The Five Most Common Tax Pitfalls That Small Business Owners Should Avoid

At a time of deep economic recession, small businesses must manage their accounting and tax functions efficiently and smoothly to avoid any unnecessary costs like SARS penalties.

Making elementary mistakes with a small company’s tax affairs can have disastrous and costly effects for a firm’s ability to survive these harsh times.

In this article, we have identified five tax hazards that many small businesses, especially newly established ones, overlook. This situation is because the owners of these companies often do not have tax expertise, or they are unwilling to use a professional to ensure that their tax affairs are shipshape.

Avoid these common tax pitfalls when managing your company’s affairs…

There are five common tax pitfalls that owners of small businesses should look out for and avoid.

These hazards include three value added tax (VAT) issues, one provisional tax matter, and the fifth item deals with the tax implications for owners of small businesses when they draw money from their company.

Failing to avoid these pitfalls can cost small businesses dearly in terms of time, stress, and money, including fines. The cost of sorting out these hazards can even destroy small businesses.

  1. Failure to register for VAT

The first issue is that many owners of small businesses fail to realise that the VAT Act requires that they register for VAT. This requirement becomes necessary once a business has made taxable supplies exceeding R1 million during twelve consecutive months.

Once a small business reaches this threshold, then they need to charge their clients VAT for the goods or services sold. “When small businesses manage their tax affairs, they often neglect to do this because they are not aware of this requirement,” Jean du Toit, head of tax technical for Tax Consulting South Africa.

If it comes to light that a company failed to register for VAT, then SARS could impose penalties, including understatement charges and late payment fines and interest. These penalties will be back dated to when a small company should have been accounting for VAT.

Small businesses can register for VAT with SARS by applying online, and the process is reasonably straightforward and quick but ask for professional help in any doubt.

For micro businesses, it may not initially be viable to register for VAT, as they may be mainly dealing with suppliers and clients of a similar size.

However, the larger a business grows, the more it would lose out on the opportunity to deduct input VAT that they pay over to VAT vendors that supply them with goods and services and so miss out on lower costs. Input VAT is the tax that a VAT vendor can claim back as a deduction from SARS. The output VAT is the tax that a VAT vendor levies on the supply of goods and services and then pays over this tax to SARS.

The advantage of registering for VAT is that it gives a company greater access to business opportunities, including tenders and contract, which usually require a company to have a VAT number.

The only way to rectify the lack of the required VAT registration was to apply for SARS’ Voluntary Disclosure Programme (VDP), Du Toit said. Such a VDP application could see SARS waive any penalties, but it would require the company to pay over the VAT due and interest on late payment of this tax. Ask your accountant to help with any VDP application.

A business can voluntarily register for VAT if over twelve months its income exceeded R50,000. Tertius Troost, a Mazars senior tax consultant, said it might benefit a small business to register voluntarily for VAT if they have many suppliers. But companies must know that there was a cost that went with complying with the VAT Act, he added.

2. Failure to obtain valid tax invoices

The second pitfall relating to VAT was that small business owners often fail to secure valid tax invoices for their VAT input claims, Troost said. Input VAT should have a neutral impact on a company, but if SARS disallows specific claims, then the input VAT becomes a cost, and that will reduce a company’s profitability.

When a small company claimed input VAT from SARS, it was required to keep records, including specific invoices from their suppliers. “If a company’s administration is not up to scratch, they might not have these documents, or these documents may not meet SARS’ requirements as prescribed in the VAT Act. At that point, SARS won’t allow you to claim back your input VAT,” Du Toit added.

Ettiene Retief, FTR Tax and Corporate Administration partner, said that SARS usually focussed on the invoices a company received from its suppliers when reviewing VAT input claims.

The VAT Act specifies that the following details should appear on an invoice for any amount greater than R5000:

  1. The word “tax invoice” or “VAT invoice” or “invoice”,
  2. The name, address, and VAT registration number of the supplier,
  3. The name, address and, where the recipient is a registered vendor, the VAT registration number of the recipient,
  4. The unique number of the invoice, and
  5. An accurate description of the goods or services supplied, and the volume or quantity of goods or services provided.

For invoices of less than R5000, only the supplier’s information needs to be included on the invoice and not the recipient’s details. Here the supplier need not specify the quantity of goods or services supplied.

 3. Trying to claim input VAT for the wrong items

The third issue regarding VAT is that small companies often try to claim input VAT on entertainment, petrol, and rental of motor vehicles. But the VAT Act makes it clear that companies cannot claim these expenses for VAT purposes.

If a company bought milk, coffee, and sugar to offer to its clients when they visited, the company could not claim VAT on these items because SARS viewed these as entertainment costs, Retief said. “When I’m in my boardroom, I’m selling my time and the coffee is not part of what I’m selling,” he added. “However, if I own a coffee shop, then I can claim VAT on the coffee beans that I buy,” he added.

If SARS finds that a person or company claimed goods ineligible for VAT purposes, it will reject these claims. In addition, if SARS finds that a person or company has overstated their input VAT, then that means understatement penalties and interest would apply.

 4. Misunderstanding about income received in advance

The fourth common issue was that small businesses often forgot that income received in advance was taxable, Du Toit said.

A common area where companies required deposits was for major construction contracts, he added. An advance payment like this was immediately taxable in the hands of the recipient of that money. Retief said that an exception to this rule was when a company was paid a deposit as security.

This knowledge is vital for small businesses when they need to make their provisional tax submissions. SARS requires taxpayers to make these submissions twice a year in February and August.

Small companies had to include income received in advance in their provisional tax disclosure to SARS or face penalties.

5. Implications of drawing money from the business

The fifth prevalent tax issue of which small businesses are often unaware is the tax implications of drawing money from their company through interest-free loans or withdrawals that SARS would deem to be dividends or remuneration. This situation arises with small companies which have a sole director or owner, and he or she makes loans from the company to themselves.

Another problem is that small companies rarely establish a formal loan agreement between the company and the director.

If a company director takes a loan from the company without charging interest, then SARS would view that interest as a dividend in specie paid by the company to the director and the company would have to pay dividends tax on that amount.

Another way that directors of small companies try to avoid paying tax on their remuneration is to have their company issue them with a loan, instead of being paid a salary. “The company should classify the loan as a salary. What often happens is that the director never pays back the loan, or they pay it back slowly over many years to avoid paying income tax,” Du Toit said. “If SARS does a full audit of a company’s books and they see that in substance that loan is not a real loan but a salary, then the agency can reclassify that item, and there will be tax consequences such as penalties and interest,” he added.

Troost said that usually, the most tax-efficient way for a director or owner of a small company to withdraw money from their company was to receive a salary rather than to withdraw money as a dividend or to receive an interest-free loan.

