FBS Small Business Index

The latest FSB Small Business Index has found that times are tougher than ever for small firms after two difficult years.

The survey of 1,500 UK small firms, conducted by the Federation of Small Businesses (FSB), finds that SME confidence has been in negative territory for nine consecutive quarters – since July 2018. It comes as small business revenue growth hits an all-time low and staff lay-offs hit an all-time high.

The Q3 SBI confidence figure stands at -32.6, down 28 points on last quarter. Only a third (34%) of those surveyed at the end of last month expect their performance to improve over the coming three months. The significant majority (66%) expect performance to worsen.

The findings also show that a record one in four (25%) small firms reduced headcounts last quarter. An even higher proportion (29%) expect to make redundancies over the coming three months; 12% say they expect to let at least a quarter of their staff go.

COVID-related disruption has caused revenue growth to fall to its lowest recorded ebb, with more than half (56%) of those surveyed reporting a drop. A similar share (50%) expect revenues to fall next quarter.

The FSB is warning that any potential economic recovery is stalling ahead of a difficult trading period in the run-up to Christmas and the end of the Brexit transition period. More than half of exporters polled say international sales have fallen over the past three months.

Although the FSB has welcomed the chancellor’s improvements to the current business and job support schemes, it is now calling for new measures, including:

  • Support for those that have received no income support to date;
  • A reduction in the cost of hiring new staff;
  • Lessening the burden of business rates;
  • Providing more resources for those looking to start a business for the first time.

“We must not forget that small firms were already under the cosh thanks to political uncertainty, rising costs and creaking infrastructure well before the Spring,” said Mike Cherry, FSB national chairman.

“The chancellor made some very welcome adjustments to support measures last week … However, too many are still without the help they need to weather current disruption – not least company directors, the newly self-employed, those without premises and those further down supply chains in the retail, leisure and hospitality sectors. An ambitious rescue package for these groups is urgently needed.

“If we want small business owners to create jobs, we have to bring down the costs of employment, starting with employer national insurance contributions. If we want them to invest, innovate and expand, we have to alleviate the strain of wider government-imposed overheads, including those stemming from an outdated business rates system which continues to stifle too many community businesses all over the country.”

Written by Rachel Miller.

European Employers Expecting to Shed Staff as Government Support Dries Up
September 22, 2020

By Richard Stuart-Turner

More than half (59%) of European employers are expecting to make staff redundant once government support comes to an end, according to new research from employment and labour law practice Littler.

Only 17% of respondents to Littler’s European Employer COVID-19 Survey Report said they did not expect to reduce their workforce following the end of wage subsidies. 

Most employers are expecting job cuts to happen quickly, with 63% saying they would begin to implement reductions in staff as soon as the law allowed before the government schemes ended or within two weeks of their expiration. Just 10% said they would wait three months or longer.

Speaking to HR magazine, Stephan Swinkels, Littler’s coordinating partner international, said:

“As government support winds down, we do see so many companies restructuring their workforce in one way or another. It doesn’t always need to be terminations, it can also be restructuring them by terminating locations and asking people to work from other places.

“If we do end up with a second wave, my prediction is that there will be a second, third or even fourth batch of government support measures, there is no way around it.

“I think most governments have learnt from the first batches what worked and what didn’t work, and just pumping money and making it available is not the right thing. Governments are looking at strategic sectors or industries that they want to support, and they must also have some political clout.”

The report also looked at remote working practices and found that in the wake of the abrupt shift from the office to home working at the start of the pandemic, respondents expect the top long-term, positive implication on the workplace to be a greater acceptance of the benefits of remote work.

Forty-one per cent of employers surveyed said they are making or will make changes to their remote working policies to allow for more flexibility, as long as employees continue to demonstrate productivity while working from home.

An encouraging 80% of respondents said they are requiring or considering requiring more employees to work remotely either somewhat or to a great extent. 

The main reasons for considering this shift were allowing for greater productivity of employees (41%), addressing the difficulty and cost of implementing new safety measures (38%) and allowing for the closure of offices (25%).

Swinkels said:

“Productivity depends a bit on the sector, but people are working even harder sometimes than they used to in the office, they’re more efficient and willing to work longer and more flexible hours, so I do think that this will structurally change the way we work.

