Small Business: Reducing the risks associated with temp staff
Are your temporary employees fraudsters in disguise? In this article, we help you to understand and reduce the risks of temporary hires.
Whether it is hiring more baristas, cashiers, or security personal, SMEs often require extra pairs of hands at certain times of the year, such as during the summer months and during the festive season in November and December.
The four weeks leading to Christmas are particularly intense for retailers and eCommerce site owners. Constant streams of sale hunters and shoppers fuel sales and get the cash register ringing, to cope with increased demand, business owners often turn to temporary or seasonal employees. However, doing so brings potential risks that small businesses must be aware of.
What are the risks of hiring temporary staff?
Poor loyalty and performance – Often tied to a fixed-date employment contract, temps may lack the loyalty and dedication of permanent employees. With a leave date in a few weeks’ time, temps are less likely to take pride in their work and may perform poorly. As a result, they can become a liability.
Undertrained staff – Temps require training in order to fulfil their job function. Incomplete or poor training leaves temps unable to meet the required standards and therefore, reflects poorly on your company.
Illegal workers – Never rush the hiring process. With the influx of illegal immigrants in the news, businesses in London must ensure that they only employ those with a right to work in the UK to prevent company losses and bad press. Businesses can be charged up to £20,000 per illegal worker under their employment, which can be devastating and hurt your bottom line.
Internal fraud – Small business owners must understand the danger of internal fraud. Fraudsters can pose as temporary employees in order to steal your inventory or to access business data for their own financial gain.
Those seeking to infiltrate businesses in the disguise of a temporary employee pose a serious risk to all businesses looking to hire. According to Action Fraud, internal fraud cost UK businesses £88 million between 2017-18, double the figure for the year before.
Why are small businesses particularly vulnerable to internal fraud?
Often lacking resolute accounting controls, effective anti-fraud measures, suitable technology and enough staff to split financial duties evenly, SMEs present a natural target for fraudsters to make a quick buck by deceiving the owners and employees. Their tricks include:
- Tricking the company into paying them a large sum of money by using fake invoices or a fraudulent identity.
- Stealing stocks. They may after high-value items or items that are small and easy to conceal.
- Stealing sensitive data and sell them on the black market.
- Taking control of the system remotely and ask for ransom.
When it comes to accounting fraud, business owners also need to keep a lookout for:
- Billing fraud – creating false payments to oneself.
- Cash theft – pocketing the money instead of registering cash transactions.
- Expense reimbursement fraud – claiming embellished or false expenses.
- Bribes and kickbacks – paying others for company information or favours.
How to reduce the risks of temporary hires
As a small business owner, you can take steps to reduce the risk of hiring temporary staff and keep your business safe.
1. Pre-employment background screening
Screening potential employees reduces the chance of hiring criminals or fraudsters. Don’t cut corners – it’s crucial that employers screen temps as if they are applying for a full-time position. We recommend you:
- Run a DBS check to check for criminal records. Go to the gov.uk website for more information on these.
- Obtain references from previous employment.
- Interview each candidate thoroughly.
- Use a DISC (Dominance, Influence, Steadiness and Compliance) personality test which can help to reveal typical behaviour.
2. Hire from current employee referrals
Hiring temps recommended by current employees can minimise the risk of hiring fraudsters or incompetent workers. However, this can only work if your existing employees are trustworthy. Another option is to re-hire former reliable temps.
3. Provide complete training
Training temps well reduces the risk of incompetent workers in your business and enables them to perform as required, helping your business survive the seasonal demand.
4. Withhold access to important company information
Restrict access to data and stocks. Temporary employees should not be given access to the same sensitive business data as senior executives, only what they need to fulfil their job function.
5. Use Anti-Fraud measures
Small business owners must proactively look to prevent fraud and have a series of anti-fraud measures in place including:
- Employee training on how to stop fraud.
- A company handbook on fraud.
- A warning against fraud in temporary employment contracts, containing details of company expectations, as well as details of ‘fraud’, ‘theft’ and ‘bribery’ and the consequences of violating your terms.
- Reward whistleblowers who keep a lookout and report any internal fraud.
Tax Agility is here to help small businesses in London
Small businesses in London really feel the pressure during busy periods when business transactions are higher than normal. While our small business accountants may not be able to recruit temp staff for you, we can certainly relieve you from bookkeeping and accounting duties, giving you more time to focus on your business.