Retief said that owners of small businesses often make withdrawals from their business by paying for personal items. But the problem was that the owner and the company are separate legal entities. Directors of small companies often used this means of withdrawing money from the business to avoid paying tax, he added. “With small businesses, the temptation is not to show a big salary because of the tax is payable on that money,” Retief said.

At the end of the financial year, the company puts payments for personal items through the director’s loan accounts. But it is often difficult to untangle all the transactions and split the personal items from the company transactions, Retief said.

Keep this list of common pitfalls in mind and ask your accountant for advice on your specific circumstances in any doubt.

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SMMEs: Preparing for the Second Wave

Covid-19 has forced the entire world to remodel how it operates, from the personal perspective to ways in which businesses operate.

Experts, including academics and government, have warned the nation of the possibility of a second wave of high infections. Research suggests that a national resurgence is most likely on the way and expected to hit by early 2021. A new trend in the resurgence is set to start and repeat every year around the same time going forward.

The national daily infection rate has decreased considerably in the recent past, but the country is far from listing the Covid-19 pandemic as a thing of the past. As mutters of a second wave increase, it’s only understandable that Small, Medium and Micro Enterprises (SMMEs) are also scrambling for cover.

“Forewarned is forearmed” (Samuel Shellabarger, Prince of Foxes)

The daily covid-19 infection rate has decreased considerably over the last month or so. South Africans have found a way to live with the risk of infections and have in the recent past become generally more active. This has increased the fear that there might be a second wave of high Covid-19 infection and mortality rate. Western Cape government, for example, has warned a resurgence is highly probable considering the second wave of mass infections sweeping across internationally.

Explaining why it is still important to be cautious against Covid-19 for the next few months, the National Institute for Communicable Diseases (NICD) warns that “Coronavirus is not going away any time soon”.

“We are seeing second waves in European countries three to four months after their first wave. We don’t know if this will happen in South Africa, but it is possible, and even likely. Also, we know that once you get Coronavirus you are not immune from it for life, and you could become re-infected in the future,” it says in a statement on its website.

SMMEs, like the citizens, have to protect themselves from the possible re-emergence of high numbers of infections, which have crippled a considerable number of them earlier this year.

Based on advice from a collective of experts, here are some tips for SMMEs looking to prepare for the possible second wave of high Covid-19 infection rates:

  1. General working conditions and workplace policies have to be reviewed

According to the Centres of Disease Control and Prevention in the US, the working conditions and policies must be reviewed in order to best assist companies in protecting themselves against the full blow of the virus. Companies are advised to “examine” working conditions and policies in order to protect employees, and ultimately themselves.

“When possible, use flexible worksites (e.g. telework) and flexible work hours (e.g. staggered shifts) to help establish policies and practices for social distancing (maintaining distance of approximately 6 feet or 2 meters) between employees and others, especially if social distancing is recommended by state and local health authorities,” said the organisation.

2. Consider remote working more as an option than a forced situation.

On the local front, Accelerate CEO, Ryan Ravens, recently spoke on a survey conducted on remote working due to Covid-19.

He told radio station Cape Talk, that “increasingly, it (remote working) works better for companies as well as employees. I think there has always been a resistance by our very traditional corporates because they felt employees would not be as efficient and/or wouldn’t deliver more, but I think that notation has been turned on its head. Employees have actually showed up and shown that they can work far better when working from home.”

3. Inventory and stock

Consider stocking up on supplies and raw material reasonably, knowing that replenishing them can’t be guaranteed ahead should the stricter lockdown regulations be reimplemented by government. The stockpiling process should be ideal to each business, considering aspects like expiration dates in certain goods, for example, and access to market. Careful management of the inventory is necessary.

 4. Insurance

The importance of having quality insurance in general can never be overstated, and the same thinking prevails in business. Policyholders are encouraged to relook at the fine print of their business insurance policies to refresh their memories and for better understanding, bearing in mind the unusual circumstances the world is operating in. Insurers on the other hand are encouraged to “pick-up the pace”. However, the global scourge is seen as a challenge that should motivate insurers to put customer-care first.

A jointly authored blog by Price Waterhouse Cooper’s global insurance advisory leader, Abhijit Mukhopadhyay, and leading practitioner in “customer experience”, John Jones, expounds on this narrative. The two expert authors express that “Policyholders will want to know their claims will be paid. But it doesn’t always work out that way — especially with a pandemic, which is not generally covered by insurance (except possibly through costly business continuity insurance). Customers are bound to be confused and anxious, and they need to feel that their questions and concerns are addressed with honesty and empathy.

5. Understand the seasonal cycle of business

Businesses prepare and operate with attention to their annual business cycles. They are advised to prepare knowing that the unidentified length of the possible viral resurgence might overlap their business season, i.e. quarters and other periodic demarcations of business.

6. Minimise spending

SMMEs are advised to minimise spending in order to have as much in the piggy bank as possible. Reserves will be critical in a period where there is minimal income. Careful budgeting could be the possible rabbit out of a hat for successful businesses during the dreaded possible re-emergence of stricter lockdown restrictions.

7. Get familiar with the government’s Covid-19 Relief Fund for SMMEs

This could be critical for SMMEs. Understanding the qualification process and benefits described by the Department of Small Business Development (DBSD) can be the determining factor between relief aided continuity and capitulation. The current amount given to businesses that qualified for the Covid-19 Relief has eclipsed R500 000, according to the department.

The department supposedly updates information related to the relief fund on its website for entrepreneurs to peruse, according to the set business classifications of the SMMEs.

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Six Tips for More Effective Online Meetings

Covid-19 continues to alter the fundamental ways we do business. While many organisations had already been partially conducting meetings online the pandemic has brought this practice into sharp focus and 86% of employed people now take part in an online meeting at least once a week. Furthermore, according to Forbes, from 2010-2020, there has been a 400% increase in the number of employees who work from home.

With meetings and even job interviews now largely being conducted online it’s important to ensure the message and purpose isn’t lost in the distractions of home life, bad connections, sound problems and any other number of possible hindrances. Here are six tips to make sure your online meetings are always a success.

“Meetings should be like salt – a spice sprinkled carefully to enhance a dish, not poured recklessly over every forkful. Too much salt destroys a dish. Too many meetings destroy morale and motivation” (Entrepreneur and author of “Rework”, Jason Fried)

While the capacity for digital meetings and interviews has been around for some time, they have only truly gained popularity this year. Covid-19 lock downs around the world have forced companies to make alternatives to their usual systems and digital meetings have become an everyday occurrence for most in the workplace. The question is, do they work as well as regular, face-to-face meetings and when it comes to interviewing for new appointees is there something being lost in the system?

