According to a recent report by think-tank ‘TEAM’ one of the most damaging and far-reaching aspects of the credit-crunch, has been the number of employers implementing a ‘pay freeze’ policy.
The report found that over 32% of small businesses in the UK had frozen the pay of some or all of their employees. According to TEAM, ‘ pay freezes’ are a short-term cost cutting strategy and if a workforce is to remain satisfied and productive, they must be told when the strategy will be terminated.

The survey also found that while many small businesses had implemented pay freezes over 50% of those businesses are planning to increase the amount of money they spend on wages throughout 2010.

Human resource consultant Mark Jeffries, comments: “It is vital that companies implementing a ‘pay freeze’ policy’ do so correctly. I welcome the findings of this report, which seems to indicate that businesses who have implemented pay freezes during the downturn are planning to terminate this policy as soon as possible. I would advise all companies to focus on rewarding staff again, as the economy continues to recover.”

You can’t turn on the television, pick up a newspaper or listen to the radio, without being confronted with some form of Labour or Tory policy declaring to help the small business sector. However, what as to what extent these policies will practically help small businesses, the jury is still out.

A recent survey, conducted by the BCC, asked over 4,000 small business owners which tax burden they felt would hinder growth in 2011 and if they felt the government were listening to their feedback.

An overwhelming 66% per cent said they felt that both the Labour and the Conservative party had failed to adequately address the real issues affecting small business and over 35% thought that government’s plan to increase the rate of National Insurance would be significantly damaging to the SME sector and hinder the growth of small businesses in 2011.

BCC director of enterprise Mark Campbell comments; “The government’s plans to raise National Insurance, is not only damaging to the SME sector, but also extremely short-sighted. Raising National Insurance means that small businesses will be deterred from employing new people and ultimately result in a decrease in tax revenue in the future.”

The recession has had many damaging and far reaching consequences for employees in Britain. Not only have they had to contend with pay cuts, they have also had to deal with the threat of being made redundant.

According to a recent report conducted by HSBC this has had an overwhelming effect on the working culture of Britain as more and more employees work longer hours than they are contractually obliged to, in order to keep their jobs.

The report asked over two thousand small business and recent company formation owners if their staff work over their contractual hours, without receiving additional payment, over fifty five per cent said yes and over thirty six per cent said it was expected.

Ben Clinkard, small business manager for HSBC, commented; “During an economic downturn, many small business owners forget that employees feel the pressure too. Consequently, they feel obliged to work longer hours to secure their job. However, small business owners must understand that a happy work force means increases productivity, so they must ensure their team is working smarter, not necessarily harder.”

Global economics has proved time and time again, that when America sneezes the rest of the world catches a cold. Surely the same rule applies to when positive growth occurs in the USA? Well, not if you compare America’s recent growth figures to the UK’s. But is the fact the government has announced that we are out of recession lulled the SME and company formation sector into a false sense of security?

Accountancy firm JWT believes it has. The firm heads an annual meeting of over twenty of the UK’s most prominent economists and the overwhelming consensus was that the SME sector was ‘in denial’ about the state of the economy.

Alistair Wilson, managing partner at JWT, comments: ‘While the recession is over on paper the fact remains that it is very unlikely that the economy will return to its pre-recessionary state for at least another four year – maybe even longer.”

“Companies need to realize that this recession has changed the landscape of enterprise in Britain. Consumer behaviour will never be the same and one of the many consequences of the recession is the fact that a huge number of companies have gone into administration. If you want you business to grow, it is vital you learn to evolve and become more dynamic.”

As we have said time and time again on this blog, one of the most effective ways of making sure your company remains profitable during a times of economic instability is by maintaining a healthy cash flow and becoming more cost efficient.
However, as the country recovers from the recession – regardless of how anaemic that recovery may currently appear to be – companies must switch their strategies from ‘survival’ to ‘expansion’ to ensure they are in the best possible position to capitalise on increased consumer confidence. For many businesses expansion, regardless of what form it may take, will mean employing extra team members.

However, with the planned increase in National Insurance and cost of employing new staff, many potential employers may be deterred from making that commitment. So what is the answer? According to management consultancy firm ‘Select Consultancy’ small businesses should follow the likes of Accenture and IBM and look to recruit an Intern.

As the employment market is currently saturated with talented graduates enthusiastic and willing to learn, business should look into ways of using such talent to drive their company forward. Furthermore employing a graduate intern for a specific time means you don’t have to make a long-term financial commitment if you don’t want to and you can monitor their progress within that timescale, to establish if you want them to play a role in your company’s future.