Small businesses are at risk of collapsing due to soaring business costs, an expert has warned, prompting concerns about how HR might allay employee worries.
Alan Thomas, UK CEO at Simply Business, issued the warning to Britain’s SME (small and medium enterprises) following the release of the latest consumer price inflation figures for July, published by the Office for National Statistics (ONS).
Businesses across the UK continue to be impacted by rising inflation, an increase in cost of living and a looming recession, which is having a significant impact on the hiring of new employees.
Concern surrounding rising energy prices also continue to grow. Thomas explained that, although the energy price caps do not apply to businesses directly, millions of small business owners are still experiencing increased energy bills at a time when costs are rising in most operational areas. Simultaneously, consumer purchasing power is going down as Brits cut back on non-essential spending, harming the books of SME owners, he said.
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“Rising fuel and energy prices are putting over half of UK small businesses at risk of collapse, with rising costs representing the single greatest threat to their survival”, said Thomas.
“As a result, three in five (59%) small business owners are calling on the government to review or reduce the energy price cap.
“We know small business owners have been left with little choice but to implement survival tactics. Half (49%) will be raising prices, 48% are halting new hires and two in five (40%) are putting expansion plans on hold. We’ve also seen over 20,000 small business owners apply for our £25,000 Business Boost grant – which speaks volumes to the financial pressure SMEs are facing right now.”
Separate to Thomas’s comments, data from the Association of Chartered Certified Accountants (ACCA) found that just over a tenth (12%) of UK SMEs are expecting to have more people on the payroll in the next 12 months, a sharp decline from earlier this year in March (37%)
Thomas concluded: “Accounting for over 99% of all businesses and contributing trillions of pounds towards the economy, the government has to acknowledge the vital role small businesses will play in our collective recovery. And while it’s encouraging to see that SME confidence is improving as we emerge from the pandemic, ultimately, for our economy to bounce back as quickly as possible, we need to support our small businesses to do the same.”
Worrying time for staff
The news of the pressure faced by the country’s SMEs is certain to create high anxiety for thousands of staff, who will undoubtedly be heavily distracted by the thought that this could lead to pay freezes, pay cuts and even job losses. And when it comes to maintaining productivity and keeping morale high among employees during difficult times, HR leaders certainly have their work cut out for them.
Lucy Heskins, Marketing Director at Career Cake, previously told HR Grapevine she believes that employees can be kept engaged as long as bosses are transparent and honest as possible.
“Be as open and as honest as you can be,” she said.
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“You don’t always need to hide everything and absorb the pressure all by yourself. If you’re transparent with your people you may be surprised by how they deal with such a challenging situation.
“Of course, people are complex, and different people will react in different ways, but keep the communication channels open, talk about it and ensure even this part of the employee experience has a plan driving it.”
What if redundancies are necessary?
One way to ease the financial strain on a business on the brink of collapse is staff redundancies – another process wrought with stress and anxiety for both employees and the HR teams overseeing the process.
On its website, the Chartered Management Institute (CMI) offers insight from Paul Holcroft, Associate Director at Croner, who advises firms on their HR policies – part of which covers redundancy packages. He said that honesty and clarity are the components of successful support.
“Being made redundant can be an incredibly distressing time, so it is essential that employers maintain regular dialogue with affected staff,” Holcroft said.
“Given the complexity of a redundancy procedure, employers should provide individuals with a clear explanation of their rights and a timeframe for when decisions will be made. This reduces any unnecessary stress and ill feeling among the workforce. Employees with a minimum of two years’ service are eligible for a reasonable amount of time off to look for new work or to arrange training for future employment.”
On its website, Begbies Traynor Group, the UK’s leading Corporate Rescue and Recovery practice, explained what HR should be aware of when it comes to staff pay rights during an administration process.
“If your company employs more than 20 members of staff, you need to make sure that you follow the procedures laid down for collective redundancies, otherwise they may become eligible for a ‘protective payment,” the firm explained.
“Your company is required to meet the minimum consultation periods with regards to employee representatives and trade unions, and if these requirements have not been adhered to your staff can claim via an employment tribunal.
“If some employees were made redundant during the administration process, and have worked for you for a continuous period of two years or more, they may be able to claim redundancy pay from the National Insurance Fund.
“How much they receive depends on their age and length of employment, and there’s a maximum cap of 20 years on their length of service.”