In April, one of the world’s leading research and advisory companies Gartner conducted an in-depth analysis of hiring in the digital world and found that while the capacity for digital meetings and interviews to be as effective as real world arrangements does exist, they often are not as effective, because simple errors are made which decrease their efficiency.

Consequently, meetings that eat up time without achieving much are more common online. Participants can experience connectivity problems and communication delays. They can also face problems in holding the discussion in a structured manner, and multiple people can start speaking at the same time.

When it comes to interviewing potential employees, these problems can exacerbate an already tense scenario for the candidate thereby resulting in a less than ideal interview.

“There are several important strategies HR functions must use to effectively conduct virtual interviews so as to ensure a positive candidate experience and effective assessment by the hiring manager or other interviewers,” says Lauren Smith, vice president in the Gartner HR practice.

So just what can be done to make your online meetings and interviews more effective.

1. Invite as few people as possible

Researchers at one of Europe’s largest independent research organisations SINTEF stress that it is important to keep meetings as small as possible. Their work has led them to conclude that when meetings have more than twelve participants, most will be unable to speak, may disengage and will leave the meeting unsatisfied. Remember, the more participants, the shorter the time available for each to be an active part of the conversation.

2. Use video chat when possible

While our primary method of communication is our voice, one should never underestimate just how much is “said” non-verbally. Being able to see one another goes a long way to gaining trust and rapport with interviewees and meeting attendants and is also an important part of getting good data. According to research scientist Nils Brede Moe, it’s much easier to feel a human connection when you can see someone’s face, and it helps both of you read the situation and each other’s feelings better.

The person conducting the meeting is also better able to control the flow, and time issues if people can see these non-verbal cues.

3. Have a clear agenda and defined goals

Holding meetings with vague agendas is never a good idea, but this is even more true online. Structure is vitally important online so be sure to prepare a formal agenda with all the key issues to be discussed in the meeting and sort them according to your business needs. Also clearly mention what role you expect from each participant in the meeting and just how long the meeting will take. This agenda should be sent to each participant well in advance, so they are able to accurately prepare.

Setting a time limit for each agenda point will help to extract a lot more value in the limited time you have. If participants know a point only has ten minutes for discussion, they will stay focused and the meeting will not go off track.

4. Open the meeting room early

Most meetings begin punctually at the appointed time, but SINTEF suggests that the meeting room should rather be opened 15 minutes before the indicated start time so that participants are able to test their audio and video before the meeting starts. Participants who log on after the meeting commences quickly disrupt the flow and interaction of the meeting and everyone should be in place and ready to go at the appointed time.

5. Share notes and record the meetings

Given that employees are now conducting meetings from home and may therefore be distracted, or have sound or connection problems, it’s a great idea to simply record every meeting and send people links to the recording at the end. Some online meeting services have a record function built in, whereas others may require you to download an extra app such as Pio Smart Recorder or GoToMeeting.

Another good trick for the end of the meeting is to send each person a list of the action points identified for each agenda item along with the name of the person responsible for its delivery. This way everyone knows exactly where they stand and can look up the relevant areas that apply to them if necessary, on the recording.

6. Appoint a moderator

Whether conducting a panel interview or a meeting, chairing the discussion can be much harder online, particularly if not all participants have their video on. It is therefore a good idea to appoint a meeting moderator who will give people permission to speak and keep the conversation on topic.

The moderator should also be aware of the words they are using and attempt to be as clear and concise as possible. They should use people’s names when addressing them as it is not always clear who is being spoken to directly, and instructions should be repeated at the end of each agenda point to ensure everyone is on the same page.

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Leaving a Legacy: Ensure Your Business Survival with a Succession Plan

It is a sobering statistic that 70% of family businesses do not survive into the second generation – a significant loss considering the time, effort and investment required to start, manage, and grow a business in South Africa.

Ensuring your business can survive beyond the loss of an owner, a partner or another key individual requires a well-structured succession plan that unlocks business value not only in the long term but also in the immediate future.

“A leader’s lasting value is measured by succession.” (John C. Maxwell)

Succession planning is preparing for the future of your business, ensuring the people and resources are available for its ongoing success beyond the lifetime of the current key players. It is especially critical in small businesses where the loss of a key person can bring the business to a sudden halt.

A formal succession plan details exactly what happens if the owner or a partner or another key individual in the business is no longer there, for both expected and unexpected reasons. These reasons range from the sudden or unexpected death or disablement to a planned and expected exit, for example, due to retirement.

Some of the options for succession include grooming the owners’ children and heirs to take over the reins; training loyal employees to take over key roles; bringing in high level expertise from outside the company; or selling the stake in the business to family, to the other partners, to a loyal employee or a group of employees, or to an outside buyer.

Why is succession planning so important?

Succession planning is crucial to ensure the viability of the company over the long term, and to unlock many benefits in the short term.

A good succession plan can secure a business owner’s legacy, and their retirement or their family’s well-being, instead of the business simply becoming one of the estimated 70% of inherited businesses that don’t survive.

It also ensures that what happens after the loss of a key person is planned and structured, rather than forced on the business by circumstance or by the courts.

A clear and fair succession plan can also:

  1. Prevent confusion and uncertainty after a sudden and unexpected loss,
  2. Avoid family disharmony and conflict between heirs and employees,
  3. Allow for continuity and a smoother transition, reducing the impact on the business and its stakeholders
  4. Ensure that successors, whether a promoted employee, a newly appointed manager, or a son or daughter or another family member, or a buyer, are qualified, skilled, and groomed to take over
  5. Provide opportunities for employee career growth internally
  6. Ensure you can get fair value if selling the business or a stake in it
  7. Prevent the forced sale of assets to settle the estate.

How to plan

Succession planning involves a combination of financial planning, estate planning and wealth planning and therefore requires the expertise of qualified advisors including your accountant.

The details of a succession plan depend on a range of issues, such as the ownership structure of the business, whether succession involves handing over to the next generation or an employee or an outside buyer, and the unique financial and legal aspects of the business.

As just one example, many businesses are sold to family or staff who may not have cash up front, and this requires special planning, for example, staggered payments over time and a slower transition.

However, here are a few common characteristics of a successful succession plan:

  1. All stakeholders are included in the planning and decision-making process
  2. Suitable, practical and gives the best outcome from a family and business perspective
  3. Documents and puts in place formal mechanisms and clear procedures for governance, conflict, and dispute resolution
  4. Contains a short-term emergency plan for each key position
  5. Details a full long-term succession plan for each key position
  6. Considers the financial, estate duty and tax implications of the decisions
  7. Takes into account legal compliance and commercial and practical considerations
  8. Ensures continuity by providing essential liquidity through, for example, key man insurance, life insurance for the partners and contingency policies
  9. Creates a viable and sustainable business operation now and for the future through modernized business systems, clearly documented and automated processes, fully trained people, and accurate up-to-date financial data – all of which will add immense value to the business now and in future.

