential threats include loss of company devices, social media misuse and hacking.”

With 60 per cent of small firms reporting a security issues last year, and a major breaches costing a small firm on average between £65 and £115k, it pays to protect your business. Some top tips to reduce the chances of the worst happening to your business include:

· Carry out a risk assessment to assess the threat cyber crime poses. For example, if a number of your employees are on your computer network using the internet every day you may be at higher risk than if you just have one company computer that is very rarely used.

· Create a business security and disaster recovery plan – If data disaster did strike your business, you and your staff need to know how you would keep the business running.

· Back up your business data – A back-up is a copy of your data, usually kept on a data storage device which is then secured away from the original. It should be taken regularly and include customer details, employee information and bank details as it’s your responsibility under the Data Protection Act 1998 to safeguard this information.

· Protect your business from viruses – These present the biggest online threat to your business data. Not only are they designed to cause disruption, but they can target personal data stored on your system (including that of your customers) and cause you to lose important data.

· Stay alert for signs of fraud such as ‘phishing’ scams – These can try to get you to part with financial details, divert website traffic to a bogus site or direct orders to a different server. Make sure you meet payment security requirements. If you take payments via your website or any other situation where the card holder is not present, you need to make sure you comply with the Payment Card Industry Data Security Standard (PCI DSS).

The Forum is all too aware of the increasing threat this poses to members and has recently teamed up with cyber protection experts Cyber AMI to create an affordable comprehensive cyber risk management package to protect your business. This includes staff training, risk assessment tools and expert support.

Read more:
Make sure your business is cyber safe!

The Small Business, Enterprise and Employment Bill was introduced into parliament in June and will proceed through the legislative system over the next twelve months. The bill covers finance, procurement, employment and specific trades and its broadness will ensure there is interest from a wide array of industries. Some of the measures are fairly mundane whilst others a little controversial. So what are the main battlegrounds likely for the bill?

Finance
The bill proposes measures to push ahead with the electronic scanning of cheques for paying in, together with measures to release small business credit data – with their permission – for other lenders to offer more competitive funding. It also gives the Secretary of State powers to impose reporting requirements on larger companies to detail their payment times and terms in annual reports.

The thinking behind this measure is to increase transparency and accountability of the payment times of larger businesses to their supply chains. Forum of Private Business research illustrates late payment is having a significant impact on business development, productivity and growth. Access to finance, cost of finance and credit trade insurance were all cited by business as problems linked to late payment.

The Forum of Private Business has long campaigned for better measures to tackle late payment and lengthening payment terms and this is a positive step forward. It is rare that a business body calls for more regulation but this is a case where more accountability is needed, to help try and stop the issue from getting worse.

Regulatory reform
Research indicates that the cost of compliance with regulations continue to rise for small businesses, though there is a case that some of this rise is down to perception. Major costs are health and safety (3.7bn), employment law (4.7bn) and tax compliance (6.0bn).

The coalition intends to be the first government in history to reduce – not increase – the burden of regulation. Measures to tackle the regulatory stock, such as the Red Tape Challenge and One in Two Out, together with changes to the regulatory flow such as the Regulatory Policy Committee and Growth Duty, means that in terms of sheer volume of regulation the Government is likely to meet that objective.

The bill will put into statute requirements for the government to review regulations for their appropriateness after a few years and put in place targets for deregulation over the course of a parliament. It is an area where more needs to be done.

Governments must understand that regulatory impact comes not just from the amount of regulation but the frequency of change too. Minor rules which change often are just as time consuming as major ones that change more infrequently. Whilst the Forum of Private Business welcomes the statutory footing the bill intends to bring in, it will do nothing to support a true reduction in regulatory burden unless politicians of all parties regulate less in the first place.

Employment law
The ‘employment’ bit of the bill is largely uncontroversial though there are clauses seeking to ban the exclusivity element of zero hours contracts. The growing use of these contracts, primarily their abuse by larger companies, is a concern but there are varied and legitimate uses for them, particularly in retail and hospitality sectors, as well as start ups. The exclusivity issue is certainly the most contentious component of them and a ban on it will be welcomed by many. However, there are some specific uses of the exclusivity clause which are justified (for instance where sensitive information is at risk) so this may become a point of debate in the bill.

The pub trade
The bill looks to introduce a pubs adjudicator and a pub code. The adjudicator is the direct result of a failure of self-regulation in the industry, as many pub tenants have been increasingly squeezed by the pub companies over the last few years – some would argue for much longer than that.

