Posted on

Dirty Truth of Handshake Agreements (Part 2 )

Dodgy Business Owners

The realities of disgruntled employees (and former employees), dodgy business owners, or the enforcement of Australian employment laws and regulations, render a ‘handshake agreement’ as a potentially dangerous liability. Unfortunately, just a ‘handshake agreement’ does not protect you, your business or your employees.

Getting caught out at Fair Work

Incredibly, despite all the recent media examples of high profile cases including Australian wide franchise organisations, entire industry sectors, and celebrity chefs, being heavily and publicly fined by the Fair Work system, many business owners are still prepared to take a risk, ignore the rules, and hope they don’t get caught out.

It is our experience, and as evidenced in the annual statistics from Fair Work, ‘handshake’, scam, and simply ‘half-baked’ employment agreements and arrangements, are still widespread throughout Australian industries. In fact, we are pleasantly surprised and extremely impressed when a small to medium sized business already has robust workplace compliance in place before we start working with them, as it is simply not the norm.

[media animation=”none” image=”4545″]

Why SME’s have their fingers crossed?

While proper workplace compliance is the exception for most small to medium sized enterprises (SME’s), means that many businesses, business owners and employees are not adequately protected. However, when discussing these issues with business owners, we hear a range of attitudes and responses such as, the ever optimistic ‘she’ll be right’, the stressed hopeful ‘fingers crossed we don’t get caught’ to the more malevolent and defensive position of taking umbrage and display of arrogance.

And, in cases when an employer is trying to do the right thing by implementing workplace compliance essentials such as Letters of Appointment and policies, often he or she is confronted with push back and irrational (possibly suspect) indignation from their employees.

Old fashioned puts lives at risk

Recently we assisted a responsible client to issue updated Letters of Appointment and a few pertinent policies (such as Drug and Alcohol) to each of his 20 tradies. These employees were consigned to work on major new commercial construction works, where Workplace Health and Safety is paramount, the owner must comply to extensive site and contract terms and conditions, and the jobs for the whole team were put at risk if there are any compliance issues or breaches.

So, the business owner was understandably upset when at least one of the employees resigned saying he preferred to work the old-fashioned way with just a ‘handshake agreement’.

Resistance at substantial risk

However, despite even the loudest opinions of business owners, managers or employees, if any employer does not have proper workplace compliance in place, they are at immediate and substantial risk of:

  • the surprise visits, audits or scrutiny of the regulators, such as the ATO, Fair Work Ombudsman, ASIC or Worksafe
  • time consuming responses to employee claims, hearings and court appearances
  • the cost of defending your position, regardless of having been otherwise fair in your dealings
  • loss of sales and reputation
  • negative media attention
  • disruption to the company, and turnover of staff
  • hefty fines, penalties and/or jail terms
  • civil law suits
  • non-budgeted lump sum back payments or settlements
  • inability to properly address performance issues with employees

We believe that being haphazard or choosing to ignore Workplace Compliance is not worth the risk to you, your business or your employees. Look for our next article in which we discuss the good news and how workplace compliance is not too hard to achieve for any sized business.

[media image=”5″]
[media image=”1840″]

Ready to be a respected, appreciated and

lawful Employer?

CHECK OUT OUR ONLINE STORE

OR

CONTACT US 

for your expert HR Support Services and Products

Posted on

Dirty Truth of Handshake Agreements (Part 1)

Can’t be bothered with the employer paperwork?

A ‘handshake agreement’ between you the employer, and employees is very convenient. A deal is done, a flat rate is agreed, and rigmarole is kept to a minimum. It is no fuss, no cost and you haven’t had to prepare and exchange formal employment contracts, fill out and approve timesheets, or administer and manage inconvenient filing systems.

Payroll isn’t an employment contract

You may even set up a quick and standard payment through the weekly transactions and call it ‘payroll’, pay some tax, and make superannuation contributions. The beauty of a good ‘old fashioned’ ‘handshake agreement’ is that it lets you get on and run your company, whilst the employee gets on and does the job.

“But we had a deal” lamented the caller. ‘We had an agreement” he kept saying over and over. This business owner was clearly distraught, angry and scared.  He was asking me if I could help him somehow reduce the back payment that was being claimed by a former, and very disgruntled, employee. The claim was for approximately $7,000.

Compliance Works

Disgruntled mates have no loyalty

Some handshake agreements are even more convenient, with cash in hand, no tax, no superannuation, no time sheets and no paperwork whatsoever. In the very best examples, handshake agreements represent trust, loyalty, collaboration and true blue Aussie mateship; and, yes, we agree, that sounds like a wonderful and mature way to do business!