If you consider for a moment what your death or retirement could do to the business’ success and to your family’s livelihood, you will realize how important it is to put in place a well-structured succession plan.

It will ensure that your time, effort and investment to grow a business in South Africa is not lost in a statistic, but rather that your legacy lives on, surviving beyond the current key players into the next generation.

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Employee Health and Wellbeing: A Strategic Priority for COVID-19 and Beyond

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Employee health and wellbeing (HWB) is vital for a company to sustain itself during the lockdown. But making your employees’ HWB a strategic priority creates a competitive edge that will be crucial for success now and beyond COVID-19. Employee HWB not only delivers significant benefits, it also creates an opportunity to play a leadership role in our communities and in our country.

In this article, you will find a list of key focus areas revealed by recent research to assist companies to tap into all the benefits of employees’ HWB and discover which components of employee HWB work best for large and small companies in South Africa.

“It goes without saying that no company, small or large, can win over the long run without energized employees who believe in the mission and understand how to achieve it.” (Jack Welch, former CEO of GE)

The health and wellbeing (HWB) of employees has a substantial impact on business success and sustainability, and this has never been more pronounced than during the lockdown.

Employee HWB is vital for a company to sustain itself during the lockdown, but making your employees’ HWB a strategic priority creates a competitive edge that will be crucial for success now and beyond COVID-19.

Why is employee HWB a strategic priority?

Employee HWB delivers significant benefits, which are well-documented and widely-known. These benefits, some of which are listed below, provide a company with a competitive advantage in a very constrained economic environment.

Benefits of Employee HWB 

  • Decreased rates of illness and injury
  • Reduce direct costs, such as providing healthcare
  • Reduce indirect costs, such as absenteeism and reduced productivity
  • Enhanced recruitment and retention of healthy employees
  • Reduced absenteeism
  • Increased productivity
  • Improved employee morale
  • Improved employee loyalty
  • Improved employee resilience during organisational change
  • Improved employee motivation
  • Increased employee innovation
  • Positive impact on business performance
  • Achieved company objectives

“Most successful and innovative organisations today make employee health and wellbeing a key focus of their business strategies. It is not something to which they simply pay lip-service: they spend a lot of time, energy and money in developing workplaces that enhance wellness and consider those to be a crucial component of their organisational business strategies,” says Freeman Nomvalo, CEO of the South African Institute of Chartered Accountants (SAICA). “These companies would therefore probably be more resilient during the pandemic, as employees are able to remain productive due to a supportive workplace environment.”

Employee HWB also provides an opportunity to make a positive difference, playing a leadership role in our communities and in our country.

According to SAICA’s Health and Wellbeing Advisory Group (HWAG): “Measuring employee health and wellness provides an indication of the wellbeing of the organisation. It is also a direct indicator of the wellbeing of a country’s workforce, making health reporting a national priority and not just a corporate one. Health reporting can help organisations create and promote environments for healthy behaviours, which will extend not only to employees but also to their families. This can result in healthier workforces, as well as healthier cities and countries.”

“Such reporting also meets the government’s call to action for the private sector to partner with the public sector in responding to the challenge of NCDs [noncommunicable diseases]. This helps organisations fulfil their shared value and corporate citizenship obligations, and will have profound positive effects on individuals, companies and societies as a whole.”

So how can a company go about tapping into all these benefits of an employee HWB? As the saying goes: What is measured is managed…


NCDs

Non-communicable diseases or NCDs, also known as chronic diseases, include cardiovascular diseases (like heart attacks and stroke), cancers, chronic respiratory diseases (such as chronic obstructive pulmonary disease and asthma) and diabetes, and are responsible for a staggering 41 million deaths each year, equivalent to 71% of all deaths globally.  


What is measured is managed…

Reporting on employee health has largely been neglected, but this element of company reporting has never been more important than it is now.

HWAG believes that companies should report on the following components:

  • Occupational health and safety;
  • Provision of medical benefits for full-time workers;
  • A smoke-free workplace;
  • Mental wellness programme (e.g. Stress management, resiliency programmes, managing depression);
  • Employee assistance programme (EAP) access for counselling and intervention for those already at high risk (e.g. Stress, depression);
  • Family-friendly policies (e.g. Flexible work schedules or working remotely);
  • Access to healthy office design components based on special needs (e.g. Sit-stand desks in case of back pain);
  • Communal spaces where employees can eat, relax, interact with co-workers, or hold private conversations; and
  • Assessments of the health and wellness of its employees, such as a health risk assessment (HRA) survey or biometrics screening assessment or self-reported general health status of employees using a confidential survey or assessment tool.

This list of components also serves as a list of key focus areas. These components, many of which may have only received passing attention previously, may be prioritised and elevated as companies strive to ensure a safe and sustainable working environment for their employees during COVID-19 and beyond.

Integrating these components into the business is vital for sustaining the company and its employees.

Employee HWB: What works best?

A comprehensive survey conducted by HWAG was completed by 172 companies, of which more than 50% are involved in the financial sector, and approximately 70% had less than 500 employees.

What seems to work best for large companies are the core and more traditional issues, including occupational health and safety; medical benefits for full-time workers; having a dedicated person responsible for employee health and wellbeing; a smoke-free workplace; and communal spaces where employees can eat, relax, interact with co-workers or hold private conversations.

Programmes, policies and practices around a smoke-free workplace received the most positive response from smaller companies, followed by the same issues raised by larger companies: regulatory requirements and policies for occupational health and safety, as well as medical benefits for full-time workers.

The survey also points to room for improvement: the majority of companies do not believe it is necessary to get involved in the following areas at the moment: incentives for a healthy lifestyle, physical exercise, reduction of alcohol consumption, tobacco use cessation, sleep management, health coaching, health risk assessment, and the extension of available programmes to family members and other dependants. This is despite the fact that these areas are key to the management of NCDs, which poses a significant threat to workforce productivity.


Employee HWB Case Study

“As a small business, we work in a dynamic and fast-changing environment. We cannot afford to have dedicated departments for specific functions, and employ a staff complement with the ability to work across functions to ensure that we cover as much ground as possible. If any of our staff members is off sick, it translates to lost revenue. From a brief SAICA introduction to the topic, it was a no brainer that we needed to invest in the health and well-being of our employees.

