Zero hours to day 1 – Should your business be planning for changes to the law?Posted: Aug 20, 2024

In the run-up to the election, the current government made some very clear promises that could have quite an effect on your business finances.

Now the initial transition fuss has died down, what could all the promised changes to employment and other business-related laws, mean financially for your business? Here are some of the top agenda items as we see them but there is a lot to unpack, so we suggest you spend some time looking at some of the less headline worthy ones as well.

5 things the Government promised to do that could affect your business financially.

As always, we are not going to play the will they/won’t they game with government policy in this article. I appreciate that it has been a while since we saw a government change, but I think we all appreciate that history tells us an election promise, isn’t always government action. That said, there were some very strong changes touted around and many of them have since been re-affirmed in speeches and in the media. Still, things do change and, as we have already seen, the current Chancellor Rachel Reeves, doesn’t seem afraid to make decisions. So, the following is to be read with a ‘assuming this happens’ in front of every section rather than assuming that these are carved in stone.

So, with that proviso in place, here are 5 changes that were promised, how they could affect your business financially, and what you may want to consider doing now to plan for them.

Goodbye Zero Hours Contracts

There has been a lot of publicity about the plan to reform zero-hours contracts. The stated aim of this is to offer more security to workers following criticism that zero- hours contracts don’t offer the stability of regular income for employees. It sounds very much like reforms will include heavy restrictions on the use of zero-hours contracts or even banning them entirely and introducing a minimum guaranteed number of hours for employees.

Financially, businesses that rely heavily on zero-hours contracts, particularly in sectors like retail, hospitality, and care, could face increased costs. Sadly, these are also areas where things have been pretty tough recently. Permanent hours could mean more admin and, of course, the salary requirements that will go with permanent employees.

To prepare, I would suggest businesses should review their reliance on zero-hours contracts and run some scenarios to explore the cost of alternative staffing models based on a part-time or flexible contracts model.

Hello New National Minimum Wage Levels

There are a couple of things to consider here. Firstly, the promise to increase the national minimum and living wage rates in line with inflation. Secondly, there is an intention to abolish the age banding on minimum wage levels.

Financially speaking, it is clearly the sensible option to look at how this will affect your base cost for staffing. Minimum wage employment is prevalent in many industries and, for some an increase could result in a significant rise in costs.

Planning is going to involve making sure you fully understand the hit on costs. Don’t forget to factor in the age band differences. Some sectors, (care, logistics and retail for example), employ considerable numbers of 16 – 18 year olds. You may need to look at price adjustments, improved productivity, or cost-cutting measures in other areas to help absorb the additional wage costs. Remember to also evaluate your pay structures in relation to your marketplace though to ensure you remain competitive as an employer and retain staff if wage expectations rise.

Sick Pay From Day One

The government promised that statutory sick pay would be available from the first day of illness, rather than after the current three-day waiting period. The reasoning behind this was that it should reduce the number of workers who attend while ill due to financial pressure.

In terms of your finances, this one seems easy enough because there will probably be more staff absence, but it could actually be rather harder to anticipate. The variable here is that nobody can tell in advance what effect this will have on absenteeism.

To prepare you may want to run a few scenarios around staffing for illness should you need more temporary cover, also account for the cost of lost productivity and so forth. However, this is a strange one to estimate for a surprising reason. It is easy to jump to the conclusion that it could lead to more absenteeism, and it may well do. At the same time presenteeism, where people work despite being ill, is a costly phenomenon. Estimates suggest that it costs the UK economy between £27 billion and £29 billion annually. This is, arguably far more than absenteeism.

Tribunal Rights from Day 1

When it comes to polarising views, this is probably the top of the list. On the one hand, few people would disagree with the protection of worker's rights, on the other hand, there is a fear that it could be misused and result in a huge increase in false or malicious claims.

Financially, a tribunal claim can be devastating. There is the cost of solicitors, the internal administration, the drain on human resources, not to mention the stress it can cause everyone involved. Many cases are resolved out of court just to avoid these issues.

Planning for the eventuality of a tribunal claim is more about paving the ground now than being ready for it should it happen. Now would be a good time to review your processes, disciplinary procedures, onboarding, training for your teams in discriminatory behaviours and so forth. The better your employment and HR process is, the less likely a claim will go to mediation or tribunal. Prevention is the best, and lowest cost, medicine here.

Flexible Working as a Right

The government have laid out plans to make flexible working a default option. That would mean allowing employees to request flexible working arrangements from day one.

The financial implications of flexible working are mostly around the cost of equipment and support. In many cases, offering flexible working can lead to higher employee satisfaction and retention. It may also require investments in technology and infrastructure though to support remote working and flexible hours.

If you don’t already offer flexible working, and it is a viable option for your business, you may well want to take the advance guard on this and look into it now. There are actually many positives to it and, despite the initial cost of supporting the new working practices, it could open up new employee options and actually reduce costs for premises and so forth.

Whether they do or whether they don’t, do the cashflow!

I know we talk about cashflow a lot in these articles, but we do that for a reason. When you look at the five possible changes in our list you can see the damage to your financial wellbeing they could cause. Forewarned really is forearmed so we always suggest checking your cashflow forecast and being honest about the numbers.

If you think your business is in financial difficulty and could be heading for insolvency, call us at your local office now and take a look at our survival guides and the help for directors section on our website. We are here to help, and your first consultation is free. The most important thing is to take action so we can find the right solution for you.

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