Two Important Insurance Policies Businesses Think They Have (But usually do NOT have)

It is a legal requirement for any company that employees staff to hold employer’s liability insurance, and no doubt there will be numerous other policies you hold as a business owner. But do they cover every area for which you need protection?

For example, do they cover the effects of cyber-crime? Are you covered for the cost of acquiring cover staff if someone is off work due to an injury? If it happened at work and was due to negligence, your employee liability cover might kick in, but what if it happened outside of work? If you are a sole trader who does not need employee liability cover, what would happen if you had an accident and suffered injury yourself?

Traditional insurance policies rarely include all these eventualities. Fortunately, you can still get the cover you need through specialist insurance policies. Cyber risk and key worker injury insurance plans are available to all businesses, whatever their size.

How to Cope with the Effects of Cyber Crime

Most organisations have no option but to rely heavily on IT that can be adversely affected by viruses or hacking. It is a sad fact that despite all efforts at protection, breaches of data security and successful cyber attacks are still happening in the small and medium business community, as well as in major companies and private sector bodies. The effects can be wide ranging and devastating, from financial penalties and specific extra costs, to loss of business and reputation.

The only way for you to have true peace of mind about this is to cover all potential risks with specialist insurance.

How to Protect a Business from the Effects of Accidents

In a small business, losing a member of staff for a sickness period following an accident can make an enormous difference to productivity. Unless someone else can do the work, in extreme cases you may be unable to fulfil orders and get a reputation for letting customers down. Whether the accident occurred at work or in the employee’s own time, there may well be heavy costs that are not covered by your liability insurance.

With the right insurance plan however, these costs can all be covered. And you could be able to arrange for the best health care and rehabilitation therapies, all covered by your insurance policy, to get your worker fit and back on the job in the shortest possible time. Everyone can benefit when this happens and it will do wonders for the morale of your whole team.

Your local bookkeepers are likely to have experience of these types of policies and will be able to direct you to a good insurance broker, so it’s worth getting their opinion on what you need and where to go for it.

What to Consider When Taking on Your First Employee

When your business has developed to the point where you need additional help, courage is needed for the next step. It has to be taken though, otherwise your business won’t be able to grow any more.

According to the government’s web page about taking on your first employees, there are seven things you need to take action on immediately. Actually you’ll find there is a lot more to it than that, but its list is a good starting point.

What Does the Government’s List Cover?

The first item is to decide how much you will pay. It has to be at least the National Living Wage (currently £7.20 per hour) unless the worker will be under the age of 25, when the National Minimum Wage applies for the appropriate age range. If you think the worker might be worth more than that, and you can afford it, you can decide on a higher starting figure, which will possibly attract more suitable candidates for the job, but take care not to set a precedent that you may not be able to keep up.

To comply with employment law, you may need to have Disclosure and Barring Service (DBS) checks of the criminal records of employees, depending on the nature of your business, and whether it involves security, children or other people who are vulnerable. You must also ensure that all applicants are not here illegally and have a right to work. And you should have employers’ liability insurance in place before employment starts.

If this is your first employee, in 2016 you probably won’t have to have a workplace pension in place yet, but from 2017 it will most likely be a requirement, so you need to start planning for it. You do need to register with HMRC as an employer.

Once you have your chosen employee, you have up to two months to issue a written statement of employment particulars or, if it applies, before the employee travels abroad for you. The statement should include the terms of the contract that automatically applies once a job offer of longer than 1 month has been issued and accepted.

What Else Should Be Considered?

Among the considerations not covered above is the legal minefield of recruitment. Great care must be taken to avoid an allegation of discrimination in any form, whether you advertise for free on social media or go the more expensive advertising routes or use a recruitment agency. You will also need to set up employment policies and procedures to cover things like bullying, staff grievances, holidays, sick pay and much more.

Even with only one employee, you must set up a payroll and make the appropriate contributions of tax and National Insurance and report on this to HMRC in real time. Your local bookkeepers will be able to help with this. In many cases, they often take over all the payroll activity so the business owner doesn’t need to worry about it. They’ll also be happy to advise and help on all the other aspects of taking on the first employee, including whether you could do with other professional help for anything.

A Useful Summary of Employment Law Changes April 2016

April 2016 sees the introduction of a number of changes to employment law. If you are an employer, read on for a summary.

The National Living Wage

The National Living Wage (NLW) was introduced on 1 April 2016. The new pay rate should not be confused with the National Minimum Wage (NMW) which still applies, or the Living Wage, which is a voluntary rate.

If you have employees aged 25 or over, the NLW will be payable without exception. This includes agency workers, casual labourers, apprentices who have finished their first year and agricultural workers. The rate is currently set at £7.20 per hour, and will be reviewed each year in April. We will be covering the National Living Wage in more detail next month.

Sick, Maternity, Paternity, Shared Parental and Adoption Pay Frozen

These statutory rates have all been frozen for 2016/17 at the rates at applied for 2015/16. For sick pay this is £88.45 per week. The others are £139.58, or if the normal weekly wage of the person involved is less than that, it is 90% of their normal earnings.

