by Richard Cuff
22nd Oct 2018
Most people start a business on their own or with minimal staff: often people they know on a personal basis. Most people run their fledgling business in a friendly, informal manner i.e. paperwork and company rules are kept to a minimum, contracts are rarely used and relationships with staff are more akin to a friendship. This, undoubtedly, has some advantages, for example the company has a family atmosphere and the staff can feel involved, trusted and cared for. If you are lucky enough to employ staff that are conscientious, hard-working, honest, reliable and responsible then this arrangement will probably be perfectly adequate. Staff that always behave like this are extremely hard to find and to uncover one is lucky, more than one: highly improbable.
Sometimes, however, conscientious, hard-working, honest, reliable, responsible staff can become less so due to various factors such as loss of enthusiasm for the work, personal problems, personality clashes with managers/ workmates. Perhaps they wanted to book a holiday in your busy period and you had to deny it. Small matters such as this can sour a relationship and once soured it is very easily ruined entirely without some careful intervention.
John has started his own business, offering Painting and Decorating services. After a short while he becomes quite busy and cannot cope with demand. He mentions this to his friend, Steve, who is currently unhappy in his own job. “Why don’t you come and work for me”? John says to Steve. Steve only has experience with DIY but feels confident that he can cope with most decorating jobs. Steve says “Okay, that would be great”. Steve then hands in his notice to his current employer of 6 years, serves that notice and then starts working full-time for John. John has known Steve for years and they are good friends. He won’t need any paperwork or agreements as Steve would never cause him a problem. A few months later, things are going well for John. He is now able to complete jobs quicker and therefore take on more work, thanks to Steve’s help. Steve cannot do everything that John can and the quality of his work is not as good as John’s but it’s still perfectly decent. John enjoys having company while working and he pays Steve a reasonable wage. Some time after this, the work seems to dry up a little and there is not enough work to fill Steve’s hours. John says that he will only need Steve for about 4 days a week until the work picks up again. Steve says that he can’t live on the reduced wage that this would give him. John says that he can’t afford to pay him if the work is not there. Steve is really unhappy at this and says that he will need to look for another job if John cannot guarantee him the hours which he has been regularly working. John feels that Steve is being ungrateful for the work that he has provided for him over the previous few months/ years. Steve feels that he has been misled. He left a job that guaranteed him a certain wage each month and now he will struggle to pay his bills. Steve continues to work for John during the downturn but their relationship is not as happy as it used to be. Conversations are often strained and Steve often likes to mention his financial difficulties to John. Steve then calls in ill. John assumes that Steve is unwell. The next day Steve does not call and John calls him to ask where he is. Steve says that he is still unwell. John asks Steve to let him know each day when he will not be at work. A week or two later Steve receives his pay for the month. He is paid a lot less than his usual (already reduced hours) pay and he asks why this is. John advises Steve that this is due to him being off work, ill. Steve asks why he has not received any sick pay. John then tells Steve that he does not pay sick pay. Of course, Steve is likely to be entitled to Statutory Sick Pay(SSP) but John doesn’t know this. Steve then researches sick pay and discovers that he should be entitled to SSP. Steve feels that John is being dishonest and that he is deliberately not paying him what he is entitled to. Steve lets John know that he should have been paid SSP, by law. John feels embarrassed that he did not know this but also slightly aggrieved that his staff member, and friend, is claiming pay when he has not gained any work from him. Steve’s work from thereon is of a lower standard, he frequently takes sickness and he is often late to work. This relationship is now in danger of turning from sour to complete distrust. John wishes that he had never employed Steve and thinks of ways to get rid of him.