The two main areas that our company decided to focus on was on what the employees eat and their physical wellbeing. The health and wellness programmes are championed by myself and my co-founder, as we are both sports fanatics. The company now provides a free, healthy lunch meal to our employees every single day. In addition, the company pays for the male employees to play indoor soccer twice a week. We also pay for our female employees’ gym membership at a local gym nearest to our offices.

The benefits of having healthy employees have translated into increased revenue and all-round happy employees.”
Mulalo Mammburu CA(SA), TiC and Mend


 

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Your SME and the Economy – Prepare for the Long Way Back

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The South African economy could take as long as seven years to return to the size of R5.1 trillion it was at the end of 2019 before Covid-19 and the national lockdown.

The most significant risk to the economic outlook is the precarious state of government finances, especially Eskom’s rising debt.

A slow recovery for the local economy is going to be “very negative” for unemployment, poverty and inequality.

Economists suggest that small businesses gear themselves for tough times, keep costs low, and ensure they are highly innovative. We give you critical insight into the future of the South African economy so you and your business can be prepared and ready for what experts forecast.

The South African economy could take as long as seven years to get back to the size of R5.1 trillion it was at the end of 2019 before Covid-19 and the national lockdown.

This forecast is according to Citadel chief economist Maarten Ackerman, who expressed this view during an interview.

Long way back

Christopher Loewald, South African Reserve Bank (SARB) head of economic research, told the Tax Indaba that it was going to take a long time to get back to a real activity level of 100% again.

During the same event, Ismail Momoniat, National Treasury Deputy Director-General for tax and financial sector policy, said that it wouldn’t be an easy road to get the South African economy back to its 2019 level.

“We need a Covid-19 vaccine, and we need to ensure that sufficient people get vaccinated. I think we need to be careful about talking about post-Covid. I think we are years away from that,” he added.

Advice for SMEs

Economists suggest that small businesses gear themselves for tough times, keep costs low, and ensure they are highly innovative.

“Small businesses need to be lean and mean. They need to have a buffer to get them through difficult times,” Ackerman said.

Every business needed to think carefully about how they expanded, he added.

Make your plans in the context of the forecasts we discuss below…

The local economy has contracted

This advice comes amid a local economy that has stagnated since 2015 and contracted for the past year, including a 51% contraction, on an annualised basis, in the second quarter because of the nationwide lockdown that started on March 27.

Sanisha Packirisamy, MMI Investments and Savings economist, said during an interview, that she was expecting the local economy to contract by 8.1% this year, followed by a muted rebound of 2% in 2021 when anticipated Eskom power cuts will constrain the economy.

Ackerman said that an 8% contraction of the local economy would be the biggest decline since 1920 when there was a 12% contraction.

A worrying sign

A worrying sign was that the outlook for fixed investment and household consumption, both key to the long-term economic health, were both bleak, Packirisamy added.

For 2022 and 2023, she is forecasting growth of about 1.5% for both years.

“We are stretched on the fiscal side, and confidence is extremely muted. We face policy uncertainty and slow structural reform. It is that combination of factors that makes it very difficult for us to grow faster,” she added.

Mild inflation outlook

The inflation outlook is positive.

Packirisamy is forecasting inflation to average 3.2% in 2020 and 3.8% in 2021 before rising to 4.5% in both 2022 and 2023.

Economists forecast that interest rates will stay low.

Packirisamy said that the SARB could cut interest rates further, but interest rates were likely to increase from the second half of 2021.

At the end of 2021, Packirisamy expected the prime interest rate to be 7.5%, and by the end of 2023, the prime interest rate maybe 8.5%.

Credit rating to fall even further

In March this year, Moody’s Investors Service cut the South African government’s credit rating to “junk” status or sub-investment grade, which is the grade that its two rivals, Fitch Ratings and S&P Global Ratings had the country on since April 2017.

“We are probably going to see more downgrades, and by 2023 the country’s credit rating will be two or three notches lower,” Ackerman said.

He said that the government was facing a fiscal crisis, and the only way for the South African state to avoid that was to embark on big expenditure cuts, but the state was baulking at doing that.

Public finances are dangerously overstretched

“Public finances are dangerously overstretched. Without urgent action…a debt crisis will follow,” the National Treasury said in July.

The government budget deficit, which is the amount by which revenue fails to fund expenditure, will widen to 15% during the fiscal year ending March 2021, according to Ackerman.

Then in the fiscal year ending March 2022, the budget deficit will recover to 10%, he expects.

In five to seven years, Ackerman forecasts that government debt will climb to 100% of GDP, he said. By comparison, the National Treasury estimates that national debt will reach 81.8% of GDP by the end of March 2021.

Unemployment rate to soar

According to Packirisamy, the unemployment rate would climb because South Africa was not growing fast enough to absorb the new people entering the labour force.

Ackerman predicts that the rate of unemployment would rise to 35% by 2023 from 30%.

South Africa needs growth of at least 3% before the unemployment rate declined, he added.

How to get out of the debt trap?

South Africa needs to get out of its debt trap by igniting economic growth. In the meantime, it needs to find international or other funding to plug the gap in the state budget.

There are fears that the state might force managers of pension funds to allocate a portion of their clients’ money to fund the running of the government and state-owned enterprises.

But Treasury’s Momoniat told the Tax Indaba that the state was not looking to put in place any prescribed asset regime.

Could an IMF bailout follow the loan?

In July, the International Monetary Fund (IMF) approved a US$4.3 billion loan to the South African government.

The state intends to borrow US$7 billion from multilateral finance institutions, including the IMF, the National Treasury said in early July.

There is a possibility that the South African government will be forced to go back to the IMF in the future for further debt in the form of a wider-ranging bailout.

“I think an IMF bailout would be very positive for markets, because it installs a bit of a policy anchor, and it forces the government to do things that it may not feel comfortable to do otherwise,” Packirisamy said.

About the value of the rand, Packirisamy said that she expected the rand would maintain its long-term depreciating bias because of South Africa’s high level of inflation when compared with its major trading partners and the deteriorating local economic fundamentals.

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How to Protect Yourself and Your Company after the Experian Data Leak

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Less than two months after the commencement of the Protection of Personal Information Act (POPIA), South Africa was affected by a massive data breach.

Experian, a consumer, business and credit information services agency, said on 19 August that it had “experienced a breach of data which has exposed some personal information of as many as 24 million South Africans, and 793,749 business entities, to a suspected fraudster”.

What does all of this mean for you or your company and how can you avoid becoming a victim?