“But softer productivity is more difficult to duplicate from home – the social communication between employees, the DNA of a company and the loyalty and the identity that a company can have. It’s also more difficult for new people to onboard and integrate.”

Littler’s research also found that most employers are taking at least some action to address their employees’ mental health and wellbeing during the pandemic. 

Fifty-seven per cent of respondents have offered their staff more flexible work schedules while 51% have asked for frequent feedback on their organisation’s pandemic response.

Littler’s European Employer Covid-19 Survey Report was completed by 758 HR professionals and in-house lawyers across Europe in late July and early August 2020.

Redundancies Expected to Increase in Next Quarter, CIPD Says
August 13, 2020

One in three organisations expect to cut jobs in the third quarter of 2020, according to new research from the CIPD and Adecco Group.

There’s been a 50% increase in the number of organisations expecting to cut jobs compared to the spring report, in what CIPD labour market adviser Gerwyn Davies predicted to be a “sombre autumn for jobs.”

The impact is particularly damaging for the private sector as twice as many private sector employers (28%) are expected to make redundancies compared to the public sector (16%).

Yet hiring intentions have increased, with almost half (49%) of employers expecting to take on new recruits in the next three months compared to 40% in the last quarter. But this confidence remains way below previous years.

The report’s new employment balance, which measures the difference between the proportion of employers whole expect to increase staff levels and those who expect to decrease staff levels, has fallen from -4 to -8 over the last three months- the lowest since the survey started using this methodology in February 2013.

Employers are also expected to offer minimal pay increases over the next 12 months.

Forty-per cent of employers plan to introduce wage freezes in between June 2020-21 and 42% have already introduced recruitment freezes.

The proportion of organisations adopting a recruitment freeze is much higher for the private sector (47%) than the public sector (22%); especially in hospitality (65%), business services (54%) and IT (52%).

Those who plan pay reviews expect basic pay to increase by 1%, much lower than the 2% median increase expected this time next year.

Davies said that despite redundancies having been low due to the Job Retention Scheme (JRS), the survey showed the weakest data he had seen for several years.

“We expect to see more redundancies come through this autumn, especially in the private sector once the scheme closes. Hiring confidence is rising tentatively, but this probably won’t be enough to offset the rise in redundancies and the number of new graduates and school leavers entering the labour market over the next few months.”

The CIPD is welcoming pay freezes for workers if they help preserve jobs and urging organisations to avoid large-scale redundancies.

Davies added: “We urge organisations to do all that they can to keep employees in work and only make redundancies as a last resort, exploring all other options first. This could include freezing recruitment, reducing hours or restricting overtime, or cuts to bonuses and deferring salary increases.”

Job seekers are also applying for high skilled roles, which Alex Fleming, country head and president of staffing and solutions at Adecco Group UK and Ireland said aligned with the trend of people sourcing alternate forms of education to upskill and expand their knowledge.

He said: “There will be ongoing shifts in working patterns not only for employees but also for those who are just starting out in their career. Businesses must demonstrate resilience and adopt new approaches to closing the skills gap by investing in upskilling and reskilling workforces. Creating a positive workplace culture is also integral to maintaining focus, engagement and motivation among existing employees.”

Redundancy: Seven Questions Employers Should Ask Themselves

By Richard Thomas Employment Law Partner Capital Law 

What are your legal requirements as an employer when making redundancies?

Serious sad woman in sweater carrying cardboard box full of stuff and leaving office after dismissal

In the volatile market situation we find ourselves in at present, redundancies may be unavoidable for some organisations, but there are certain legal obligations that need to be fulfilled when employers take this route. Here, we’ll look at seven key aspects employers should consider before embarking on this.

1. Is redundancy a ‘legally straightforward’ way of dismissing employees?

Not really. There are plenty of variables that can easily complicate and delay a redundancy process. These include an employee’s length of service, the number of employees at risk, the involvement of a trade union, the number of sites affected, and the timescales involved. Add to these the logistics of trying to arrange the consultation process mid-pandemic, and it can quickly become difficult.

2. What is required before I can start a redundancy process?

The key condition is that a ‘genuine redundancy’ situation must be proven. In the current context, it would be relatively easy for many businesses to show that they find themselves in such a situation.