Give us a call on 020 8108 0090 if you need a helping hand on:
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This post is intended to provide information of general interest about current business issues. It should not replace professional advice tailored to your specific circumstances.
Small Business Saturday (7 December)
Supporting Small Business Saturday on 7 December 2019
With empty shops stand at a record high on our high street and in our neighbourhood, supporting the Small Business Saturday campaign has never been more critical. This year, we are doing our part to persuade small businesses across the UK to sign up for Small Business Saturday taking place on 7 December 2019. We are also encouraging residents to spend locally in independent shops.
Calling small business owners
If you run a small business, visit the smallbusinesssaturdayuk.com website to register and get listed on the Small Business Finder free of charge. You can also download the logo and marketing pack. If you have a plan for the day, share it with the organiser and they will announce it on their social media.
Calling shoppers
Use the Small Business Finder to find local shops near you and post photos of yourself supporting your local shops with #SmallBizSatUk. The smallbusinesssaturdayuk.com website also has a cook book which you can download.
Let us make a difference to support our local shops.
Limited Company or Umbrella Company – which is right for you?
If you’re looking for a career change and have decided to work for yourself, Tax Agility’s accountants can advise you on the best contracting option for your business.
Before starting out as a freelancer or contractor, it’s worth taking some time to decide if you should set-up a limited company or register with an umbrella company.
Deciding which route to take often comes down to your requirements, the level of control you want, your long-term business strategy and the type of operations that you'll be undertaking.
At Tax Agility, we believe that there is no right or wrong decision when it comes to choosing between a limited and an umbrella company. If in doubt, our expert accountants for contractors can help you understand what your business requires to determine the best course of action for you. With years of experience in helping contractors across London, we can provide you with solid guidance and advice so that you can make an informed decision.
Contracting through a limited company
A limited company is a type of business whose legal standing is independent of its shareholders and directors. Setting up a limited liability company can take only a few hours. It involves choosing a name for your company, submitting the required documentation to Companies House, and registering with them once the documents have been approved.
Setting up your own limited company means that you are in control, and your personal finances will be separate from your company’s finances. In the event that something goes wrong with your company, your personal finances will not likely to be affected. However, it is also important to understand that setting up a limited company means that you will be in charge of managing your administrative and legal obligations for the company.
Is a limited company the right option for you?
If you are planning on contracting for a long period of time, a limited company could be the most tax-efficient way of working – as it allows you to claim various expenses and pay yourself a combination of salary and dividends (a sum of money that a limited company pays out to someone who owns shares in the company, i.e. a shareholder) to benefit from the tax free allowances available to each. You can also make tax-free pension contributions through the company and leave funds within the business to grow and expand.
On the other hand, a limited company is costly to set-up (more so than registering with an umbrella company). Also, there is some administration involved in running a limited company even with an accountant for contractors supporting you. For example, you will need to keep track of your income and expenses, such as receipts and invoices, as the information is required for the submission of your year-end accounts and tax returns.
It is worth noting that if you fall within the IR35 legislation, the tax benefits of a limited company will completely disappear. IR35 is a tax legislation that is designed to combat tax avoidance by workers supplying their services to clients via an intermediary, such as a limited company, but who would be an employee if the intermediary were not used. By falling on the wrong side of IR35 due to your working arrangements, you can end up paying tax and National Insurance at the same rate as a permanent employee. To understand more about the IR35 legislation, you can check out this post, What does IR35 legislation mean?
Contracting under an umbrella company
Contracting under an umbrella company means that you are considered an employee of the umbrella company. You will need to submit timesheets to the umbrella company which will then invoice the end client or agency for the work that you have completed. In terms of salary, you will be paid as a PAYE (Pay As You Earn) employee minus the umbrella fee, which the company will charge each time you receive a payment. Contractors who prefer no administrative duties generally favour this type of contracting route.
Is an umbrella company the right option for you?
An umbrella company frees you of all the administrative and financial responsibilities that come with being a contractor, meaning that you don’t have to manage or pay your taxes or National Insurance, allowing you to focus on your work.
You will work under a form of employment contract, which still guarantees you the benefits offered to permanent employees, such as holidays, sick leave, maternity and paternity pay.
However, the biggest disadvantage of working with an umbrella company is that they charge a substantial sum of administrative fee, as they take care of your timesheets, billings, PAYE and National Insurance. As such, this option is only suitable for contractors who are new to contracting or work on short-term contracts.
Tax Agility accountants for contractors
Before taking the leap into contracting, contact one of Tax Agility’s specialist accountants for contractors and discuss the options that are best for you given your individual circumstances.