“Cyber-Security is much more than a matter of IT.” (Stéphane Nappo, 2018 Global Chief Information Security Officer of the year)

According to official communications from Experian, a consumer, business and credit information services agency, an individual in South Africa claiming to represent a legitimate client fraudulently requested services from it and was simply given the  personal information of clients including cell phone numbers; home phone numbers; work phone numbers; employment details; and identity numbers. Information was also leaked for 793,749 business entities and included: names of the companies; contact details; VAT numbers; and banking details. Experian said that the data had then been placed on a third-party data sharing site on the internet, but added that subsequently that third party had “disabled the links” and that the data had “been removed” after Experian was successful in obtaining and executing an Anton Piller order. This does not, however, mean that the danger is over.

Steps to take to protect yourself and your business

While the breach has been reported to authorities, and South African banks have been working with Experian and the South African Banking Risk Centre (Sabric) to identify which of their customers may have been exposed to the breach and to protect their personal information, the investigation has not yet been concluded. As a result businesses are advised to take numerous steps to prevent any damage that may result from the leak.

The first thing to do is to simply not panic. Despite how bad it sounds the breach does have one very clear silver-lining.

“The compromise of personal information can create opportunities for criminals to impersonate you but does not guarantee access to your banking profile or accounts,” said CEO of the South African Banking Risk Information Centre (SABRIC), Nischal Mewalall.  “However, criminals can use this information to trick you into disclosing your confidential banking details.”

What this means is that you, and the staff who have access to your finances and accounts need to be extremely vigilant when it comes to dealing with phone calls from people claiming to be from banks and financial institutions, or who are eager to get additional details or sell you services that may require you to divulge any further personal information.

The Southern African Fraud Preventions Services (SAFPS) has advised companies and individuals to take the following precautionary measures:

  • Do not disclose personal information such as passwords and PINs when asked to do so by anyone via telephone, fax, text messages or even email.
  • Change your passwords regularly and never share them with anyone else.
  • Verify all requests for personal information and only provide it when there is a legitimate reason to do so.

Experian themselves take this advice further, suggesting that anyone who is afraid they may have been affected to “Visit their online bank and financial accounts, and set up any alert features they may have, if they have not already done so. This could help save some time and keep them notified of any unusual events when they occur”.

The company also recommends that everyone checks their credit report as regularly as possible.

“You can check your credit report for free once every twelve months by visiting AnnualCreditReport.com. Checking your credit report can help you identify any unusual activity, such as new accounts, new personal information or inquiries,” says Experian CEO, Brian Cassin.

Additionally, should you suspect that your identity has been compromised, notify your bank and apply immediately for a free Protective Registration listing with SAFPS. This service alerts SAFPS members, including banks and credit providers that your identity has been compromised and additional care must be taken to confirm they are transacting with the legitimate identity holder.

Consumers wanting to apply for a Protective Registration can email SAFPS at protection@safps.org.za.

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The Feasibility of a Freelancing Business in Uncertain Times

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In the difficult and uncertain times in which we are encapsulated at present with the Covid-19 pandemic, one wonders what steps one can take to ensure one’s financial stability and growth over the medium term ahead, at least. Our economy, and that of the world at large, has been brought to its knees, unemployment is rife, many people are losing their jobs, and businesses are shutting down daily while others are reducing their staff complement.

Being self-employed as a freelancer certainly is a valid option but take great care before racing full steam ahead. As is often the case, unfortunately, one comes up with what one believes is a great business idea, with visions of grandeur and dollar signs springing up, ultimately only to fail. This is often because new business owners or freelancers do not perform the very necessary research and a greatly needed feasibility study.

Business start-up planning has been extensively covered over the past twenty years and longer, and without understating its importance or re-inventing the wheel, perhaps it has been overplayed. Much training is available on the Internet, including templates and guidelines provided by banks and the SA Department of Trade and Industry. To start a freelancing business can be a challenge – and then some. Thus, following a business plan infrastructure with the use of a project planning tool is the best route to follow.

Why perform a feasibility study?

The feasibility study is a vitally important step in the well-known business planning process, not only pre start-up. In fact, it is the most important step because, if the business idea is not feasible, there is no point continuing with it. There are often more reasons for the business to fail than to succeed. Many renowned business analysts believe that only one in forty new businesses succeed and materialise in accordance with their original plan. Another good time for doing a feasibility study is when a business needs to be restructured to increase profitability, improve production, reduce production costs and overheads, increase sales/services income, expand the market reach, and many other valid reasons.

In the normal scheme of business planning, one deals with deciding on what type of business entity one wants to set up such as a Sole Trader, a Partnership, a Private Company, a Close Corporation, and then the drafting of various reports are needed in order to gauge the feasibility and to make the right decisions going forward.

What information do you need to prepare a feasibility study?

The list of matters to be decided and the necessary analyses needed follows, such as are usually covered in the typical business plan.

  • The services or products to be offered.
  • Establish the professional standards and qualifications required to operate as a freelancer in your field of expertise.
  • The equipment and tools needed.
  • Start-up expenses, including legal and business analysis services.
  • Initial capital requirements.
  • The target market to be accessed and establish whether there is space for you in it.
  • The economy relating to that market, current demand, future growth opportunities.
  • Determine what barriers exist at present which may hinder your success.
  • How best to promote your products or services.
  • Distribution channels and agencies.
  • Operational plan.
  • Legal environment and statutory requirements
  • Establish a system of record keeping
  • Bank services needed – a separate bank account for the business is strongly advised.
  • If staff need to be employed, establish the Human Resource policies and SARS requirements.
  • Do the costing of each product and service very accurately.
  • Calculate selling prices based on all costs plus mark up.
  • Establish the total you personally need to earn per month. When an hourly rate will be charged for your work, you will need to calculate your hourly rate.
  • Compare your prices to those pertaining to the freelance industry of your services.
  • Draft the projected financial plan, a detailed budget for twelve months.
  • Draft the projected cash flow for twelve months.
  • Draft a Break-Even analysis.
  • Draft a starting balance sheet.
  • Draft a SWOT Analyses – Strengths, Weaknesses, and Opportunities.

Some business plans have the feasibility study way down in a list similar to the above list, but perhaps a better view is that most of these tasks need to be done in order for the feasibility or viability of a business plan to be ascertained.

Assistance and collaboration

For an aspiring freelancer, these are all important steps to follow. It is also important to search for organisations and associations that provide vital services and advice for those in the various freelance fields. Let’s take as an example SAFREA (the Southern African Freelancer’s Association). They advocate for and support freelance workers in the communications fields. They also provide resources, tools, training, and networking to strengthen freelance careers. Their network includes hundreds of talented writers, editors, proof-readers, graphic designers, illustrators, researchers, translators, photographers, and other experts in media and communications. Another good example would be Project Management South Africa for freelance and professional project managers.