There is no one-size-fits-all test, but the situation must fall within one or more of the following categories: a business closure (the business shuts altogether); a workplace closure (the business is partly shut/ is relocated); or a reduction of workforce (the business no longer has sufficient work for some or all its staff).

As well as the impact of Covid-19, other scenarios could include a reduction in demand and/or customers, automating systems and streamlining staff.

3. How should I choose the employees to be made redundant?

At the outset, the business should ‘identify the ‘pool’ – i.e. the group of employees from which it will choose those who are to be made redundant.

When choosing those who are to be made redundant, fair and objective selection criteria should be used. Common examples can include length of service; disciplinary history; performance, skills, qualifications, experience and appraisals.

Selection criteria should not be based on unlawful/unfair grounds, such as an employee’s age, sex or race (discriminatory factors), absence for family, maternity, or disability related reasons, a role as a trade union or employee representative, or whistleblowing.

There is usually no requirement to consider any selection criteria if all employees are being made redundant, or if there is a pool of one.

4. Do I need to consider any alternatives to compulsory redundancy?

One option to consider at the outset is to offer voluntary redundancy. This might reduce the number of employees in the process, or prevent it happening altogether.

Before and during any meaningful process, you should consider other ways in which compulsory redundancies could be avoided, or at least reduced. This might include:

  • Identifying and offering alternative employment.
  • Recruitment freezes.
  • Reviewing and ending contractor arrangements.
  • Reducing overtime.
  • Allowing sabbaticals, flexible or reduced working, career breaks etc.
  • Cutting bonuses and other benefit schemes.
  • Early retirement.

If an employee has two years’ service or more, employers will be under a legal obligation to consider alternatives like the above, or otherwise be faced with the risk of a claim for unfair dismissal.

Employees and their representatives may also have their own suggestions on how to avoid a redundancy situation, which should come to light during the consultation process.

5. Do I need to think about collective consultation?

Quite possibly. In addition to individual consultation, if the number of proposed redundancies will be 20 or more within a period of 90 days at a single establishment, this will trigger collective consultation requirements. These include:

  • Notifying the Redundancy Payments Service before any consultation starts.
  • Consulting with trade union/elected employee representatives, and providing them with certain prescribed information.
  • An obligatory freeze on any redundancies taking effect for a 30-day period for 20 to 99 redundancies, or 45 days for 100 or more redundancies in 90 days.

Failing to follow these rules can prove costly. An employment tribunal can award up to 90 days’ uncapped pay per affected employee where an employer has breached its obligations.

If fewer than 20 redundancies are proposed, there are no strict collective consultation rules to follow, but it is always best practice to fully consult employees (and their representatives if applicable) throughout the process.

6. How do I consult during the pandemic?

If businesses remain open and staffed, and it is possible to do so, the traditional way of consulting face-to-face and electing representatives (within social distancing guidelines) may still be a viable option.

For many businesses, however, the alternative virtual route may be best. Employers can, just as efficiently, inform and consult employees through Microsoft Teams, Zoom, Skype etc. Provided that the legal requirements are met, conducting the process remotely should not prove to be an obstacle for employers.

Similarly, employers who have been required to arrange elections of employee representatives (which should be done by secret ballot) have found online tools such as Doopoll and SurveyMonkey useful for gathering nominations, while still protecting anonymity.

7. What will I need to pay redundant employees?

If an employee has two years’ continuous service or more, they will normally be entitled to a statutory redundancy payment (SRP) – calculated on the basis of their age, pay and length of service, and paid tax-free. There is also a weekly cap (currently £538) and a total cap (currently £16,140) when it comes to calculating SRP.

Some businesses may also offer enhanced redundancy packages, over and above SRP, which may also be paid tax-free (but not guaranteed) up to £30,000.

For those who have less than two years’ service, there is no automatic legal right to SRP. The employee’s contract and all redundancy-related policy documents should be checked, however, to make sure that no such right exists.

In addition, redundant employees (regardless of their length of service) will be entitled to their notice period and pay at the end of the procedure. Depending on the employee’s contract, you may be able to make a payment in lieu of their notice period (otherwise known as PILON).