The pub code will perhaps be the fiercest battle of the whole bill. On one side, pub companies maintain there is no need for the code. On the other, many groups want it to go much further, with a compulsory ‘free of tie’ option and an independently assessed rent review, to ensure a tied tenant is no worse off than a free of tie one.

These are the main four clauses for small business but with less than a year to the election, there is plenty left to fight for, for small businesses and many groups will see this bill as a vehicle for further supportive government legislation.

Alexander Jackman is Head of Policy at the Forum of Private Business

Read more:
The Small Business, Enterprise and Employment Bill – the battleground ahead

However, excessive use of social networking sites can be disruptive to the day-to-day running of a business and it makes sense to set some ground rules if you are concerned that your employees are spending too much of their working day networking online.

1. Decide what you think is ‘acceptable use’ of the internet and create a policy to reflect this

The policy should set out what is deemed acceptable behaviour when using the company’s IT systems (e.g. accessing social media sites only at lunch or not at all) and explain what will happen if that policy is breached.

Make it clear that any use of the internet is a privilege that can be revoked at any time.

If you monitor or intercept emails or internet usage, you should make this explicit to members of staff. Undisclosed monitoring can be against employment law. This policy should be in your terms of conditions of employment, either in the contract of employment or employee handbook.

2. Handle negative employee comments with care

A reported one in 10 employees has posted negative comments about their boss on social networking sites like Facebook and Twitter, and the Forum’s advice team receive numerous calls from members who want to take disciplinary action against members of staff for what they’ve posted on personal Facebook accounts. However there are a few issues that come into play here.

For an employer to be able to discipline a member of staff, you first need to have a specific internet policy which addresses social media. It also depends on whether the user has an open or closed profile. If it is public, their comments about your business will be there for anyone to see, but if they were made on a private profile, this is the equivalent of a discussion between friends and it would be difficult to take any action.

If the incident escalates to an employment tribunal, you would need to be able to prove that the comments were made in a public domain and demonstrate that you have a social media policy in place, which has been clearly communicated.

3. Decide if you need to create a specific workplace policy when it comes to social media

Depending on your company’s involvement in social media, you may need to extend your internet policy to include social media, or you can create a separate policy.

Unlike a standard internet policy, which covers use of internal IT systems, you cannot dictate what members of staff do outside of working hours. You can, however, take disciplinary action if they post negative comments about the company in the public domain.

To discourage this type of activity and protect your business, a social media policy should outline what is deemed unacceptable behaviour and what is likely to happen if the policy is ignored. If staff use social media on behalf of your company with your permission, it’s also wise to outline in your social media policy how you expect them to conduct themselves online. This is especially important if you don’t want sensitive information to get out into the public domain.

As with internet usage, ideally the social media policy should be part of the terms and conditions of employment/staff handbook, but can also be an addendum to it. If this is the case, we advise that you get the staff to sign to say they have read the policy and understand what is expected.

4. Regular monitoring is key!

It’s important to constantly monitor what is being said about your business online, by employees and non-employees. The easiest way to do this is to carry out regular searches on Google and key social media sites.

Members of the Forum can contact the business advice team on 0845 130 1722 for further guidance on this and other employment issues or visit www.fpb.org.

Read more:
Four winning tips to effectively handle social media use in the workplace

No consumer can walk into MarsUK’s factory and try to buy chocolate with the offer of paying less than the full price on the spot, or 100 per cent of the price four months later. The factory security would eject you reasonably quickly. Yet that is what MarsUK is offering its supply chain, a new finance initiative, but coupled with a doubling of its payment terms to 120 days. It isn’t fair. Lengthy payment terms and late payment is more often than not a useful cash flow tool for bigger businesses and even as we enter recovery, firms continue to act badly in this area.

In a recent survey conducted by the Forum of Private of Business, 23 per cent of members reported an increase in late payment over the past 12 months. 29 per cent had seen an increase in the average number of days beyond the deadline that a payment is made late and 19% have seen an increase in both elements of late payment.

The research indicated that as the economic situation has improved the number of businesses reporting late payment as a serious problem has remained static. However, with upwards of £30billion tied up in late payments, costing a typical small business 130 hours a year chasing invoices, small businesses are keen to see more measures to tackle the issue.

The government’s late payment consultation contains a number of suggested remedies, some non-regulatory whilst others part of the Small Business, Enterprise and Employment Bill, recently announced as part of the Government’s programme for the year ahead. Some draconian measures have been dropped but overall there are some positive steps forward in the efforts to tackle late payment, even if one critical obligation of government has not been met.