Membership associations like these are great for collaborating with fellow freelancers and professionals for professional advice, current industry standards relative to their professional fields, the current going rates for different work, up to date market research, training courses, and to finding available work.

As noted earlier in this article, the Internet is packed with valuable information such as from the DTI, SARS, the banks, and other websites through which one can glean the necessary information and assistance in one’s quest.

Freelancing is normally a challenging type of business to operate, but as business start-up and functionality are even more so during the pandemic and state of disaster, it is very important to ask your accountant for guidance and for help in drafting an accurate feasibility study and business plan. Wasting time and finances in going it alone would not be the preferred route to take

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Six Important Business Lessons From The Coronavirus Pandemic

The coronavirus pandemic arrived like a thunderbolt and the unique situations it created found many companies unprepared and disorganised. Around the world, organisations began closing as it was found their emergency planning was not up to scratch and basic functions of the company could not exist in the new world.  

Now that we are half a year into the outbreak some companies are still playing catch up and many will never manage. For those who have survived and even thrived, there are plenty of lessons to take away from COVID-19 that will hopefully change the way we do business and future proof our endeavours for the inevitable coming emergencies. 

We discuss six of the most important business lessons we can all benefit from… 

“Given the nature of the crisis, all hands should be on deck, all available tools should be used” (Christine Lagarde, President of the European Central Bank) 

1.Working from home is possible 

Ever since the creation of the internet employees have been pushing for more opportunities to work from home and the vast majority of companies have been resisting it, worried that productivity would plummet or that team culture would suffer. With their hands forced many will now admit that working from home is not only possible but also saves the company money. 

Some of the largest businesses in the world are leaning into the trend. Twitter and Square have both notified employees that they may work from home permanently if they choose, while Google and Facebook have extended work-from-home options through to the end of the year.  

South African Business and Automation Analyst Grant Buchanan explains, “We are going to see a shift towards shorter and more flexible leases as firms realise they actually require significantly less floor space than before. There will be an emphasis on collaboration spaces and desk sharing and this is going to have an impact on the demand for commercial office space.” 

2.Understand your whole supply chain 

What the pandemic has made abundantly clear is that businesses do not operate in a vacuum. Your suppliers, in turn, have other suppliers and a disruption to one link in the chain can result in your whole business suffering. It has therefore never been more important to understand just who your suppliers are, how their businesses operate and just what sorts of emergencies may impact them down the line. 

Knowing what to expect is half the battle won, as you cannot plan for emergencies you were not expecting. It’s easy to control the issues and items within your own company only to be let down by the actions of others. 

Buchanan says it’s important to understand which suppliers you are dependent on for your most critical goods and services. Do you understand how many supply options you have, and do you have plans in place for if they fail to deliver? How capable are your service providers of delivering when they are ill, trade wars kick in, or their key suppliers hit snags? What sort of emergency procedures do they have in place to ensure you will not be negatively affected? 

3.Communication and crisis planning is essential 

During the scramble of early lockdown a number of companies realised there were flaws in their communication and crisis management systems.  

While email works perfectly well in an environment where in-house emergencies can be dealt with on a quick walk across the office, employees at home required other solutions.  

Does your company have a way to communicate with all employees quickly and efficiently without relying on email? There are many stories of IT managers breaking curfew to try to fire up servers that had frozen, resulting in significant delays.  

The same goes for crisis management. How do you secure your premises and assets? How do you notify your staff? What systems are in place to protect them in the event of a catastrophic incident? And how do you minimise the damage from a future pandemic or related drama? 

Leaders need to put plans in place, introduce new technology and train their staff in these new processes before they become necessary.  

4.Use the available technology 

It’s easy to get caught up using systems that have always been in place. In smaller businesses particularly it’s common to use manual systems for accounting, payroll and other functions, and companies that did this were badly exposed by the virus.  

Many smaller, local retailers and restaurants were caught off-guard by the pandemic. Where they should have been at the ready to serve online customers, and provide delivery or curbside pickup to keep afloat, they instead took many months of lost income to get there.  

Technological uptake has been phenomenal over the past few months. The need to meet up has seen collaboration apps booming with Zoom experiencing a 1,125% spike, Webex 560%, and Microsoft Teams 108%.  

The trick is to take that collaboration app approach across the board, look closely at what solutions are already out there and find innovative ways to use that technology to make your business work away from your desk before the next event strikes. 

5.Build relationships with your accountants, bankers and lawyers  

Some people only see their accountant, lawyers or bankers during a crisis or tax season but these relationships have recently played an integral part in the survival of many companies.  

The COVID-19 business rescue loans were implemented via the banking system, and banks, which are overloaded with applications, are giving first preference to their current customers. Those companies that have a good working relationship with their bankers appear to have more luck with these applications and get them processed faster due the banker’s familiarity with their accounts.  

Similarly company accountants and lawyers have been working overtime helping their clients interpret the regulations for obtaining disaster loans and TERS funding, as well as guiding them on seldom-used aspects of business such as suspending rent payments, delaying vendor invoices, and chasing non-paying customers.  

“Understanding our clients’ businesses has been integral over the last few months,” says Robin Gerhold of Gerhold & van Wyk Attorneys in Sandton. “Knowing the details of how they operate has allowed us to tailor solutions and secure aid much more easily, efficiently and ultimately, cheaply, than if we were coming in cold without that information”. 

6.Broad-based skills are important 

The tendency when hiring is to focus on getting in highly-trained niche experts for each position. The pandemic has, however, shown us that the organisations which were able to rethink their business model and pivot quickly had a much better chance of adapting to market conditions and surviving, and these organisations were also full of employees with broad skills, emotional agility and a wide range of competencies.  

It is a well-known fact that companies should constantly be innovating, and the pandemic has shown us just why. Being able to shift quickly relies on an employee base of innovative and creative thinkers who are empowered by company culture to take risks and develop new ideas.  

According to one of the world’s leading management thinkers and award-winning Harvard Medical School psychologist Susan David, organisations today, “operate within unprecedented complexity resulting from many forces including technology, globalisation, and strong competition. At present, organisations are also feeling the added impact of the COVID-19 crisis. All these pressures require companies to offer swift responses.” 

However, she says, “organisations themselves can never be truly agile unless the people who work within them are agile.” 

David advises hiring and rewarding out-of-the-box thinkers and supporting those who are risk-takers.  

It’s impossible to ignore the difficulties of doing business in 2020. The lessons learnt this year have been hard won, but by putting them into practice, and reaching out for help when we lack the expertise, we can ensure the next set of challenges won’t be our last. 

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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Tips and Ideas to Retain Your Best Staff and Skills During COVID-19

In the highly competitive local economy, disrupted by the arrival of the COVID-19 pandemic, firms more than ever cannot afford to lose their best staff and skills. 

