The 6th December pre-Budget Report (PBR) contained few surprises for the small-business sector. As expected, education emerged as a key priority. There are no short-term fixes, but any success in this area will be of huge benefit to business – there is mounting concern about the lack of basic skills among job applicants.
One of the big PBR stories as far as the SME sector is concerned related to a change that didn’t occur. Business representative groups had expressed hope that the Chancellor would take steps to reduce the complexity of the tax system, and that he would cut the rate of corporation tax businesses pay. These changes weren’t forthcoming.
Among the measures that were announced, those likely to impact on SMEs include the following:
- an increase of 1.25p per litre in fuel duty.
- a fast-track system to help small companies protect their trade marks.
- a clampdown on businesses paying less than the minimum wage rate.
- changes to the way managed-service companies are taxed (full rates of employed tax and NI will now be payable)
- a tightening of VAT record-keeping requirements for both buyer and seller when a business is sold.
The Chancellor also confirmed that a new Construction Industry Scheme (CIS) will take effect in April next year. The revised CIS is intended to reduce the regulatory burden on those using it, while continuing to ensure that all tax obligations are complied with.
For more information, you can visit the PBR 2006 section of the Treasury website
Q: Are there any forthcoming legal changes I need to be aware of?
A: There will always be a few regulatory changes in the pipeline, so it pays to keep an eye on developments at all times. The main changes that will affect most businesses over the coming months include:
- New rules, to be announced in January, that will apply to Romanian and Bulgarian citizens wishing to work in the UK when their countries join the EU in 2007
- the extension from 6 April 2007 of maternity and adoption leave from six months to nine months
- the extension, also from April 6 2007, of the right to request flexible working to cover carers of elderly or sick relatives
- a widening of the scope of rules requiring employees to inform and consult with their employees – all businesses with 100 or more employees will be included from 6 April 2007
- the introduction of a smoking ban in almost all workplaces from 1 July 2007.
Meetings are a crucial part of most working schedules, but there are few of us who feel we make the most of them. New research from Bibby Financial Services puts the problem in perspective. As many as 42 per cent of entrepreneurs think that more than half the time they spend in meetings is unproductive.
Alarmingly, Bibby calculates the aggregate cost of all this dead time as being worth £25 million each year. The most commonly cited downfalls for meetings are:
- failing to stick to the agenda
- colleagues being unprepared
- disruptions from outside the meeting room.
So what’s the solution? It sounds obvious, but it’s a matter of holding fewer meetings. Owners and senior managers need to have the confidence not to get bogged down in internal meetings.
Instead, you should delegate well and let people get on with things. Your time is better spent focusing on the bigger picture rather than micro-managing everything in an endless round of meetings.
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Managing your time
It’s well established that a great deal more men than women set up in business. According to recent research commissioned by business-support group Prowess, 8.1 per cent of men were involved in running their own business last year, compared with 3.8 per cent of women. (The gap is even greater among young people – male entrepreneurship is four times higher than female in the 18-24 age bracket.)
However, the Prowess research makes the point that it’s important to look beyond these average figures. When you break the figures down it becomes clear that there is a lot of vibrant female entrepreneurial activity out there. For example, black women of African origin are four and a half times more likely than white women to be entrepreneurs. And women in rural areas are almost twice as likely to be entrepreneurs as those in urban areas.
The rising level of female enterprise in rural areas challenges a range of stereotypes. Many women setting up in business in the countryside are turning to technology to develop business ideas to fill the gaps that have emerged with the decline of the agricultural sector. It turns out that twice as many women as men set up new businesses based around the newest of technologies (ie less than one year old).
Despite its length (1,300 sections no less), one of the main aims of the new Companies Act, which became law in November, is to streamline the rules and procedures involved in setting up and running a business.
The Government estimates that the Act will lead to savings for the small-business sector totalling £100m. This will be down to efficiencies created by changes such as:
- the removal of the requirement for companies to appoint a company secretary or to hold AGMs
- the introduction of new model articles for companies that better reflect the way modern businesses operate
- easing the financial rules for companies purchasing their own shares.
You should note, however, that the Act also introduces some new obligations, particularly for company directors. While the key duty of the directors to act in the shareholders’ interest is restated, the Act notes that attention should also be paid to the interests of employees, suppliers, consumers and the environment.
In addition, the Act introduces a new criminal offence of knowingly including false or misleading details in an audit report.
The Act’s provisions will be introduced gradually, but all will be in effect by October 2008.
Find out more about Company Directors’ responsibilities
Your monthly at-a-glance answers to frequently asked questions. This month we look at smoking in the workplace, bullying and employee retention.
Q: What will the forthcoming smoking ban mean for my business?
A: Regulations have yet to be finalised, but from mid-2007 businesses in England will have to ensure that all indoor areas are smoke-free. Certain workplaces will be exempt, such as those that are also someone’s home (including residential care homes, for example, or offshore oil platforms).
However, if a workplace is affected by the regulations, then it covers the entire premises, so setting aside a designated smoking area will no longer be an option. Many small-business premises are already smoke-free inside, but when the new regulations come into force the issue of setting rules for employees “popping outside” for a cigarette break is likely to increase in profile.
Q: How can I stamp out bullying in my workplace?
A: Your first step should be to ensure all employees are aware that bullying won’t be tolerated and will be considered a significant disciplinary matter. You need to take all reports of bullying seriously, and deal with them under your discipline and grievance procedures. But you also need to be proactive in looking for signs of bullying. A recent survey highlighted that bullying takes many shapes and forms. Almost half of respondents highlighted blocked promotions and threats to job security as instances of bullying.
Q: What are the keys to encouraging employee loyalty?
A: A small business’s employees are almost always its key resource, so you should work hard to hang on to good people. It’s not easy. Recent research shows that while eight out of ten workers expect to be in the same job in 12 months’ time, half will have signed up with a recruitment agency over the past year to keep an eye out for better jobs. To avoid losing your best workers, pay attention to factors employees reported as being of highest value to them, such as regular pay rises, a friendly working environment and challenging work.
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Motivating your employees
Most small companies have benefited for many years from a scheme that allows them to produce less detailed accounts and directors’ reports each year, and that removes the requirement for them to have their accounts audited.
Changes to the rules, which took effect on November 8, have widened the pool of companies eligible for this less-stringent system. Previously, a wide range of businesses in the financial services sector were excluded, but this exclusion has now been lifted for certain categories of business.
The specific categories of financial services companies that can now take advantage of the small-business requirements include: investment management companies; personal investment companies; securities and futures companies; and mortgage lenders and intermediaries.
For a full list of business categories covered by the new regulations, and for more information about reporting and accounting rules that apply to small companies, visit the Small Business Accounting and Audit page of the DTI website.
A new survey has revealed a startling level of complacency among small businesses about the need to draw up contingency plans to keep things running smoothly in the event of a fire, flood or explosion. While most owner-managers acknowledge that such a disaster would risk the survival of their business, 50 per cent have no formal procedures in place setting out what needs to be done if a disaster occurs.
More worryingly, 48 per cent of these unprepared businesses said that putting this kind of business-continuity plan in place had never even crossed their mind, on the basis that the chance of a disaster affecting them was too remote.
Disaster isn’t nearly as remote a risk as it might seem. Almost one in five businesses is affected by major disruption every year, so business continuity should be an integral part of the management of your business.
It doesn’t need to be a big commitment. There are small steps you can take that would make a big difference in the event of a disaster, such as backing up your computers to an offsite location, or setting up a mutual agreement with another business to share facilities if either of you is badly disrupted.
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IT disaster prevention