New figures from the Federation of Small Businesses (FSB) show that sickness absence costs small businesses on average £1,500 per year.

Long term sickness absence does not affect the smallest of businesses frequently, but when it does it has a big impact and the costs can be high. The FSB’s ‘Voice of Small Business’ survey panel shows that on average small businesses only experience 2.4 days sickness absence per employee each year – much lower than the national average 7.7 days per employee – 25 per cent said that they experienced no sickness absence at all and 81 per cent said that they were not at all affected by long-term sickness absence.

However, in the last 12 months sickness absence cost firms on average £1,500, but for nine per cent it cost more than £5,000. So it is important that the Government does more to help with the costs of sickness absence in the smallest firms.

Currently, some small businesses can feel confused by the Percentage Threshold Scheme – the current system used to calculate how much SSP an employer can claim back. This means that many small businesses either have to spend time doing difficult calculations or they have to spend money on buying in help.

With 40 per cent of small business employers claiming that dealing with holiday entitlement and sickness absence was one of the most difficult aspects of employment law, the FSB believes that recovery needs to be simplified so micro firms can reclaim all SSP costs more easily to stop them from being hampered at such a difficult time.

The FSB is calling on the Government to introduce a small employer’s relief for all firms with an annual National Insurance Contributions bill of less than £45,000 to recover SSP. This relief would be like that used for reclaiming statutory maternity pay and would use the same calculations. As a result, it would ease the administrative burden, as well as helping businesses manage sickness absence better.

Small firms care about their staff and want to invest in their health where they can. However, Government must understand the pressures small firms are under, and that this is one pressure among many. This needs to be recognised within the soon to be published independent review into sickness absence.

It will also need to recognise that small firms are not able to cope with an increase in the burden of responsibility or an increase in regulation, but that by better supporting small businesses, they could be able to improve the way that they manage sickness absence.

The Government should look at improving the way the Fit Note is used by making it electronic and increasing the training that GPs are given on how to use it.

Small businesses also need better access to free occupational health advice either through GPs or via the national occupational health phone line to make this issue easier to manage.

John Walker, national chairman, Federation of Small Businesses, said:

“Small firms act like a tight knit family and value the contribution their staff bring to the business. And research shows that staff in smaller firms are more often committed and loyal. But sickness absence is one of the most complex pieces of employment law they have to deal with. It can also be costly with small businesses paying around £1,500 over the past 12months. The Government must provide a small employers relief for statutory sick pay in the same way they do for statutory maternity pay so those small businesses that experience a member of staff on long-term sickness absence, are not hampered and are given the support they need.”

Proposals to charge small firms for ‘material’ faults found during inspections by the Health and Safety Executive (HSE) could damage relationships and may be seen as a way to raise revenue rather than improving compliance, according to the Federation of Small Businesses (FSB).

 

The HSE has proposed to extend its current systems of cost recovery to include a fee for intervention where an inspector will charge for the inspection and any subsequent actions when a material fault has been found. The HSE estimates that for an inspection that results in a letter, the cost to business could be at least £750.

 

For a small or micro business, a bill of £750 or more for a material fault could be extremely damaging especially during difficult economic times. The proposal currently states that micro firms will in general receive the same level of fees as large businesses. This will disproportionally affect micro firms as fees of this level will have a greater affect on the ability of the business to function and grow.

 

The FSB is concerned that small firms may view the proposal as a revenue generating exercise which could damage the HSE’s relationship with business. Worryingly, the proposal fails to clarify whether the money raised would go to the HSE or to the Treasury.  The FSB believes that if it goes to the HSE small firms could fear that their inspection has been influenced by the need to raise money – especially as the context for this consultation is a 35 per cent budget cut to the HSE.

 

It is important that businesses have a good working relationship with the HSE to allow them to ask for help and support to ensure they achieve compliance. With the possibility of a hefty fee over their heads they may be less likely to want to ask for help and compliance may suffer.

 

Furthermore, those businesses that wish to challenge the result of their inspection may have to cover the whole costs of the dispute if their complaint is not upheld. The FSB is concerned that many businesses will feel pressured to pay the fees and not appeal even if they have just cause due to the potentially large and undefined costs of a dispute process.

 

John Walker, national chairman, Federation of Small Businesses, said: “The FSB has a real concern about these proposals as they stand. Not only could they add to the fear that many small businesses have about health and safety regulation, but could have a serious impact on their relationship with the inspector, which if positive can help compliance to the benefit of the business and society.

“£750 is a hefty fee for small and micro businesses especially during difficult economic times. Most small businesses do not have the same resources that larger firms have to buy-in expert help and yet they are required to be experts in a wide range of complicated regulations. Instead of penalising them with large bills, the HSE should be there to help and support small firms to be compliant. For many small firms this proposal will be seen as anti-growth.”

 

The responsibilities that come with running a business may seem somewhat daunting at the start, but there are a number of insurance policies that can help you protect yourself and your business.

Running your own business may be an exciting and profitable enterprise, but along with the rewards come a number of responsibilities. And no matter how careful you may be, one slip could end up costing you and your company a fortune.