To boost prompt payment in the public sector the government announced that 30-day payment terms were to be passed down supply chains with public reports on late payments, together with greater powers to investigate complaints raised by the Cabinet Office’s ‘Mystery Shopper’ scheme. The ‘Mystery Shopper’ scheme is a highly valuable, if not well known, policy that allows anonymous feedback on government procurement practice, and greater powers for it should help drive higher usage.

In the area of incentivising fair, transparent, payment practice, the government intends to legislate to give force to a new reporting framework. The Forum of Private Business believes that major companies should face mandatory requirements to disclose their average payment terms and times. This is a strong metric for accountability to supply chains and shareholders. It is important that any such metrics are easily comparable and transparent in their meaning. With a hazy commitment to legislate ‘when Parliament permits’ it will require continued pressure to get this implemented in time for the shortened, 10 month, Parliamentary session.

On the Prompt Payment Code, much more thinking needs to be done. The government proposed an ‘upper tier’ creating two categories of signatory. With the potential devaluing of the commitment for those signed up to the lower tier, together with general confusion of having two categories, this idea has been shelved. Certainly, there remains very low usage of the challenge function within the Code, most recently used by the Forum of Private Business to challenge Marks and Spencer’s status, but more work has to be done to strengthen the monitoring of companies on it together with the sanctions that can be made if they fall foul of it.

On the length of payment terms, an issue frequently in the headlines, the government stepped back from introducing a maximum legal payment period, which could cause unintended consequences given the variance of contracts already in place. Nevertheless, this is a highly contentious area with a number of companies extending their payment terms but at the same time introducing a supply chain finance scheme.

However, one major issue remains unanswered in the government’s response. The Forum of Private Business asked for clarity over existing EU regulation that enables small businesses to challenge ‘grossly unfair’ payment practices whilst retaining their anonymity. The EU legislation places an obligation on governments of member states to put a mechanism in place to support this right, for instance by creating and supporting a forum to support representative bodies to challenge payment terms on behalf of members.

Maintaining anonymity should not be underestimated as a root cause for why many businesses do not use existing legislation to pursue late payments. Creating a system where that anonymity is protected is essential but it remains the one area the government is yet to tackle. As the various proposals in the government’s document start to trickle forward, getting this issue sorted will be at the forefront of our mind.

Read more:
Late payment – what is the Government proposing and is it enough?

but before you let the heart rule the head and it’s important to do your homework and follow the steps below to ensure that you go into the process with your eyes wide open!

1. Establish what the business is actually worth
There are several ways to do this and business transfer agents or brokers can provide qualified advice on a business’s value.

Key areas to consider include:
• The business’s track record
• Current performance in terms of sales, turnover and profits
• Future projections from its business plan
• The financial situation
• The reasons why it is now on the market.
‘Good-will’ is often an important factor involved in setting an asking price, but can be the most difficult to put a value to, particularly in terms of reputation. It’s advisable to speak to the vendor directly, and to existing clients and suppliers if at all possible, to build up as clear a picture as possible. The more information you have the better placed you will be in terms of negotiations around the business value.

2. Make sure you carry out a thorough due diligence process
Once you’ve put your offer in and it’s been accepted, you’re then given a period of time to get hold of the business’ books and get a realistic snapshot of how your dream business is actually performing. Known as ‘due diligence’ there are three main types and you may need expert advice on each of these.

• Financial due diligence – making sure the numbers stack up and that there are no financial skeletons in the cupboard
• Legal due diligence – as part of the terms of sale and purchase contract, solicitors can check if the business you want to buy has a legal title to sell, ownership of all the assets and regulatory and litigation issues
• Commercial due diligence – this looks at the business’s market position, competitors and regulatory issues.

Due diligence is not simply about the business’s finances but also a more detailed look at what you are taking on and whether you are equipped to handle the undertaking. You should not start the process until you have agreed a price and terms with the seller and on average an investigation period can take in the region of 3-4 weeks.

3. Make sure you are up to speed with your obligations as an employer
Alongside due diligence you should fully research your obligations as an employer to get a clear understanding of your responsibilities, as your dream business could soon turn into a nightmare and you could find yourself facing an employment tribunal.

It’s important to remember that there are employment regulations (commonly known as TUPE regulations) that apply to employees when someone takes over a new business.

Employees have the legal right to transfer to the new employer on their existing terms and conditions of employment and with all their existing employment rights and liabilities intact.

