Legislation that shouldn’t keep retailers awake at night

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At a recent speaking engagement I spoke about current legislation that, some of my retail clients' inform me - keeps them awake at night! 

During my talk I went on to discuss my views way to solve these issues and reduce stress.

Firstly let's look at what are the major legislations affecting retailers?

National Living Wage / National Minimum Wage

• When the National Living Wage (NLW) was introduced in 2015 the promise was that it would be £9 by 2020.  Weaker than expected economic growth has seen this figure revised to £8.56 by 2020.  At 40 hours per week this is a little short of £18,000 and for many of my clients this concerns them as to how they will remain competitive.
• Not only does the NLW affect low earners but it also has the knock on effect to those earning above NLW as they see their wage differentiation erode and they will expect pay rises.

What can be done to solve these?

• Cut opening times / operate split shifts for staff / Put prices up / Cut staff perks
• Those options are negative solutions that negatively affect staff / customers, my preferred solution is to use sales training for retail staff to help them offer a better customer service and encourage greater level of sale conversions. In most retail employees would cover these increased costs if they could upsell by £5 per hour.
• In addition to  technology will deliver greater efficiencies to reduce labour costs where possible, freeing up staff to deliver even better customer service.
• One thing for sure is poor performing team members should not be tolerated, as the rate rises there really is no room to carry team members its not fair on you, other team members and customers that ultimately pay through profit margins.

Auto enrolment

• 2017 saw the majority of employers move to Auto enrolment (AE), the majority of my clients believed that their employees would opt out of AE, in reality very few have and this is the whole point of AE, people are inherently lazy and by the time they get round to dealing with it they are used to paying the extra payments and live with it.
• This year sees the employer contribution rise to 2% and 3% next year and its not just the hard cost of AE it’s the management time it takes to mange that adds costs.  If an employee opts out then you have to automatically opt them back in three years later and if you don’t penalties will loom.

What can be done to solve these?

I very much doubt it will stop at 3% I imagine this will sneak up to 5% in the coming years. So what can be done to reduce this burden on retailers?

• Consider employing staff under the age of 22, AE only kicks in for employees over 22.
• Consider more part time staff, employees must be opted in when they earn over £10,000.
• Use the 3 month rule, if your employees breach the £10,000 equivalent salary in any pay period you need to automatically enrol them, however there is a three month rule that allows you to review salary within three months an if it drops back to below £10,000 you do not need to enrol.  This is very useful for spikes in busy periods such as Christmas.

I would recommend hiring a payroll bureau to take the burdens of AE and payroll off your hands and allow retailers to spend more time on their business.

Making Tax Digital

• More red tape is coming for businesses with turnover over the VAT registration limit operating under the sole trader and partnership business structures.  As of 1 April 2019 these businesses will be required to make additional quarterly reporting over and above the normal VAT returns.
• Businesses that are not already using good accounting software will find it very time consuming or costly to meet these requirements.

What can be done to solve these?

• If you haven’t got an accounting software package capable of dealing with Making Tax Digital then it would be best to make a start now to get started.
• I have been working with Xero accounting software since 2010 back when it was referred to as “cloud accounting” now for many of my clients it is the only accounting software. Xero have been working with HMRC to deliver a product that will seamlessly link to HMRC to allow compliance with Making Tax Digital.