Award winning Cumbrian accountancy firm, Lamont Pridmore, offers advice for hospitality businesses facing a multi-billion-pound cost burden from employment reforms, while the industry presses the Government for VAT relief.
Crackdowns on zero hours contracts and shifts under the Employments Rights Act have posed new challenges for the hospitality sector.
Recently, a Government analysis estimated the annual cost to employers of these reforms could amount to as much as £2.9 billion per year.
These findings are reflected in a recent NIQ hospitality monitor which stated that ongoing cost pressures contributed to 1,839 hospitality outlets closing between March and June – equivalent to 20 per day.
While reforms are intended to ensure workers are paid fairly, ending a ‘one-sided flexibility,’ some business groups argue the costs to employers are disproportionate as they must now offer a permanent contract reflecting regular hours worked over a referral period, alongside reasonable notice for changes to assigned shifts.
Where shifts are cancelled, cut or moved last minute, employers need to provide proportionate financial compensation.
Graham Lamont, Chief Executive of Lamont Pridmore says: “The hospitality industry is the backbone of our community and we need to do all we can to protect it. These companies often rely on zero hours workers for the added flexibility, so they are likely to feel the squeeze most acutely.”
Aside from the changes to zero hours contracts, employers are carrying the concurrent weight of rising National Minimum Wage and hikes to National Insurance.
The #VATsTheProblem campaign continues to gain momentum, with 320,000+ people having signed a petition led by sector bodies and prominent chefs – all calling for a new rate of 10 per cent VAT for hospitality businesses.
Graham says: “I’ve proudly signed both the open letter and the petition, as I believe a cut to VAT rates will provide a much-needed injection of capital for the hospitality sector struggling to absorb cost pressures.
“The high employment costs and tightening of zero hours contracts can act as a catalyst for insolvency, especially where firms are already dealing with a reduced business confidence and persistent inflation costs.”
While Graham is optimistic a VAT rate cut could be the answer a lot of hospitality firms are looking for, he offers some practical advice to weather the current cost pressures.
“Focusing on the impacts of zero hours contract reforms, businesses need to evaluate where reference periods of an employee’s working hours fall within.
“If it was to capture a busy summer with a lot of hours worked, employers might end up guaranteeing a lot of hours that just aren’t available.
“With wages and National Insurance at all-time highs, my advice is to start forecasting demand and work rotas around it to make sure the hours are there for staff.”
Graham also highlights how having a workforce made up of many different contract types – including full-time, part-time staff and seasonal fixed-term employees – can make a business flexible and resilient.
His core message is for employers to move towards “planned flexibility” models of working, which can be accomplished by better forecasting and stronger employee engagement.
He concludes: “Reaching out to an accountant can help your business model the financial impact and improve workforce planning. We want to help shield hospitality venues, the cornerstone of our community, by protecting their profitability while remaining compliant.”
Lamont Pridmore’s new Employment Rights guide gives an executive summary of the changes to be implemented: www.lamontpridmore.co.uk