Effectively, the new employer steps into the shoes of the old employer and it is as though the employee’s contract of employment was always made with the new employer and the old employer is required to provide the new employer with written details of all the employee rights and liabilities that will transfer.

Under TUPE regulations you will also need to let existing staff know:
• that the transfer is happening, when and why
• how this will affect them; and
• whether there’ll be any reorganisation.

As the new employer you can’t make an existing employee redundant just because they have transferred from another employer, but this can be considered for ‘economic, technical and organisational’ reasons, for example if a decision is made to close an underperforming part of the existing business. The new employer can consult about redundancies before the transfer if the old employer agrees. This process can be quite complicated and it is recommended that you seek specialist advice.

Buying an existing concern involves a lot of homework and can prove costly. Even after due diligence and negotiations you may decide that it is simply a risk too far and to walk away altogether. However, by following the steps outlined above, you are likely to be better placed to make the right decision.

The Forum can provide advice on a variety of issues, including purchasing an existing business, for further information visit www.fpb.org.

Read more:
Three key things to consider when deciding to buy an existing business

Countless surveys highlight the need to achieve a healthier work-life balance and in addition we have seen a raft of changes to employment legislation to help in achieving this.

However the challenges facing many employees managing their home and work commitments is not simply a challenge for the individual but also for the employer, and it is important for small business owners to remember that there are several key pieces of legislation to consider:

1. Maternity leave

A pregnant employee is entitled to paid time off to attend antenatal appointments and 52 weeks’ maternity leave, which can begin any time from 11 weeks before the expected week of confinement (EWC). This is made up of 26 weeks’ ordinary maternity leave and 26 weeks’ additional maternity leave.

The minimum amount of leave a new mother must take after the birth of a baby is two weeks (four weeks for factory workers).

She must notify you of her pregnancy in or before the 15th week before the EWC, or, if that is not reasonably practicable, as soon as possible.

If she intends to return to work before the end of the 52-week maternity leave period, or change her previously-notified return date, she should give at least eight weeks’ notice.

You must confirm the end date of the maternity leave to the employee within 28 days of receipt of her notification.

An employee returning after maternity leave is entitled to return to the same job on the same terms and conditions, or she must be given another job of similar worth on the same terms and conditions.

Women can return to work on a limited basis during maternity leave without causing the maternity leave to end. Up to a maximum of 10 working days (generally referred to as ‘keeping-in-touch (KIT) days’) are allowed.

You’re allowed to make ‘reasonable contact’ with your employee during maternity leave and you should maintain some level of contact so that the employee can be kept informed, but you cannot pressure them to take less than their full leave entitlement.

Employees on maternity leave will continue to accrue both statutory and any contractual entitlement during maternity leave. It is not possible for an employee to take annual leave at the same time as maternity leave. Please contact the Forum of Private Business for further details of this.

2. Paternity leave

To qualify for paternity leave, an employee must be the father of a child or be married to, or the partner of, the child’s mother, including same-sex partners.

Employees are currently entitled to take two weeks’ paternity leave. These weeks must be taken either as one week’s leave or two consecutive weeks’ leave – not two separate weeks or individual days. The leave must be taken within 56 days of the child’s birth, or, if the child is born prematurely, of the EWC.

Additional paternity leave (APL)

Additional paternity leave came into force in 2011, allowing mothers to choose between taking full maternity leave or returning to work early and allowing their partner to take the remainder of the leave instead.

It is also worth noting that under a new system of flexible parental leave, parents will be able to choose how they share the care of their child in the first year after birth. Employed mothers will still be entitled to 52 weeks of maternity leave; however, working parents will be able to opt to share the leave.

Mothers will have to take at least the initial two weeks of leave following the birth as a recovery period. Following that they can choose to end the maternity leave and the parents can opt to share the remaining leave as flexible parental leave.

The government will legislate on this year and plan to introduce the changes to flexible parental leave in 2015.

3. Adoption and parental leave

In terms of adoption leave, the statutory rights that apply to employees (male or female) who adopt closely mirror the provision for maternity rights.

Parental leave applies to parents with at least one year’s continuous employment with you have the right to take up to 18 weeks’ unpaid time off to look after a child under five or under 18 and receiving disability allowance. Employees can take a maximum of four weeks’ leave per child in any year.

4. Time off for dependants

In addition to childcare-related leave entitlements, employees are entitled to a reasonable amount of unpaid time off to deal with emergencies involving a dependant. All employees qualify for time off for dependants from day one of employment.