Employer National Insurance Contributions Abolished for Apprentices Under 25

From 6 April, employers no longer have to pay Class 1 National Insurance contributions on earnings that fall below the upper earnings limit for apprentices under 25 years of age.

Pensions Changes

With the introduction courtesy of the Pensions Act 2014 of the new state pension for anyone reaching the pension age from 6 April, the pension rules for employers have changed. There will be no more contracting out for defined-benefit schemes. Employers in the private sector can therefore increase employees’ pension contributions and reduce pension accrual.

Employment Tribunals

From 6 April, the rules of Procedure in the Employment Tribunals (Constitution and Rules of Procedure Regulations 2013) changed, so that there is a limit to the number of postponements that a party can be granted, unless the circumstances are exceptional. This is to avoid significant delays in decisions and related rising costs. What is more, from 6 April, increases in the limits on certain employment tribunal awards came into force. The limit on a week’s pay for calculating redundancy payments will increase from £475 to £479 and the maximum compensatory award for unfair dismissal will increase from £78.335 to £78,962 providing it is lower than the additional compensatory award cap of 52 weeks’ pay.

If you have any queries about these changes, bring them up with your local bookkeepers. They will be happy to guide you through the implications for your business, and just as earnest as you to ensure that you don’t fall foul of any of the new rules.

Are you Prepared for the New Rules on PSC Registers?

Business owners and employers know only too well that the 6^th of April every year always brings changes, and this year the date has not let us down.

One of the most far reaching changes this 6^th of April is the introduction of the need for the majority of UK companies and limited liability partnerships (LLPs) to start keeping a register of ‘people with significant control’.

The ‘PSC register’ as it will be known is a new statutory register which has been formulated to make sure the people that ultimately own and control a company are identified.

What Legislation is Behind the New Rules?

The rules come in on the back of the Small Enterprise and Employment Act 2015 and carry the objective of tackling money laundering, terrorist financing and tax evasion. This will be done by making public both the beneficial and legal ownership of a business.

A new part and two new schedules will be added to The Companies Act 2006 and provisions will be detailed in TheRegister of People with Significant Control Regulations 2016.

Who is Affected by the Registers?

Anyone who owns or controls over 25 per cent of a company’s shares of voting rights, or who has control in any other way over the management of a company, will need to appear on the PSC register. The register will not resemble the shareholder register, as the controlling individuals are not usually the same as the shareholders.

All UK companies will need to compile and maintain PSC registers, except publicly traded companies already subject to the disclosure requirements of DTR 5.

PSC registers are not allowed to be blank, even if the company is dormant or has no interests to register. Failure to comply will lead to criminal punishment.

What are the Key Dates to Note?

Registers must start being compiled from 6^th April 2016 and from 30^th June 2016, companies will be required to file their PSC registers with Companies House.

Once filed, the registers will be searchable online, although residential addresses will not be shown.

What Action Should I be Taking Now?

It is time to take the first step and identify who owns or controls your company indirectly and directly, and who will need to appear on the register. Check your register of members, articles of association or if applicable, your shareholders’ agreement where you should find the information you need.

If you feel you need any guidance in ensuring you are compliant with the new system and its statutory requirements, you could speak to your local bookkeepers in the first instance. They will be able to point you in the right direction concerning the compilation of your PSC register and if required, they will be able to manage the maintenance and filing of the register at Companies House.

Four Things to Consider Before Going it Alone with Self Employment

Self employment in the UK reached an all time high of 4.5 million in 2014. The benefits are many: freedom to work the hours you want; control your own earnings; take holidays when you wish; challenge yourself. But is it right for you?

If you are considering taking the plunge into working for yourself, here are four key things to think about before you do so:

Security

You will need to think about how comfortable you will be without a regular, guaranteed source of income. What would you do if you became ill or had an accident that prevented you from working? If things like this worry you, there are insurances you can take out for peace of mind that will cover you should you be unable to work in such circumstances.

Short term illnesses won’t be covered however, so if you were forced off work for a week with flu, you would need to ensure you had sufficient reserves to cover your income, as sickness pay does not exist for the self employed. Uncertainty as to where your next job will come from may also cause anxiety, as will unpaid leave such as holiday and perhaps maternity leave, so you will also need to consider how this will affect you.

Confidence

Working for yourself calls for excellent networking, negotiation and communication skills. You will need good levels of confidence in order to sell your services at a rate that you believe you are worth. You will need to possess the ability to make decisions and stand by them; you’ll need patience as well as understanding of how those you deal with need to work, and your presentation skills will need to be top notch so that prospective clients have the utmost faith in your abilities.

Research

Before you go it alone, you will need to make sure there is a market for your services. Start by searching online for others offering similar services that match your skill set. Can you match the quality of work they are showing in their portfolios? Are the rates they are charging in line with what you have in mind, and are they going to keep you afloat?

