Welcome to the February 2009 Newsletter from Connolly Accountants Ltd

Amid ongoing concerns about the economy, business groups have called for further measures to help UK firms weather the storm, including a proposed delay to forthcoming legislation which could cost small firms up to £800m a year. The calls came as the Bank of England made a further cut in interest rates, bringing them to an all-time low of 1%.

Meanwhile, Chancellor Alistair Darling has confirmed that he will present his second Budget statement to the House of Commons on Wednesday 22 April - the latest date since Labour came to power in 1997. Economists are speculating that the Chancellor will revise his forecasts for economic growth, and more measures aimed at reviving the economy are also expected.

However, despite the current climate and rising levels of unemployment, recent research suggests that many small firms are planning to retain valued staff during the recession. This month's newsletter includes some essential tips and advice on dealing with staffing issues during a downturn.

'Further measures needed' to help small businesses

Business groups are urging the Government to bring in further measures to help UK firms during the current economic downturn.

According to research conducted by the Federation of Small Businesses (FSB), recent measures including a cut in VAT, bank lending guarantees and pledges on payment practices have had little effect. In all, 97% of businesses reported that the cut in VAT has had 'no impact' on their levels of trade.

Meanwhile, more than half of the 4,000 businesses surveyed revealed that trade has decreased in the last two months, while only 8% of firms are being offered the Enterprise Finance Guarantee by their banks. Many firms also reported that they are still experiencing problems with obtaining payment from both the public and private sectors.

The FSB is also warning that forthcoming regulations will place additional pressure on struggling businesses, and could cost firms up to £800m a year. The organisation is calling on the Government to consider each piece of legislation individually to determine whether it can be delayed.

New business legislation is currently introduced on two common commencement dates each year, in April and October. Some of the key legislation due to come into force this year includes an increase in the statutory holiday entitlement to 28 days, and an extension of flexible working rights to parents of children up to the age of 16. Any increases to the National Minimum Wage are also due to come into force on 1 October.

However, the Low Pay Commission recently confirmed that it will be delaying its recommendations for this year until 1 May, to allow the Commission access to two months of additional data, including the Bank of England’s Inflation Report, employment figures, GDP figures for the fourth quarter of 2008 and updates on average earnings.


Retaining key staff in an economic downturn

One unfortunate consequence of the economic downturn has been a sharp rise in levels of unemployment. In times of recession, are large-scale job losses inevitable, or are there some viable alternatives? And when redundancy is the only option, how can you protect the best interests of your business?

While redundancy may initially seem to be the fastest way of reducing overheads, it can involve many associated costs, from redundancy payments and potential legal disputes, to reductions in productivity and a loss of core skills and expertise.

Staff represent a significant investment for the small business owner, and considering the alternatives to redundancy could work in your business's favour in the long-term, helping you to reduce costs while retaining valuable employees. Some of the options to consider may include:

  • Freezing recruitment, overtime and pay
  • Introducing reduced hours and flexible working arrangements
  • Retraining and redeploying existing staff
  • Early retirement
  • Voluntary redundancy

Considering the alternatives to compulsory redundancy could save you money, and enable your business to respond more quickly when the economy begins to recover.

If there is no escaping the need for redundancies, the issue must be approached carefully. Employers are bound by a number of legal obligations and must follow the correct procedures when making redundancies. It is therefore essential to have in place strategies for managing redundancy that will minimise the impact on your business, and help your enterprise to move forward into more positive times.

For more detailed information and advice on retaining key staff and dealing with redundancies, visit our Hot Topics section.


ESSENTIAL TAX DATES AND DEADLINES

Click here for key tax deadlines for the coming month.


QUOTE OF THE MONTH

'Scrooge bosses who dock pay and take away holiday will add to their business woes by creating resentment among staff. Workers who have been prevented from working through no fault of their own should not have to foot the bill for the bad weather conditions.'
TUC General Secretary, Brendan Barber, urges employers to show lenience as February's heavy snow brings disruption to businesses throughout the UK.


WEBSITE OF THE MONTH

www.workingforhealth.gov.uk
Offers practical resources and advice for employers seeking to improve health and well-being in the workplace.


ON OUR WEBSITE

What's new in the world of business?
Visit our Hot Topics section, where you will find information on the latest business topics, including dealing with staffing issues in a time of recession.

Essential tax and financial information
For a host of useful tax and financial strategies, visit the 'Your Money' section of our website.

Small businesses urged to bid for Government contracts
Small firms are being urged to take advantage of thousands of lower-value public sector contracts by signing up to the Supply2.gov.uk portal.
Click here for the full story

Firms 'retaining talent' during downturn
Despite the recent surge in redundancies, retaining talented workers remains a top priority for small businesses, new research suggests.
Click here for the full story

Mixed reaction to interest rate cut
The Bank of England’s decision to cut interest rates for the fifth consecutive month has prompted a mixed reaction from several leading business groups.
Click here for the full story

Record number of taxpayers meet online filing deadline
Nearly six million taxpayers filed their self assessment tax returns online by the 31 January deadline, HM Revenue & Customs has revealed.
Click here for the full story

Increase in late filing penalties
On 1 February tougher penalties came into force for companies that file their accounts late at Companies House.
Click here for the full story