5. Flexible working

In addition to leave entitlements, employees with children under 17 years old or who are carers, and have worked for you for at least 26 weeks, have the right to make a request to adopt flexible working arrangements to care for an adult or child.

While as an employer you do not have to agree, you do have a legal obligation to consider any flexible working request.

What’s more, from 30th June 2014 the flexible working regulations will be amended. This will mean that the right to request flexible working will be extended to cover all employees after 26 weeks’ service, rather than only those with children under the age of 17 (or 18 if the child is disabled) and certain carers.

Read more:
What employers need to know when it comes to employee work-life balance

In the organisation’s latest banking and finance survey, 23 per cent of members reported an increase in late payment over the past year compared with just 3 per cent who reported a decrease. 29 per cent have also seen an increase in the average number of days beyond the deadline that a payment is made late whilst 8% reported a decrease, and 19 per cent have seen an increase in both elements of late payment.

While the improving economic situation means the number of businesses seeing late payment as a serious problem has remained static, small businesses are still keen to see more measures to tackle the issue. 39 per cent of businesses surveyed would like to see prompt payment better promoted, 37 per cent would prefer to pay VAT on money that has entered their account rather than when an invoice is submitted and 36 per cent wanted to see persistent late payers barred from government contacts.

Commenting on the results of the survey, Phil Orford MBE, Chief Executive of the Forum of Private Business, said: “Improving cash flow is the likely cause for late payment issues remaining static, despite lengthening payment terms. However, upwards of £30 billion remains tied up in late payments, costing a typical small business 130 hours a year to chase and meaning that a third are forced to seek external finance to cover the gaps in cash.

Government is mulling over responses to a recent late payment discussion paper, which revealed ample ideas for tackling the issue in a more robust manner including the reintroduction of compulsory reporting of company payment terms and practices, and annual checks for Prompt Payment Code signatories.

“It is essential that government uses the recommendations to introduce effective measures and accepts that it not only has a responsibility to play in this area but also that its increased action can also act as an important catalyst for better payment practices.”

Read more:
Late payment remains a concern for SMEs

Headlining the recommendations in the Forum’s Budget submission are calls for further action to support small firms with rising business costs including a fundamental review of business rates. In addition, Forum members also would like to see further action to combat rising fuel costs by considering the phasing out of VAT on the fuel duty element of pump prices.

The Forum is also calling on George Osborne to introduce effective measures to tackle late payment, which remains a key concern for small firms when it comes to cash flow and managing finances. These include making it compulsory for large firms to make their payment statistics public and easier for smaller firms to challenge unfair payment practices.

The Forum would also like to see measures introduced to encourage small firms to make the business investment needed to ensure a sustainable recovery. These include the introduction of an export credit scheme to support small businesses looking to explore growth into overseas markets, and further support for skills development through an extension to existing grants for small business employers.

Commenting on the submission, Phil Orford MBE, Chief Executive of the Forum of Private Business, said: “The Chancellor has admitted that a recovery based on consumer spending is unsustainable and that encouraging businesses to invest and export will be key to ensuring a long-lasting sustainable recovery. The Chancellor must not forget that small firms as well as households continue to face an uphill battle to make ends meet. What our members want to see on March 19th is a Budget that takes decisive action to reduce rising business costs, cut red tape to improve confidence, make it simpler and more profitable to run a small business and encourage the investment essential for a sustainable recovery.

“Small businesses are grateful for the measures announced in the Autumn Statement to mitigate the rising costs of business rates, but a more fundamental review is needed, and sooner than 2017. The Government should bring forward the 2017 proposed review to after the election, a commitment we would like to see all parties have in their manifestos.

“On fuel duty, again businesses will welcome the measures to tackle the increasing costs but again there needs to be a more thorough review. VAT is a consumption tax based upon the sale of products or services. The principle of having to pay a VAT on a fuel duty tax at the fuel pump is fundamentally unfair and raises the average litre cost by more than 10p. We would welcome the Government looking at phasing that out.

“We are looking at a recovery but businesses need time to invest in skills and training and take proper advantage of the better trading conditions. With many facing new pension costs over the next two years, now is not the time to also be raising the National Minimum Wage significantly above inflation, especially when many businesses paying more than that rate cannot afford significant pay rises to their staff due to profitability concerns and cash constraints.

“UKTI and UKEF are providing innovative and helpful solutions to get more businesses exporting which is a key element needed to ensure a sustainable recovery. We have proposed a new, end point incentive that will see companies’ tax bills reduce if they focus more of their growth on exporting. Getting Britain trading more overseas is the key to a genuine recovery.”