I cannot say that having a contract for Steve, showing him company policies and making his working conditions abundantly clear would have stopped all of these problems but I am certain that it would have made these events a lot less likely. If Steve was aware that John would only be able to offer work when it was available it would not have come as a shock. Perhaps a more advisable arrangement would have been to say to Steve that “Currently I have full time work available but, realistically, I can only guarantee an average of 25 hours per week. Is that okay for you?”. Steve then could have made an informed decision at the point of handing in his notice and, if this would not have been financially viable for him, he would have been able to politely decline the offer. If he accepted and then hours were eventually dropped, Steve could have little complaint that he was receiving less work. If John had contracted Steve to 25 hours per week, then Steve could have worked overtime (at an agreed rate which could be the normal pay rate) when there was work and still have been within his contracted hours once the downturn arrived. It is always necessary to consider the probability of a worse period of business when setting up contracts, agreements and policies. Likewise, if Steve was aware, before handing in his notice, that only SSP would be paid then there would be no nasty surprises for either party later on.
Another possibility would have been to put Steve on short-time working or even lay him off for a short period of time. If he had given Steve a contract that allowed for these without pay (although he will be probably liable to pay Guarantee pay (up to £140 per week)) then this may have overcome this, hopefully, short-term problem.
It is a sad fact that friendly relationships often turn sour once work/ money are involved but a fact nonetheless. Having the relevant paperwork before you need it may seem untrustworthy or extreme but, in my opinion, it’s the best way to keep the relationship as healthy as it was at the start.
Most business owners aren’t knowledgeable in Employment laws and most don’t seem to want to know but it really can make the difference between having a happy, productive workforce that are a credit to your business and the opposite. It takes real skill, or luck, to keep a company with unhappy staff in profit.
by Richard Cuff
31st October 2018
In all businesses there are periods of famine and feast. If you haven’t experienced this yet then you will. When the inevitable happens, and you are faced with a drop in demand then there are many options available to you. The most obvious probably being cutting costs. The biggest cost to many businesses is its staff but this can be very tricky in most cases. We will return to this in detail later. Cutting costs can be carried out elsewhere in the businesses, for example by switching suppliers or negotiating better prices with them.
Your own pricing also needs to be looked at. Would a price increase help to pay the wages or maybe a price decrease would bring in more customers. These need to be considered and will likely give rise to many more questions such as “What do my competitors charge?”, “Are their products/ services better/ worse than ours?”, “Do our customers pay more for our better level of service etc?”, “Are we too cheap? (there is such a thing, by the way)”. A bit of customer research should help answer many of these questions but, ideally, you would already know them as this type of information gathering should already happen regularly. When starting a business it is impossible to do everything that a large, established business can do e.g. customer feedback and research. Don’t even try. Concentrate on the most important tasks and do them well. There are, however, some important things that can really help out in the future and won’t cost much time, effort or money to put in place.
Returning to the point regarding your staff and how to reduce their costs in a downturn. There is an option known as ‘Laying-off’ staff whereby you are able to tell your staff that there is not enough work and so they are not required to attend. This is designed to allow an employer to temporarily reduce their staffing costs by sending staff home or reducing their hours (short-time working). The bad news is that there is no automatic right for an employer to do this, it must be contained within the employees’ contracts. It would be possible to amend their current contracts to include this (as an alternative to redundancy) but many employees will view this as a detriment and are unlikely to agree to the change. Employees may not be willing to sign an amendment to contract that includes a period without pay which is beyond their control so it would be reasonable to include some quite specific terms e.g. “for no more than 1 month in any calendar year”. You could agree a one-off period of lay-off (without amending the contract ) e.g. for 2 weeks until business picks up again. Of course, it is likely to be much easier to gain agreement if this clause is included in an initial contract than at the point at which it is needed.
Staff whom are laid-off may be are able to claim statutory guarantee pay from the employer which is capped at five days in any three month period. A day’s pay is also capped, at £28.
If the downturn is sufficiently bad then you may need to consider redundancy.
Once you have laid-off any staff it would be very beneficial to both parties to keep them up to date with any developments and how likely it is to continue.
If the downturn is sufficiently bad then you may need to consider redundancy. Staff laid-off for a substantial amount of time (four consecutive weeks or six weeks in a thirteen week period) can claim redundancy.
If you have any queries about any of this then please give us a call or message us (below).....ideally before you need to need to use any of these options
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