Post Co-Vid - Can't afford holiday pay

[jl2879]

I own a small barber shop, employing one full time worker, and 3 part time workers (one is on Maternity leave but had only been with me one month before lockdown, so is costing me nothing at the moment).
In a nutshell, we were a really busy shop before this, turning over around 1200-1700 per week. All staff are on minimum wage of £8.72 per hour. Since the post-Covid rush for haircuts, I have seen a very sharp decline in customers, and hence income. There are many factors; elderly afraid to come out, no weddings, events, holiday haircuts, many folk working from home, men not going out every weekend etc... the list is endless PLUS (the usual summer holiday dip between Mid July-Aug).
My problem is this. My rent and services charges (I'm I a shared building) have still had to be paid. I've used up nearly all of the £10k grant for this.
Going forward, if business remains this bad, I simply can't afford the staff, but I do need their presence in the shop when it's open, ie I can afford their basic wages, but not the holiday pay, (which is £8.72 x 2 per hour - as I have to pay another person the same rate to cover the absence). Holiday pay is costing me around £7-8k per annum. Can I ask my 'employees' (all on a contract which dictates hours can be increased or decreased according to trading patterns), to do self employed. I'm literally at the point of wanting to walk away from a business I loved; I'm not able to work myself any more, as I have had a chronic back problem for years now (I'm 53), and am also waiting the results of blood tests to see whether I have rheumatioid arthritis - my finger and feet joints are very painful.

The one employee who costs the most is the full time person, as she hits the PAYE and NI thresholds. Also her pension is more than everyone else's. The pension is small but it soon mounts up.

I'd like to do rent a chair as I'm at the end of my tether from going into this running a shop and cutting hair, to feeling like I have had to become a 'furlough expert', pensions adviser and now they are all ringing ACAS as I've mentioned that I don't know if going forward I can afford to pay holiday pay. Maybe I've been too honest? I'm out of my tenancy as far as I can see - it was signed for five years in January 2014.

I still know there is a viable business there - but the business model needs to change and I'm also going to ask the landlady whether she'd consider reducing the rent, even for six months, just so I can get a better picture as to how the public mood may change, and my customers, in that time.

Can anybody help, particularly regarding the asking them to go self employed part of this tale of woe?!
(I know I can't force anyone to do it, and seemingly I have to ask them ALL and not just single out one person).

Thanks in advance
A stressed business owner, Northumberland

 

[Bushman]

Neither you or your workers can chose an employment status to suit yourselves. Employment status is decided by the facts of the situation. Have a look at this link.
https://www.gov.uk/employment-status/selfemployed-contractor

 

[Aniela]

Changing them from being hired staff to self-employed isn't as easy as it sounds it is. In fact, it's rather complicated and messy half of the time.

Plus, based on your situation described above, you likely wouldn't want them to be self-employed.

For starters, it's a massive con for the current employers. They wouldn't get holiday pay, no sick pay, need to handle their own taxes etc. As you pay them minimum wage, they would be much better off just getting a job elsewhere. They would be losing out by working for you.

You also can't dictate to someone that is self-employed specific hours they have to work. You can only offer them the 'job/hours' and it's up to them to decide if they want it and can do it or not.

That's when staffing issues come into play. One takes the day off and no-one else wants the hours; you can't do anything about it.

 

[MBE2017]

OP, have you considered reducing the hours atm just to help regarding salary?

Seems to myself at first glance you need to reduce costs quickly, which unfortunately means redundancies. Apart from that maybe approach care homes and offer a drop in service to generate extra income?

Sad to say if you are not making money and cannot yet find a way to return to profit, maybe you are better off shutting it down. We have had several barbers mentioning similar downturns after an initial burst once lockdown finished. How long it will take to adapt is hard to say.

I have just been informed there has been a sudden increase in panic buying, something has got out about a possible new lockdown and Aldi and Lidl shelves are pretty bare after today. All the old rules are out of the window atm.

 

[Mr D]

Rather than £8.72 an hour they'd be charging you say £84 for a 7 hour day. Is that better for your finances? They'd have to factor in income, holiday pay, pension, national insurance and tax into their fees.

Oh and they'd turn up when they want, go when they want, have a break when they want. And can send someone else in their stead to do the work.

Oh and perhaps in a year or two complain to an employment tribunal that they were really employees and the facts of the case come out - if decided they were actually employees then you get a big bill.
Its happened.


You could negotiate with them to delay taking any holiday for a few months. However if they leave / get fired / the business shuts down then they are owed outstanding holiday pay besides wages etc.

 

[Darren_Ssc]

Spoke to my barber about this and although he only employs himself he is thinking of letting the shop go and working from home only. This is a guy who's been around for donkey's years and has come to the realisation that things are not going to suddenly bounce back to how they were.

I would start considering similar drastic strategies rather than moving the deck chairs around whilst the ship is sinking.

All of you questions above are applicable, btw.

Best of luck either way though.

 

[Aniela]

Spoke to my barber about this and although he only employs himself he is thinking of letting the shop go and working from home only. This is a guy who's been around for donkey's years and has come to the realisation that things are not going to suddenly bounce back to how they were.

I would start considering similar drastic strategies rather than moving the deck chairs around whilst the ship is sinking.

All of you questions above are applicable, btw.

Best of luck either way though.

The thing is, is that people are obviously getting their hair cut somewhere. There's not a magic hair fairy going around.

So the big question barbers/hairdressers need to ask is why are they going to their competitors and not them.

 

[Darren_Ssc]

The thing is, is that people are obviously getting their hair cut somewhere. There's not a magic hair fairy going around.

So the big question barbers/hairdressers need to ask is why are they going to their competitors and not them.

They are not going to competitors though. People are making do, using hair clippers, getting partners to do it, etc. Talk to any barber, you'll hear the same story.

 

[Mr D]

The thing is, is that people are obviously getting their hair cut somewhere. There's not a magic hair fairy going around.

So the big question barbers/hairdressers need to ask is why are they going to their competitors and not them.

Perhaps not having it done so often - no need.
Perhaps, for those who adapted to the lockdown, they have a much cheaper way of cutting hair now.

 

[Ds1874]

What I would do is make them all redundant and then rent out a few chairs, The going rate here is 150 a week dunno if its similar where you are but it's a easy way to cover costs, I've had a similar start to you, mobbed at the start then just covering costs now, but I've done things to get people talking about the shop, I leafleted the local area and brought in a pool table for people to play with. This has brought me a few folk in the door, maybe do something similar

 

[Financial-Modeller]

I think your numbers may be mixed up @jl2879

You're confusing hourly wage rates (not loaded cost), weekly turnover rates, and blaming running a business that may not be viable on annual cost of holiday pay!

I'm going to guess that with £1200-£1700 per week turnover, you're doing c.150 cuts at say £10 each. If they take your staff 20 minutes each, you need to pay barbers for c.50 hours per week, but I'm going to guess you're paying one f-t and two p-t staff more like 70 hours per week in total.

You think the cost of each hour is £8.72, but when you load the hourly rate with NIC, Pension, Holiday pay, sick pay, it will obviously be more - perhaps £12 per hour.

A couple of hundred pounds per week for rent, and another hundred for business rates, takes your costs to £1100-1200 per week, before your other operating costs.

These are guestimates but if anywhere near to accurate, you need to bring more people in for haircuts or to pay your barbers for fewer hours to perform them.

Renting out chairs will give you fewer headaches, but obviously the barber needs to see the prospect of plenty of work to justify moving from PAYE to that model.