Post questions on forums or blogs to help you gauge whether there is potential for you in your chosen market, and look for industry related reports to see if there are any economic or seasonal trends you should be aware of.

Insurance

Aside from the accident and illness insurance, there are other insurances you will need to consider when going self employed.

Professional indemnity insurance will protect you should a claim be made against you for professional error, negligence or omissions. Public liability insurance will offer protection against third party property damage or bodily injury that you cause during the course of your work. If you receive business related visitors to your premises or visit clients’ premises, then this is a very important insurance to have.

Legal expenses insurance will provide you with the backing you need in the event of having to pursue a claim, for example for professional negligence or debt recovery.

If you are considering becoming self employed, an excellent first port of call for advice is your bookkeepers. They will be able to advise you on the tax and accounting related elements as well as get you set up with the right type of business structure.

Self employment can be exceptionally rewarding, but you do need to ensure it is the right thing for you. Good luck!

An Important Change to the Law on Contractual Penalties

On 4^th November 2015, judgements were made in the Supreme Court that have clarified the law on penalties in contracts. The decisions on two cases mark the first authoritative final appeal court decisions in 100 years that comprehensively address and amend the law surrounding contract penalties.

Most contracts, especially contracts of a commercial nature, feature clauses known as ‘liquidated damages’ clauses. In some cases, contract law will dictate that these clauses may amount to penalties. If this happens and a liquidated damages clause is deemed by a court to be a penalty, then it cannot be enforceable. It has therefore always been vital to make sure that clauses in contracts cannot be construed as penalties.

The Cases

In the first case, Cavendish Square Holding BV v Talal El Makdessi (The Group), the owners of The Group agreed to sell a share to Cavendish. The terms of the agreement provided that Mr Makdessi, one of the owners of The Group, was required to refrain from competing activities for several years and failure to comply would mean that he would no longer be entitled to two of the payments still due, and that he could be required to sell his remaining holding to Cavendish, for a sum ignoring any value for goodwill. The case went to trial due to Mr Makdessi having breached the restrictive covenants, however he alleged that the clauses constituted penalties and were therefore unenforceable.

The second case was ParkingEye v Beavis. ParkingEye was the manager of a retail park car park. Notices placed around the car park stated that exceeding the two hour free parking limit would lead to a charge of £85. Mr Beavis had exceed the limit by almost an hour, but refused to pay the charge, arguing that it was unenforceable and unfair under the Unfair Contract Terms in Consumer Contracts Regulations 1999.

Penalties, or not Penalties?

In both cases, however, the clauses were held to not be penalties.

Previously, the penalty rule was said to have become, in the words of Lord Sumption, “an ancient, haphazardly constructed edifice which has not weathered well”. The Supreme Court had to consider various options, including the abolition of the rule, or its extension to make it more widely applicable. Instead, it reformulated the test for a penalty, which now stands as: “Whether the impugned provision is a secondary obligation which imposes a detriment on the contract-breaker out of all proportion to any legitimate interest of the innocent party in the enforcement of the primary obligation.”

It is now much clearer to work out whether a clause counts as a penalty, which should spell good news for businesses entering into contracts.

A Guide to Keeping Employees Happy and Fulfilled

Finding good employees takes time and investment, so once you get the right people in your organisation, you really want to hold onto them.

Money may seem like the obvious lure in this respect, but this won’t always be possible, and in fact there are things that can mean a lot more to your staff. Here are some ideas to help you retain your star workforce.

Offer Incentives

As the saying goes, little things mean a lot, and outside of salary, bonuses and benefits, there is plenty that can go a long way to making employees feel content and valued. How about the odd duvet day, or an afternoon off? A fruit basket on a Friday, or a longer lunch break on a Monday? Use your imagination and see what you can come up with. The gift of time is often something that is much appreciated, and always remember that rested employees are productive employees.

Be Flexible

Employees value flexibility, it is a proven fact. Allowing home working, longer hours on one or more days a week that allow for a half day or day off and good old flexi-time where hours can be staggered to allow for getting the kids to school or starting the commute once the peak hours are over can go a long way to showing your appreciation of each staff member as an individual.

Provide a Sense of Purpose

The majority of people naturally seek out a purpose for their work and their life. If you feel that you are not really offering any benefits through your work, you can feel like there is little point in doing what you do. The feeling that you are contributing to a good cause makes your work and life feel worthwhile, so if you can give your staff a sense of feeling that they are really contributing towards something, it could make a remarkable difference to their motivation.

So how to do this? You need to give people a good reason to believe in your business. So for example you could promote the benefits of the work that you do and how it is appreciated; you could get involved in community or charity work and include your staff in your efforts, or adopt a positive environmental policy.

Always Listen

The final piece of advice is to always listen to what your employees have to say. Asking for input will, above anything else, make people feel valued. Ask for ideas about marketing the business, about how to get new customers and about how the company could run more efficiently. And don’t forget to ask them what they value from their employers!

If you need some help coming up with staff incentives, or working out how perks might affect your bottom line, speak to your bookkeepers for advice.