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Budget business focus as essential as household concessions to secure the recovery warns Forum

It is true that businesses don’t cast votes but with the Coalition’s dependency on small business driving the country out the recession surely it can’t be politically savvy to abandon them in favour of the electorate as they enter the home stretch.

The second question on our minds ahead of Wednesday’s Budget is what can be announced that can actually be implemented before the election? 14 months is not a long time in political timescales. If we look back to Budget 2013 and what has been implemented 12 months on, the slow pace of the political machine is more than apparent. One of the big announcements at Budget 2013 for small business was the Employment Allowance – that won’t be seen until next month. Growth Vouchers, which have real potential to deliver a real incentive for business support, only went live at the end of January this year, nine months after being announced.

2014 may well have started more positively than recent years, but there remains a feeling of cautious optimism from businesses. The Forum of Private Business wrote to the Chancellor last month suggesting a series of possible measures that could be implemented quickly and support small businesses to maximise their growth potential.

The biggest ask from business that the Coalition have been so far unable to crack is business rates. When last polled 97 per cent of our members said property taxation is too high. In the last year half of members had seen their property costs increase, 37 per cent reported they had stayed the same; not a single member reported a decrease in property costs. Accepting that business rate reform is a long-term project the Forum is asking for a commitment (from all parties) to bring the review currently scheduled for 2017 forward to 2015.

The other ever-increasing cost small businesses are facing is energy costs. Instead of switching, many businesses are absorbing the rising costs of energy. In 2011, 9 in 10 members of the Forum of Private Business environment panel had responded to increased utility prices, with 41 per cent tightening up processes and 28 per cent reducing usage. However, two years and a further 20 per cent increase in energy costs later, there is little more they can do internally to mitigate the costs. Small businesses have been reluctant to pass on costs to their customers in recent years and have absorbed higher bills. With 87 per cent of businesses seeing a rise in energy bills again over the past year, this situation is increasingly untenable.

The Forum of Private Business has recommended to the Chancellor that small non-domestic energy suppliers should see their business customers exempted from the Climate Change Levy (CCL) in the same way that independent domestic providers are exempt from the ECO tax. Removing this levy has the potential to take £256.30 off a typical bill of around £5,600.

Alongside cost cutting measures, the government needs to ensure the UK’s labour market is fully equipped with the skills required for enterprise. One straight forward move the Chancellor could look to implement is an extension to the Apprenticeship Grant for Employers (AGE 16-24). The incentive, introduced in 2012, covered a £1,500 grant per apprentice. Eligibility for the grant was extended to employers with up to 1,000 employees last year, however to deliver greater value for money the Forum believes the government should commit to use AGE 16-24 to deliver targeted support to SME employers (with up to 249 employees) until the apprenticeship funding system is fully reformed.

Rebalancing the economy through export growth has been the major piece of the puzzle in Osborne’s economic plan that has failed to materialise. The Forum has presented the Chancellor with an option to incentivise exporting through a tax relief. Based upon the principles of Research and Development Relief, an Export Activity Relief would reduce an eligible company’s tax bill by offsetting either sales or allowable costs against Corporation Tax. Such aid would be limited to certain sectors and needs to pass State Aid tests, but would be a huge incentive for companies to invest more in export, which is needed by the UK to meet the £1trillion target for exports by 2020.

Encouragingly, this year Forum members reported for the first time since 2010 that finance is no longer the major barrier to growth – time has replaced it at the top spot. However figures from Bacs show that the late payment remains a significant issue for SMEs and payment times are continuing to creep up with the average waiting time for payment now sitting at 38 days. This government has paid great lip service to late payment, successfully raising the profile around the Prompt Payment Code among FSTE companies. Nevertheless more needs to be done to support small businesses in their struggle against late payment.

This Budget will undoubtedly be a feat in electioneering – we’ve already had David Cameron pre-empting his right hand man with the announcement of a National Minimum Wage increase. However our eyes will be firmly fixed on the Chancellor to deliver a package of ongoing support for the engines of his economy, upon whom his economic plan has been dependent on for the past four years.

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Budget for Business or a People’s Budget?

One of the most common problems business owners face is the unenviable task of having to discipline a member of staff or dismiss a member of staff. As an employer it’s your job to ensure that you set and uphold standards of work and behaviour that are good for your business and the other members of your team, but it is also essential that you follow the correct procedures for what can be a very difficult issue to tackle.