The ‘handshake agreement’ between this business owner and his employee was simple, and both were agreeable to it at the time. He would pay a flat hourly rate of $20.00 to the employee who would work at least 38 hours a week driving his commercial vehicles.  For several years, he kept his word, and the employee kept hers.  He was absolutely furious that this now former employee had reneged on their agreement, had ‘dobbed him in’ and had ‘betrayed him’.

The follow-on effect

Basically, while there maybe a few convenient advantages, there are far too many downsides of verbal arrangements and ‘handshake agreements’ between an employer and employee. Such informal agreements may assume an aberration of trust, integrity and fairness between the employer and the employees. They also may rely upon the vagaries of memory, nebulous details, and, two completely different perspectives and circumstances that inevitably change over time.

Although an unbudgeted $7,000 is a lot of money for a small business, the real issue was that at least another 20 employees (including his existing workforce) had the same verbal ‘handshake agreement’ with the owner. And of course, by the graciousness of the former employee, the existing employees had all been made aware of her claim and their potential entitlements.

Most of these 20 employees were due back payments of more than $20,000 each. Also, by this stage, the Fair Work Ombudsman had been notified, so potential fines and other penalties were a real possibility. Unfortunately, summing the back payments and entitlements due, the business owner was facing potential bankruptcy of his business.  

This is not an exceptional call nor story, it is typical of what we hear every week. Look for our next article Part 2 Dodgy Business Owners in which we discuss the true risks of ‘handshake agreements’.

To be a more respected, appreciated and lawful employer,

go to our HR ONLINE STORE or

CONTACT US for expert

HR Help and Products 

[media image=”5″]
Posted on

Warning Signs of Trouble

Warning Signs of Trouble banner

The bookkeeper or office manager usually notices the trouble first! With the automation of bookkeeping systems such as MYOB and Xero, bookkeepers are now spending less time uploading banking transactions so could be spending more time providing better reports to their clients.

Often a business owner or manager is struggling with an issue within their business especially when it involves conflict on any level.  As conflict situations are usually hazed by emotion, it usually results a reaction of procrastination, avoidance or denial.  However, the breakthrough point, to see through the emotion of a situation, can be when the facts and right information is simply revealed.

[media alignment=”center” animation=”none” link=”https://mygotohub.com/wp-content/uploads/2016/07/Warning-Signs-Checklist-BusinessEmbassy.pdf” image=”3204″ width=”600″]
[block_title title=”The Bookkeeper is the Key”][/block_title]

A bookkeeper can provide that key information which may unlock the stalwart stress or blinding barrier to success in a business.

Not only do bookkeepers process critical financial information, they may sit inside a company and hear or see what is going on.  Whether it be anecdotal or quantified evidence, a bookkeeper is often privy to the good, bad and ugly of the operations, administration and management of a business.

[block_title title=”Aha! There is a Problem”][/block_title]

Having a good working relationship with the owner and armed with evidential information, a bookkeeper may at least show the owner/manager the relevant information, and explain what it means in terms of the business issues.  At worst, the discussion and data may get the ball rolling as a thought starter or it may even provide the ‘aha revelation’ that solves a critical problem for the owner/manager.

[textbar title=”Not sure how to start the conversation with an owner?” button_title=”Call 08 9278 2552″ button_link=”tel:+61892782552″ icon=”steadysets-icon-type”]
[block_title title=”Why do bookkeepers matter?”][/block_title]

Bookkeepers may also sense if the owner/manager is out of his or her depth. Understanding how to help the owner/manager can be as easily as understanding what some of the key triggers might be and then when and where to get good advice.

If you find your business is answering yes to multiple questions in a category, or if your company answers yes to more than 10 items in the checklist, your company can resolve the issues before there is big trouble. Save your company from legal disputes, fraud or a review by the Fair Work Commission by getting in touch with our experts.

[block_title title=”Our Experts Manage the Problems for You”][/block_title]

Business Embassy has Your Go To Experts for fixing the issue before bigger trouble develops.  We can

[media animation=”none” image=”3186″]
Posted on

Why Do You Need a Budget?

Why do I need a budget? Business Embassy answers

Recently a client rebuked to me “Kath, stop telling me I need a budget, I need a forecast, I need these things to run my business.”  So I said, “Well, you are right. You don’t need a budget or forecast or any of those things to run a business”.  And then I went on to say, “However, let me put it this way, I strongly suggest that you use a budget, a forecast and those sort of things to run your business better”.

[block_title title=”How to Measure Profit Margins & Performance”][/block_title]

My client has been conducting a successful business for over five years and on the surface it seemed like it was buzzing. Clients wanted more, staff were dedicated and the owner was creative, innovative and relaxed.