This piece provides critical insight from leading business thinkers including practical advice that you can implement to ensure you retain your best performing staff and skills so as to avoid the significant cost of having to hire new people. 

We also bring you a vital understanding of how employees’ needs and requirements have radically changed due to the national lockdown and COVID-19. 

The piece also provides advice from experts for keeping your employees motivated and keen to stay at your company. 

Small businesses across South Africa face the challenge of keeping their best staff and skills during the COVID-19 pandemic to ensure that they can survive these hard times and can thrive when the economy picks up again. 

For small and medium enterprises (SMEs), keeping top talent is vital to ensuring that these companies deliver effective products as well as services to their clients. 

This comment comes from a “thought paper” published in June this year about talent management and penned by six University of Pretoria master’s students. 

The right talent is a differentiator 

The right talent was a key differentiator for companies to gain a competitive advantage and attain future success, they wrote. 

They defined the right talent as “giftedness, individual strength, meta-competency, high potential and high-performance workers”. 

“Employees are a crucial and valuable element of any organisation. They are the life force that drives innovation, profitability and sustainability,” they added. 

Nishan Pillay, Gordon Institute of Business Science’s (Gibs) executive director for open programmes, said during an interview that it was vital for small businesses to keep their high-performing staff. 

A quote to bear in mind 

The master’s students’ paper included a quote that is worth bearing in mind when considering strategies to keep top people. 

It comes from the former chairman of the Citicorp, Walter Wriston, who said: “Human capital will go where it is wanted, and it will stay where it is well treated.” 

“In a time of… disruption, evolving technology, stiff competition, and increased demand for limited talent, no organisation wants to lose their top talent that they have invested so much in to acquire and develop,” the master’s students wrote. 

Costly to replace staff that exit 

Adding to the picture is that it is expensive and time-consuming to replace staff. 

Alex Nieuwoudt, manager of recruitment firm Michael Page’s finance and legal team in Johannesburg, said during an interview that it could cost between R150 000 and R350 000 to fill a middle to senior role. 

“Hiring people, getting them to know your culture and systems, is hugely expensive. Recruitment costs aren’t just about the agency costs of bringing someone in, it’s about the training, development and the cultural assimilation,” Gibs’ Pillay said. 

Changing candidate questions 

It is also worth noting that candidates that Michael Page interviewed before COVID-19 focused their questions on the job in question. 

But now the critical issue for these candidates was how the company doing the hiring was coping with COVID-19, Nieuwoudt added. 

It was essential to answer these questions accurately, as a new hire would find the truth once he or she joined the company and could leave if what they discover wasn’t to their liking. Thus the company would have to incur all the hiring costs again, he said. 

Given this, it is essential that when small businesses advertise for a post that they have their answers ready for this burning topic. 

Four strategies to keep staff 

There are many strategies that companies can use to keep staff. 

Nieuwoudt suggested four strategies that SMEs can consider for keeping staff. These four strategies are:  

  1.  Allowing staff flexible working conditions, 
  2. Empowering employees, 
  3. Providing virtual wellness, which is where the company gives their employees the means to operate successfully remotely while maintaining staff motivation, 
  4. Promoting staff and acknowledging their achievements. 

Virtual wellness is also determined by a company’s reputation, including its corporate social responsibility schemes. This measure impacts on employee mood and decisions about whether to join and then stay with the company, Nieuwoudt said. 

The desire for flexible employment 

Michael Page ran a poll recently, and 84% of the respondents wanted their companies to give them a permanent option to have flexible conditions of employment, Nieuwoudt said. 

“This gives you an understanding of how the mind-set of employees has changed in South Africa,” he added. 

“Flexible working conditions are now at the forefront of hiring conversations. It is very critical to keep that in mind,” Nieuwoudt said. 

Digital working is vital 

Geoff Jacobs, president of the Cape Chamber of Commerce & Industry, advised that for companies to keep their staff, it was vital for them to move to the digital way of working, especially given the COVID-19 social distancing requirements. 

Jacobs also suggested in response to questions that to allow for easier retention of staff, SMEs should review all expenses, especially rent. 

A third retention tactic that he suggested was that small companies remodel the roles of their staff, so they take on extra duties or get the employees to help the company offer new services and products given the opportunities because of COVID-19. 

If a company had to retrench staff, it was critical that the business part with its staff on the best possible terms so that when the economy grows again, these former employees would be keen to re-join the business. 

Recruit from your pool of alumni 

Karel Stanz, a University of Pretoria professor, said during an interview that hiring a company’s former employees or alumni was one of the most cost-effective ways of recruiting staff. 

He is a professor in industrial psychology at the Department of Human Resource Management at the university. 

Jacobs also advised that as part of the staff retention strategy, small companies should ensure frequent interaction across digital platforms. 

“Build online communities that aid in social interactions for employees preferring flexible work arrangements. These online communities allow employees to interact with colleagues, superiors, and clients. It also allows the organisation to monitor the employees’ engagement levels and needs,” the University of Pretoria master’s students wrote. 

These students in their paper also listed the following measures to ensure a company keeps its top staff: 

  • Have a conducive company culture, 
  • Provide staff with meaningful work, 
  • Offer employees career advancement 
  • Provide staff with a sense of belonging. 

They also referred to respect, recognition and rewards as necessary means to keep staff. 

Opportunity to gain scarce skills 

In a surprising turn of events, Stanz said that the COVID-19 pandemic had provided specific companies with a chance to gain scarce skills. 

He said that a former student of his was working in a human resources role for a timber company in Nelspruit. 

Before the lockdown, it was difficult for this company to find people with technical skills such as artisans. 

But ArcelorMittal South Africa retrenched many people, including artisans, and this has provided the timber company with access to these skills. 

Digital skills important 

Dr Jabulile Msimango-Galawe, Wits Business School programme director for business and executive coaching, said in response to questions that during and after lockdown, some businesses would continue to work online. 

“People in the digital space with the required skills will need to get businesses trading again, and marketing online will be in demand,” Msimango-Galawe said. These skills would include analytical and digital capabilities, she added. 

Attitude is key 

“From what we’ve seen in the past few months, it’s not so much skills that you need to keep, but the attitude of your staff that supports the values of the business,” Jacobs added. 

Individuals with multiple skills would be in demand and the era of having one critical skill was over, Msimango-Galawe said. 

Michael Page’s Nieuwoudt said that essential skills right now included candidates that helped companies achieve their employment equity targets. 

Gibs’ Pillay identified types of people and critical areas of skill where small businesses needed to keep staff, and these included staff with high levels of creativity as well as those with strong people skills. 

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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