Can a director claim redundancy when their company is insolvent?
When a company enters insolvency and there is no hope of rescue or restructure, a director may be entitled to claim redundancy pay and other statutory entitlements following the company’s liquidation.
It is not commonly-known that directors can claim redundancy under certain conditions, but if they are also an employee of the company, they may meet the required conditions. So how does a director prove their status as an employee, and what are the other criteria?
Eligibility criteria for director redundancy
To establish their entitlement to redundancy pay, directors will need to complete a form for the liquidator to determine whether:
- A written, oral, or implied employment contract is in place
- The company has been incorporated for at least two years
- The director worked for a minimum of 16 hours per week
- Their role within the company was practical rather than advisory
Although it is more straightforward to prove a director’s employee status when a written contract is in place, the liquidator will look closely at their overall relationship with the company if they have been working under an oral or implied contract.
The office-holder will identify whether the director is paid through the PAYE system as are other employees, for example, and if they worked comparable hours to members of staff on a day-to-day basis.
How much redundancy pay could directors claim?
For directors who can prove they are a company employee, the amount of redundancy pay they can claim depends on a number of factors. These include their age, length of continuous service, and final wage.
Redundancy pay can be calculated as follows:
Aged under 22
Half a week’s pay for each full year of service
Aged 22-40
One week’s pay for each full year of service
Aged 41 and over
One and a half week’s pay for each full year of service
For redundancies occurring on or after 6th April 2017, the government has placed a cap on the length of service at 20 years, weekly wages at £489, and the maximum amount of statutory redundancy pay is capped at £14,670.
What additional statutory entitlements can be claimed by directors?
Eligible directors and employees are entitled to claim other statutory payments when a company is liquidated. These include up to eight weeks’ unpaid wages, and up to six weeks’ arrears of holiday pay.
Pay in lieu of notice can also be claimed at a rate of one week’s pay for each full year of service, up to a maximum of 12 years. Tax and National Insurance becomes due on arrears of wages and holiday pay, but redundancy payments under £30,000 are not taxable.
How directors can make a claim for statutory redundancy
Directors will need to discuss their situation with the liquidator, and if eligible, make a claim from the Redundancy Payments Service (RPS) within six months of the liquidation date. In some cases this timescale can be extended to 12 months. If a claim is accepted, it will be paid from the National Insurance Fund (NIF).
Claiming redundancy as a director provides a vital financial lifeline when their company has failed. The payment could also cover the cost of the professional fees involved in a voluntary liquidation process, and depending on how much is owed, potentially some of the debt.
It is not widely known that directors may be able to claim redundancy pay when their limited company is insolvent, but working under a written contract of employment makes the process easier to navigate.
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Written by Gary Addison; a director at Redundancy Claim. Gary advises company directors on issues related to director redundancy, employee redundancy and statutory entitlements.
How apps can help to keep your clients happy
Today’s businesses face an uphill battle to keep their customers loyal. With the Google effect meaning that competitors are only a click away, instilling loyalty among existing clients is the new imperative.
The role that Apps can play in boosting client loyalty in today’s increasingly mobile world cannot be underplayed. Globally, time spent in apps has nearly doubled over the past two years and, on average, consumers spend two hours a day in apps. According to App Annie, the market data and analytic company, in 2021, users will spend more than 3 trillion hours in apps globally and rapid, sustained growth is expected across the app economy.
How do apps affect client loyalty?
Mobile apps provide a highly targeted channel for open two-way communication that can be a powerful driver of customer loyalty.
For example, with your own branded app, it is much easier to send individual messages that are called ‘push notifications’ that are tailored to your specific client. Evidence already suggests that triggered push notifications in particular deliver remarkably high ROI and according to ZipStripe research, it takes a recipient an average 6.5 hours to view an email, but only 15 minutes to view these instant messages.
It’s important to remember your competitor is only one mouse click away.
When users see that a business is going the extra mile to speak to them personally, it can make all the difference in terms of their loyalty. Then, armed with data on what works, it is easier to continually optimise to make targeting and messages more and more effective.
Putting your app platform the centre of your client’s business activities also helps to drive customer loyalty and is made easier with useful tools that become part and parcel of their day.
One great example of this is when information from Smartphone cameras is integrated and processed within a native app and used to record copies of receipts and invoices, which can then be sent directly to the accountant. Everyone likes to that feeling of achievement and of a job being completed and the receipt management tool really helps to forge that all -important link between the client and accountant.
How to stay first in the app world
Your app does not have to be a single offering as there are many useful apps in the thriving add-on community in this powerful eco system. By incorporating these add-ons in your app, along with cloud accounting login portals, you can make sure that your clients will see you as the main link between them, the principal software accounting companies and the add-on community.
How access is managed is a major consideration in this new appy world and it is important to keep control and not give away trusted adviser status. Having the firm’s own branded app protects the accountant’s status as it provides the mechanism to link to the others from within the app. It also helps to alleviate confusion for clients as their home screens become more streamlined and your icon becomes the place to go for all financial and tax tools.
With adults spending the majority of their time on their smartphones in apps, accountants have it in their grasp to boost customer loyalty by delivering a tailored app experience that reaches out and makes the client feel valued.
The old adage "Customer satisfaction is worthless. Customer loyalty is priceless" stands true, even in this new app-driven world.
Joel Oliver, is CEO of www.myfirmsapp.co.uk. Exhibiting at Accountex 2018, Stand 798.