However, when I first starting working with the owner and his business, it became quickly evident that he also was struggling with cash flow especially when it came to paying quarterly BAS and other lump sum tax payments.  A few more conversations and it was apparent that his staff were frustrated with lack of positive feedback, guidance and direction from the owner.  They each complained that the owner didn’t trust them or value their individual contributions to his business, and they didn’t have budgets, nor did they know how much they could spend on capital improvements

On the financial side, the owner knew his profit margin had dramatically shrunk over the past two years, and that his supplier costs had gone up but hadn’t factored that into any flow on impact into his own product pricing – he hadn’t increased his prices for over two years. He also knew that utilities bills had also increased substantially over that period of time as had salary and wages.

[block_title title=”The Budget as a Management Tool”][/block_title]

Business Embassy actively worked with the owner on a number of different aspects of his business. We streamlined his bookkeeping and clarified roles/functions; set up weekly team leader meeting in which the owner would give updates, discuss his ideas, and agree to upcoming priorities.

We also set up meetings with each of the managers so they had the opportunity to dialogue directly with the owner and engage in two way communications. At times, we would be part of those meetings and sometimes we had to step in for the owner when he wasn’t available. This meant that the momentum was kept up and the team leaders were encouraged and supported.

[block_title title=”Costs and Opportunities for Growth”][/block_title]

We sat down with the accountant and bookkeeper to set up and obtain fundamental budget and costing information and reports. This information enabled the team leaders to cost the products and to manage their operational costs. Until now, the product line had not been costed – ever, to take into account the actual costs of production per item

We guided the owner through discussions with employees who were not performing, and assisted the decision making and implementation process for bringing in new staff or letting some go.

After six months of our working with the owner, we reviewed the financial numbers.  Whilst we had been told the business was at capacity when we started working with the owner, it was clear that the specific improvements we introduced delivered a 20% increase in revenue and substantial positive impact on the profit margin.  The cash flow was now smooth and there was cash in the bank sitting ready and allocated for future payments.

The business is now ready for the next step – and that is, to expand and double its capacity.  As the business mentors, we’re working with the owner to achieve this future growth.

[media image=”3045″]

Business Embassy works quickly and efficiently. We have years of experience and practical templates to get the budget and cash-flow started.

[block_title inner_style_title=”only_text” title=”Contact Us to Get Started”]Ask us for a free quote[/block_title]
Posted on

Why did the minimum wage increase?

Each year the federal Fair Work Commission determines if the minimum wages need to be increased. The Commission adjusts wages to keep up with the impact of financial changes that are occurring in the Australian economy. The Commission reviews cases put forward by the industry representatives, including the employer associations and the unions. It takes into account key factors, including changes in the Consumer Price Index (CPI).

[block_title title=”What types of jobs are affected?”][/block_title]

Any job that is paid on the Award rates will be directly impacted. This includes apprentices, casuals, full-time, and part-time employees who are paid on Award rates. Overtime and other penalty rates will also change.

What happens if an employer does not raise the wage rates of affected employees?

If an employer does not increase the wages of those being paid on the Award rates, they could be severely penalised by the Fair Work Commission with an order to pay, plus heavy fines and possible jail. Also, the employees may make a successful claim for back payment later down the track, which could be years later and a lot of money for the employer.

How do I measure the total cost of the wage increase in my business?

Well, the wage increase must be applied to your total wages bill for those on Award rates. It will impact superannuation amounts as a flow-on effect, and any accruals such as annual leave or long service leave balances which are sitting on your books as a current liability.

We recommend your employees take their leave when it falls due and for employers to work with your employees to keep your annual leave liabilities as low as you can.

What can a business do to offset the added expense of high wages?

How to offset the added expense is a tough question. Many companies add the increase into their pricing of their products and services. For example, the price of menu items may go up in restaurants.

The best solution is to use this opportunity to review the business for opportunities to save money, control costs and improve profit. The announcement of the minimum wage increase is a good time to check that your inventory, suppliers’ contracts and overhead costs are fair and cost effective.

[media alignment=”center” animation=”none” image=”1893″ width=”800″]
[block_title title=”Dealing with the Minimum Wage Increase”][/block_title]

Why does Business Embassy want to help businesses deal with the wage increase?

Business Embassy wants to help you apply the increase appropriately. With the extra pressure on your operating costs of your business, we want to help you ensure your employees still feel secure in their jobs.  We are Your Go To Experts to help you manage your labor costs effectively. Don’t hesitate to give us a call. We offer a free, confidential 30-minute telephone conversation and quote.