Dealing with potential disciplinary issues in a timely and effective manner can often nip bad behaviour in the bud and reassure other members of staff before things become a major issue. However if dealt with in the wrong way this can not only have a demotivating effect but also result in legal action. The costs can be significant, with the average tribunal award for unfair dismissal in 2012–13 being £10,127, it pays to get it right.

Disciplinary do’s and don’ts

• Do make sure each employee understands your disciplinary procedures and who they can appeal to as soon as possible and definitely within 2 months of them starting. These procedures should also be included in your staff handbook.
• Do remember you should follow different processes depending on the severity of the employee’s actions and whether the disciplinary issue relates to performance, or is due to behaviour or misconduct.
• Do remember you need to allow an employee going through the disciplinary process to be accompanied to any disciplinary meetings by either a work colleague or a trade union representative.
• Don’t bury your head in the sand and hope that the problem will go away. Deal with performance or conduct issues as soon as they arise and don’t wait until they become critical.
• Don’t fail to follow the correct procedures set out in the Acas code of practice on disciplinary and grievance procedures as a minimum requirement. If it does develop to a tribunal situation, evidence that these have been followed will be required and failure to follow these, could result in any settlement fees increasing by as much as 25 per cent.

Dismissals

• Do ensure if you have to resort to dismissing a member of staff that this is done ‘fairly’, this means that you have a fair reason for doing so. Common reasons can include, but are not limited to capability, conduct, illegality or redundancy.
• Do remember that you don’t have to take employees with less than 24 months service through a full disciplinary process in order to be dismissed, but you should seek specialist advice to ensure that you are not in breach of employment law.
• Do remember that in most dismissal situations, employees are entitled to notice either under their contract of employment or to statutory notice depending on the length of service.
• Do remember should ensure that you pay an employee what they’re entitled to including pay up to the date of termination of employment, pay for any unused accrued holidays, pay in lieu of notice and any other contractual benefits after going through the correct redundancy process. It is also worth noting that any redundancy process cannot include the ‘first in last out’ option.
• Don’t feel pressured to give a reference to an employee who has had their employment terminated. There is no legal obligation to do so. If you do, you should ensure that it is true, accurate and fair and based on documentary evidence to avoid any potential legal action.
• Don’t refuse a request for written reasons for dismissal from an employee with 2 year’s continuous service as they have a right to written reasons within 14 days if requested.

Disciplinary issues are one of the most common areas that businesses will face and ensuring you have the correct procedures in place from the start can avoid any problems later. These issues are complex and it’s essential that you act carefully and seek specialist advice before dismissing somebody.

The Forum of Private Business provides members with a legal advice line providing advice on all employment and HR issues. For further information visit www.fpb.org.

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An essential guide to the do’s and don’ts around disciplinary and dismissals

Training was one of those areas that suffered as a result. According to government figures, total UK business spend on training fell from £45.3bn in 2011 to £42.9bn in 2013. However, with the improving economic climate the tide appears to be turning as businesses look to invest in skills to drive growth.

Research from the Forum of Private Business has revealed small businesses are making a conscious shift towards training to facilitate growth. The number of businesses engaged in strategic skill development, including management and business planning, grew from 16 per cent in 2012 to 28 per cent in 2013. Similarly, the proportion of small businesses undertaking CDP and training to build capacity grew by 12 per cent and 5 per cent respectively.

These positive developments are buoyed by a decline in other types of training such as training to replace lost skills and a fall in the number of businesses not training at all. The number of businesses engaged in efficiency training and skill replacement fell by 9 per cent and 13 per cent respectively, suggesting fewer redundancies and a more stable workforce. Similarly, the report which looked at small businesses’ training provision over the past year and future skills requirements, reflected the more positive employment outlook for 2014. Over half of Forum members indicated they were looking to increase staff numbers or up-skill their existing workforce in 2014.

This shift away from efficiency training to growth facilitation is encouraging but is a modest move rather than a seismic shift. Government data suggests nearly a third of all businesses are not training at all and when asked how to overcome the barriers to training a worrying 20 per cent of small businesses responded that they did not know or would do nothing.

As we emerge from the recession businesses are beginning to take stock of the skills in their workforce and the gaps that have developed. Small businesses reported time management skills topped the list of skills negatively impacted by the recession. 12 per cent of businesses reported these skills had grown worse over the last five years with owner managers forced to take on additional responsibilities as redundancies were made. 39 per cent of businesses also reported senior management skills had been neglected with time and cost being the major reasons why.