The growth in ‘no win, no fee’ lawyers means that more people are heading for litigation if they have suffered harm, and can put the blame on to a business. As most cases don’t go to court – they are settled by mutual agreement – there are few figures for the numbers of cases but, says the Association of British Insurers, they run into the tens of thousands each year.

Essentially, says Tim Lazenby, managing director of FSB Insurance Services at Towergate Riskline, you need to both legal and asset protection. “You build up your levels of protection as your business grows – there are certain policies you need to start with, but as the money starts to come in, it’s all about transferring the risk [from your business to the insurer].

Asset protection

Every small business will have an asset worth protecting, whether it’s your stock, your computer, or a large factory. The key policies you need to consider are:

Vehicle insurance: If you run vehicles, you have to have insurance, it’s the law. But it’s relatively easy to get yourself covered, and even businesses can spread the cost over a year. Check though that you won’t be charged interest if you want to pay monthly – what may look like the cheapest headline rate can swiftly come up costly if the premium is loaded. If you lease your vehicle, some providers will include insurance as part of the cost of the lease. And if you use it to carry your tools or equipment, make sure you empty them out at the end of each day – unless specified, your policy won’t cover anything left inside overnight.

Buildings insurance: If you own the property, you will definitely be responsible for insuring it, and it’s likely that if you lease premises, you’ll still need to do so – it’s usually a condition of the lease, or any finance secured on the property. The level of cover you need is not the value of the property, it’s the amount that it would cost to rebuild if it was completely destroyed – after all, the land would still be there, and that makes up a significant part of the value.

It’s virtually impossible for a layman to work out the rebuild cost; some insurance companies will work it out for you, or you may need to engage a surveyor to give you the information. But it’s worth getting it right – estimate too low, and you’ll be uninsured; too high and you’ll be paying too much for the premium.

Contents insurance: Whatever you keep within your premises – or anywhere else – should also be protected. While it’s unlikely to be a legal requirement, just think of how you would be able to run your business if you lost the tools you need to carry it out. It can be worthwhile to bundle the buildings and the contents insurance – in addition to any discounts you may get, it also protects you from items slipping through the net – those not covered by either policy. If you run your business from home, check your home insurance policy covers you – many don’t and you may need to look into getting extra cover.

Legal protection

Small business insurance policies can help you in the event of making a claim, but they don’t absolve you of responsibility. “Small businesses have a responsibility to their staff, their customers and their suppliers – if you don’t comply with the rules and regulations, it’s not just a civil claim you could encounter, you could also be liable for criminal charges,” says Malcolm Tarling from the ABI.

Here are the business liability insurance policies SMEs need to consider:

Employers’ Liability Insurance: This is a legal requirement if you have employees, which is defined as someone who is working for you on your premises. It’s there to cover you if any employee claims for an injury or ill-health while working for you. This doesn’t necessarily just mean someone falling off a ladder or slipping on an icy surface; some of the biggest claims have arisen from problems nobody knew about at the time, such as exposure to asbestos or other harmful chemicals. And as a result, the claims can go back decades – because the evidence of harm may take some time to come up, it’s worth keeping a record of who your insurer is for any given period.

“It’s a strict liability cover, that’s for anyone who works under your instruction,” says Lazenby. “You must have it and you must display the policy in the workplace. The minimum cover you are required to have is £5 million, though most policies will automatically offer £19 million.”

Public Liability Insurance: Over £1 billion a year is paid out in public liability insurance claims, and many small businesses go out of business because they are not covered. A public liability insurance policy will protect you from claims from members of the public who visit your premises – so if you have visitors to your place of work, then this is a must. It will also cover you if you cause damage to a third-party property while carrying out your business.

Product Liability Insurance: If you manufacture, repair or adapt any products, then product liability insurance will protect you from any claims related to injury or damage as a result of a fault or flaw in the product. The price of a policy for this varies greatly, depending on the product in question – the greater the risk of the product, or the more damage it could do, the more expensive it will be.

Directors’ and Officers’ Insurance: Just because you run a limited company doesn’t mean that you are immune from any potential claims. “It’s one of the areas that few businessmen know about and the repercussions can be huge,” says Tarling. Company directors and officers must comply with over 200 areas of statutory liability under the various Companies Acts, and can face personal costs if they are found to have acted improperly. This cover provides insurance for those who have inadvertently acted outside the rules and face penalty.

Business Protection

While the recent swine flu outbreak has not – yet – had the disastrous impact on British businesses that some predicted, there are plenty of unforeseen events that could cause businesses to struggle.

There are some estimates that 80 per cent of businesses with no business continuity plan fold in the aftermath of a major disaster. And while this could be something along the lines of a national emergency such as a terrorist attack or health epidemic, it could just as easily be something closer to home, for example the incapacity of a key member of the business. Or it could be something as simple – yet damaging – as a strike leaving you out of contact with your customers.

Putting a plan in place can not only help you arrange procedures for dealing with emergencies; it also provides a step-by-step guide for individuals to follow when they may be finding it difficult to make decisions – giving them a route to follow will help them work through the crisis.

