When payroll gets personal

The challenges sparked by the COVID-19 pandemic have meant many small business owners have had to make personal sacrifices to keep their staff on the payroll and their businesses going.

Small businesses have been disproportionately impacted by COVID-19. With 58% unable to trade at some point in the past year, the stakes are high as pressure on their cash flow builds.

New research from QuickBooks reveals that due to the challenging business environment in 2020-21, 67% of small business owners have been faced with tough decisions to keep their business afloat and employees on the payroll. Over a third (35%) have had to furlough staff, 24% have had to freeze recruitment and 21% have had to freeze pay for staff.

Many small business owners have also had to make significant personal sacrifices to keep employees in jobs, with 33% giving up their own salaries, 30% giving up their dividends, 46% giving up holidays and 41% not taking their bonuses.

The exceptional stories of sacrifice that small business owners have had to make during this uncertain time were highlighted through the research, and we gained important insight into the support networks they are relying on to help them navigate the changing business climate.

Carina Lepore, winner of the BBC’s The Apprentice 2019, owns bakery Dough Bakehouse, which she runs with her sister in Herne Hill. Carina had to pivot quickly through digital to takeaway in order to keep going through lockdown but found that her business was still impacted. To keep her full team on the payroll, Carina gave up her Christmas bonus and the bonuses of the management team.

The study found that accountants have taken on an increasingly important role for small businesses, with small business owners turning to their accountants for support on changing regulations and processes such as payroll. Accountants have experienced a 60% uplift in small businesses approaching them for payroll expertise and services in the last 12 months.

Eriona Bajrakurtaj is the Managing Director of accountancy firm, Major’s Accounts and Co. During the first lockdown, Eriona found that she had to take on a new role of therapist for many of her clients, who were looking not only for payroll advice but guidance on how they could pivot to survive.

Despite only finding out about the new payroll rules and guidelines at the same time as everyone else, the team had to quickly learn about the new regulations to help clients understand the changes, potential government support they could receive and ways to they could adapt their business plans.

Eriona Bajrakurtaj, Managing Director, Major’s Accounts and Co., said: 

“Furlough has been a fantastic scheme for businesses but for a family-run accountancy firm like ours, it’s been a huge time investment to keep on top of the ever-changing regulations. Often, we have found out about the new payroll rules and guidelines at the same time as everyone else, so have had to work at pace to digest the information and translate it into guidance for our customers. 

“We’ve acted as therapists for many of our clients, helping them understand not only the payroll changes and support they can receive from the government but also ways they can and pivot to survive. I was personally working 20 hours a day for the first few months to ensure we were on top of the changes and could provide the support our customers were relying on us for.”

With new payroll regulations such as the furlough scheme and revised employee benefits coming into force rapidly through 2020, successfully managing payroll through digital tools has become an important part of the journey to business recovery – or for the businesses who have not been so heavily impacted by the pandemic, the route to growth.

Our recently launched report also showed that through the pandemic, being able to digitally pivot has been critical for survival; 73% of small businesses said they became more digital in 2020 and of these, 88% said it was key to their ability to continue operating.

Small business owners have really shown their resilience through the challenges of 2020, even through having to make difficult decisions and sacrifices to keep on employees and keep their business going. The right support is vital - connect with your accountant for advice on continuing to weather the uncertain business landscape.

For more information and advice for small businesses and the self-employed, take a look at the QuickBooks Blog.