It is also worth checking out these pages written specifically for contractors:
If you choose to set-up a limited company, we will work with you to ensure that you understand what is required of you in terms of your financial and tax obligations, so that we can try to maximise efficiency and minimise your tax obligation where possible. We can also assist you with registering with Companies House, and subsequently, assist you in bookkeeping and accounts so you can concentrate on your business.
If you are already a contractor and want to increase your take-home pay, need assistance with adhering to regulations (such as IR35), or help with your ongoing accounts and bookkeeping, contact us today on 020 8108 0090 or get in touch via our contact us page to arrange a complimentary, no obligation meeting.
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- How to lighten your workload as a contractor
- How contractors should invoice for expenses
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This post is intended to provide information of general interest about current business/ accounting issues. It should not replace professional advice tailored to your specific circumstances.
Your guide to bullying and harassment in the workplace
Next week, November 11 to 15, is the anti-bullying week, so let’s use this opportunity to promote a safe workplace. The theme for this year is “Change starts with us”.
Bullying and harassment both refer to ‘unwanted behaviour that makes someone feel intimidated, degraded, humiliated or offended’, according to Acas (The Advisory, Conciliation and Arbitration Service). It can be obvious or subtle, persistent or isolated, between individuals or groups. It can also take many forms:
- Face-to-face
- By letter
- By email
- By phone
However, business owners must understand that there is a slight legal difference between bullying and harassment.
What is bullying?
Acas defines bullying as offensive, intimidating, malicious or insulting behaviour, an abuse or misuse of power through means that undermine, humiliate, denigrate or injure the recipient. In any business, all employees are responsible for ensuring that their behaviour does not fall into this category.
Bullying itself is not against the law, but nevertheless must be reported. It is said that one in four employees have experienced bullying or been made to feel out of place at work. These negative experiences at work often lead to stress and pressure. Accordingly, it is crucial that small business owners understand the severity of the problem and have a clear and rigorous policy in place to combat bullying and harassment in the workplace. To promote a bully-free workplace, look for the following signs of bullying:
- Someone has spread malicious rumours about certain team members.
- Someone has been treated unfairly.
- Someone continuously picks on or regularly undermines another person.
- Someone has denied other’s training or promotion opportunities.
What is harassment?
Harassment violates the Equality Act 2010, which defines it as ‘Unwanted conduct related to a relevant protected characteristic, which has the purpose or effect of violating an individual’s dignity or creating an intimidating, hostile, degrading, humiliating or offensive environment for that individual.’
Harassment is extremely personal. HMRC characterises harassment as behaviour relating to the following:
- Age
- Sex
- Disability
- Gender reassignment
- Marriage and civil partnership
- Pregnancy and maternity
- Race
- Religion or belief
- Sexual orientation
Every business owner must be aware that because harassment violates the Equality Act 2010 and Health and Safety at Work Act 1974, it requires urgent resolution before it is being escalated to legal action.
Why small businesses may struggle to deal with bullying and harassment
Smaller businesses often face greater difficulty in successfully dealing with bullying and harassment claims than larger corporations for the following reasons:
- A lack of HR
Many small businesses lack the resources to employ a full-time HR department. Consequently, cases may go unreported as recipients of bullying and harassment may feel isolated, and perhaps afraid to speak to their managers.
- A lack of money
Should the case of harassment go to court, majority of small businesses cannot afford to pay the fees attached to legal cases. The troubles may lead them to shut down the company instead.
- Unclear policy on bullying and harassment
Small businesses are less likely to have a clear, formal policy on bullying and harassment than larger businesses.
What small business owners can do to promote a safe workplace
As a small business owner, you know first-hand that workplace bullying and harassment can lead to low morale and increased absenteeism, which in turn will lower productivity and hurt your bottom line.
To establish a high-performing team where everyone can contribute to business growth, there is no room for anyone to create hostility at work. For small business owners looking to foster a safe and effective workplace, here are a few things you can consider:
- Have a clear statement that bullying and harassment will not be tolerated and deserve to be treated as disciplinary offences.
- Provide examples of unacceptable behaviour.
- Encourage your employees to report any incidences to management right away.
If you are unsure of how to respond to unwanted behaviour, please follow the guideline above or call the Acas helpline for advice:
Telephone: 0300 123 1100
Textphone: 18001 0300 123 1100
Monday to Friday, 8am to 6pm.