“By developing a simple plan, a business continuity plan, you can protect your business to ensure that no matter what disaster strikes you are prepared and “Business as usual” is the only thing your customers and suppliers see,” says Colin Ive from SME Continuity.

Your first step, according to the Contingency Planning and Disaster Recovery Guide, is to prepare a list of all the potentially serious events that could happen. This doesn’t necessarily mean listing all the disasters that could befall you, but looking at the issues that would affect your business. So instead of listing swine flu, ebola or any other illness, the list would include something along the lines of staff shortages or key person unavailability.

For each potential issue, you need to come up with a process to follow – the key people involved, any suppliers that need to be contacted, a list of contractors who may be able to support you and, vitally, any insurance policies you can claim on.

While business insurance won’t be able to completely prevent any effects of a disaster, it can help to mitigate any costs you may incur. Key Man Insurance can provide a cash injection into a business in the event of the untimely death or incapacity of a specified member of staff. The funds can be used to offset any loss of revenue caused by that person’s absence, or to recruit or train a new person in that position.
If your business is hit hard, and has to stop trading for a short period, Business Interruption insurance can help to tide you over. It’s a short term solution for a few weeks and is there specifically for if you have to stop trading due to factors outside your control – it doesn’t cover a downturn in trading conditions.

If the emergency is a bit closer to home, public liability insurance and employers’ liability insurance will protect you from claims for issues that arise on your premises. We live in a culture of litigation and if an injury or damage could be found to be your responsibility, then expect a hefty bill.

Costs

For all types of cover, the cost of the insurance will depend on the business you are in, and your and your company’s claims experience. For example, an office based business will play less than a firm supplying parts to the airline industry.

Lazenby, who represents a broker, says that independent advice is vital for small businesses. “There are niche products available for specific businesses, which may be difficult to find, and only a specialist will be able to ensure you have exactly the cover you need.

The British Insurance Brokers’ Association (BIBA) has responded with support to the FSA consultation paper for the new Employers’ Liability Centralised Database, operated by the Employers Liability Tracing Office (ELTO)

The new proposals, set out in the consultation, which closed on the 14 September, are designed to help employees trace old insurance records more easily if they suffer from injury or disease caused at work and cannot trace a former employers policy, where the employer has ceased trading or is untraceable.

Peter Staddon, BIBA head of technical services, said: “BIBA strongly believes the best result for consumer protection would be to have one single tracing office run by the insurance industry”.

BIBA expects insurance brokers to have to change their current practices in order to comply with the new requirements. It depends on the final new regulations, but BIBA anticipates that insurance brokers will have to source their customer’s Employer Reference Number at point of sale.

Staddon concluded: “We believe that supplying the ERN will create a system that makes it much easier and more successful when tracing Employers’ Liability Insurance (ELI) records, which is vitally important at a time when people are suffering from a disease”.

Bad things happen. It’s a fact of life. But with a little preparation, businesses can mitigate some of the impact.

There are some estimates that 80 per cent of businesses with no business continuity plan fold in the aftermath of a major disaster. And while this could be something along the lines of a national emergency such as a terrorist attack or health epidemic, it could just as easily be something closer to home, for example the incapacity of a key member of the business. Or it could be something as simple – yet damaging – as a strike leaving you out of contact with your customers.

Putting a plan in place can not only help you arrange procedures for dealing with emergencies; it also provides a step-by-step guide for individuals to follow when they may be finding it difficult to make decisions – giving them a route to follow will help them work through the crisis.

“By developing a simple plan, a business continuity plan, you can protect your business to ensure that no matter what disaster strikes you are prepared and “Business as usual” is the only thing your customers and suppliers see,” says Colin Ive from SME Continuity.

Your first step, according to the Contingency Planning and Disaster Recovery Guide, is to prepare a list of all the potentially serious events that could happen. This doesn’t necessarily mean listing all the disasters that could befall you, but looking at the issues that would affect your business. So instead of listing swine flu, ebola or any other illness, the list would include something along the lines of staff shortages or key person unavailability.

For each potential issue, you need to come up with a process to follow – the key people involved, any suppliers that need to be contacted, a list of contractors who may be able to support you and, vitally, any insurance policies you can claim on.

While business insurance won’t be able to completely prevent any effects of a disaster, it can help to mitigate any costs you may incur. Key Man Insurance can provide a cash injection into a business in the event of the untimely death or incapacity of a specified member of staff. The funds can be used to offset any loss of revenue caused by that person’s absence, or to recruit or train a new person in that position.
If your business is hit hard, and has to stop trading for a short period, Business Interruption insurance can help to tide you over. It’s a short term solution for a few weeks and is there specifically for if you have to stop trading due to factors outside your control – it doesn’t cover a downturn in trading conditions.

If the emergency is a bit closer to home, public liability insurance and employers’ liability insurance will protect you from claims for issues that arise on your premises. We live in a culture of litigation and if an injury or damage could be found to be your responsibility, then expect a hefty bill.