Time and cost emerged as the top two barriers small businesses faced to training, preventing many SMEs from taking advantage of the improving economy. Nearly a quarter of businesses highlighted time as the major barrier to skills development followed by about 20 per cent who noted cost. In contrast to previous years, time has overtaken cost as the biggest barrier to training and skills development.

Given the lack of time available for skills development and continued difficulties funding courses, it is not surprising that a fifth of small businesses do not know how to overcome the barriers they face to training.

These barriers are compounded when we consider that the vast majority of training undertaken by small business – almost three quarters – is mandatory training required to comply with regulations. Compliance training, despite government initiatives to reduce regulation, has increased in the last year.

Whilst attempting to reduce the regulatory burden the government has recently launched an initiative to boost the use of business support amongst the UK’s SME community. The Growth Voucher programme, a £60m project, went live last month. Whilst the vouchers cannot be used to fund training, they will help cover the cost of strategic support from a range of professionals that will enable SMEs to identify their growth needs and direct them to appropriate training or services.

In the few weeks since the programme began nearly 1,000 businesses have applied for the voucher programme. Already over half a million pounds worth of vouchers have been allocated through the programme, which provides all eligible businesses with a business support diagnostic but allocates the vouchers through a randomised process.

So what training support do small businesses really want to increase their access to, and use of? Forum members highlighted the need to balance compliance training with other forms of skills development. The punitive nature of compliance training, (where costs can escalate if a business is a day out of date) was highlighted as an incentive to prioritise compliance training over other forms of training regardless of the priorities of the business. Members also suggested the government should look at the tax system to incentivise training in a similar way as research and development is incentivised.

With time emerging ahead of cost this year as the greatest barrier to training it is essential the government take a holistic view of business when considering how to encourage training. Further action to create time savings through regulatory reduction would free up time for small businesses that could be used for training. The Forum of Private Business is developing a policy recommendation to introduce a limit on the number of regulatory interventions a government can make within a single Parliamentary term. This could potentially save employers a great deal of time and money as they would not need to train staff year-on-year to comply with the constant flow of regulatory change.

So whilst the growth voucher scheme will help SMEs identify areas where they need support and direct them to relevant training, it is evident that the balance between mandatory training for compliance and non-mandatory training for skills development and growth needs to be redressed.

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2014: Time to Train?

According to the latest figures from the Insolvency Service, there were 24,282 individual insolvencies in England and Wales in the last quarter of 2013 – highlighting a decrease of 4.6 percent in comparison to the same period in 2012.

This figure consists of 5,386 bankruptcies (which were down 22.2 percent on the corresponding quarter of the previous year), 6,563 Debt Relief Orders (down 13.1 percent over the same period) and 12,333 Individual Voluntary Arrangements (up 12.3 percent over the same period).

In total, there were 101,049 individual insolvencies in 2013 – the lowest level since 2005. Surely this is good news?

Commenting on the figures, Vice-president of R3, the Association of Business Recovery Professionals said: that the latest personal insolvency figures might only represent the “tip of the iceberg”. He is worried that many people will have done their best to avoid insolvency in the run-up to Christmas and this is going to see them struggle in January and February.

It will be interesting to see how these figures change in the next quarterly reporting of statistics. I believe that there is a general trend of the economy getting better but it is very fragile and will be very sensitive to any upwards change in the base rate.

The Vice-president of R3 said; “Consumers traditionally overspend over the festive period and unless they have a solid plan in place for dealing with this situation, they can find themselves with a debt hangover.”

Is this really a sign that the UK as a whole is becoming more responsible with their finances as they try to avoid going into the red? I believe that most of the cases we are now dealing with are ones that have had historical problems for the last four or five years and they cannot keep going any longer.

Individual Voluntary Arrangements remain the most popular debt relief with 12,333 taken out in the fourth quarter of 2013, which accounts for nearly 50 percent of all insolvencies. What this figure does not analyse is the split of businesses using IVA’s, such as sole traders and private individuals with bank loans and credit card debts.

There has also been a rise in the number of self-employed individuals seeking bankruptcies, with this sector accounting for 24.4 percent in the third quarter of 2013. This is an area that my colleague and I at Kirks Insolvency have been watching with interest. In the last quarter our experience shows that businesses are still under pressure from historical problems such as ‘time to pay’ agreements with HM Revenue and Customs that cannot be renewed. One good thing to note is that the banks continue to be lenient and are particularly supportive to those of their banking clients who have problems.
See Insolvency statistics at: http://www.insolvencydirect.bis.gov.uk/otherinformation/statistics/201402/index.htm

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A true reflection of the economy?