Cashflow clarity: Five essential metrics for accountants
Tracking margins, KPIs, sales data. These are most commonly associated with retail or e-commerce based business. Professionals such as accountants miss out on a host of information they have at their disposal. In this sector you’re unlikely to have a warehouse full of inventory or logistical tracking. So what metrics should you be measuring... and why?
1. Project profitability
A project in the professional space can take many forms. It could be a particular contract for a set period or an outcome-based agreement. Either way you need to track and review your profitability on a project basis. It can be easy to overlook losses on individual projects if you are making a profit in your business overall.
By getting specific about individual projects you can learn what went wrong. Then you can revise processes and procedures for future work. You may even be able to improve your margin on already profitable projects.
2. Staff costs as a percentage of revenue
We all know the mantra of more billable hours. In many professional firms, this is one of the only metrics that is tracked extensively. But one of the most useful metrics is the ratio of total staff costs to revenue (or net revenue if you have significant third-party costs that are passed through). A typical professional services firm would likely find that overheads – office rent, marketing and general running costs – might amount to 18-20% of revenue. So, for a professional services firm looking to make a 20% profit margin, staff costs should be a maximum of 60% of (net) revenue.
3. Repeat business rate
We have all heard the saying that it is five times more expensive to attract a new client then it is to keep an existing one. Clients like to work with professionals they trust. Combining this will excellent customer service usually means great repeat business rates. Unfortunately, without tracking these rates it can be difficult to know how successful your business really is when it comes to retention.
Put in place a system to monitor repeat business and if it is not as good as it could be you can take action and implement changes. A small percentage increase in repeat business could add a lot of revenue to your bottom line.
You’ll want to measure repeat business both in terms of percentage that repeats by value year-to-year and also the percentage of recurring income each month.
4. Stay on top of billing
Every business needs to be paid. All too often this can be much more complicated than it sounds. Especially in services businesses where typically some proportion of the bill is in arrears so it can be difficult to have any leverage when it comes to getting paid.
If the issue is large enough it can be damaging to your business and create issues with cashflow. This can put you under pressure with your bank and create headaches for all concerned.
Automating billing, call follow-ups and reminders using debtor management software can improve your payment rates and reduce your need for an overdraft or other financing. Stay on top of this metric to keep your business moving forward.
5. Cashflow – number of weeks of trading
And we already looked at getting paid above. Of course, that is one of the major contributors to the health of your cash flow. With overheads and payroll commitments, it’s essential to always be managing working capital. Late or erratic client payments, uneven pipelines of work and even VAT payments all create peaks and troughs in your cash flow that must be navigated.
One metric to track here is the number of weeks’ trading the business has. This takes into account the current bank balance and upcoming commitments to see how long the business could continue to trade for if no future sales came in. A 12-week buffer or more of cash is prudent.
By using cashflow software you can manage this and plan accordingly.
So these are some of our favourite metrics to track for professional services firms like accountants – what are yours?
Written by Caroline Plumb OBE, Fluidly. Exhibiting on stand 1170 at Accountex 2018.
What did the visitors think of Accountex 2017?
With registration now open for Accountex 2018, we thought we'd share a few thoughts on last year's event which took place at Excel London.
Accountex 2018 will return to London ExCeL on 23-24 May. To book your free trade ticket, register here now.
A survival guide for tomorrow's accountant
The third and final part of a conversation between business development expert Rob Brown and Australia's accountancy thought leader Trent Mclaren focuses on a future-proof survival plan for accountants.
And at the heart of navigating tomorrow's professional landscape is a business-winning team.
Rob, who's speaking at Accountex 2018, asks Trent: "How can professional firms best encourage or incentivise their people to win business?"
Trent, head of accounting at Practice Ignition, sees KPIs and mission statements as key factors in establishing the right culture. The aim should be summed up as: 'This is what we did last month, this is what we want to do this month, this is what we need to do, week on week.'
Business winning attitude
"If that's your focus, you can only track what gets measured, and if you're not doing that with your team, but wondering why they're not doing it for you, then there's your answer. But not all accountants are in that business-winning frame of mind. "They don't all have that hungry urge," says Trent.
"So you've really got to identify who is hungry, and who wants to win business? And then, who are my hard workers that are the more introverted ones, the ones that are great with the client, work? And then, balance it out that way, and make sure you apply those roles accordingly.
"I think about a good football team. You've got different positions for different things. You wouldn't want to put your goalkeeper as a striker, because that wouldn't make sense."
Rob asks: "What do you see in progressive firms? What do you see them doing really well, to grow, and thrive, in today's competitive world?"
Trent suggests: "Start building products and services around clients. What do our clients need? What do they want? How do we help them be successful?"
Put your customers first
"Then building customised services around that. Because, if you do that, then they'll grow. If they grow, you'll grow. Put your customers first, in terms of what their needs and desires are, and solve those things.
"Even if it's things they don't necessarily understand, or identify with, it's your role and responsibility to help them understand what their opportunities are, based on the circumstances that they've presented to you.
He adds:"I'm seeing a lot of accountants look outside of the accounting industry for technology that can help them scale their practice. I'm seeing a lot of firms using things like Slack, Skype, Zoom... using all these different platforms to interact and engage with their clients that improve the communications internally with their teams.
The next five years
And Rob's final question for Trent is: "What excites you most about the next few years, when you look in your industry?"
Trent says: "I get excited when I see firms start looking at better ways to innovate their technology?" When firms say this: "Oh, my goodness. This is so good. I literally don't have to spend 10 hours every month doing this anymore. It'll just automatically happen."
Good example, we just practised the initial, and we just released a really cool integration in December, which would now allow all of our accounting firms to trigger five or 10 different actions to occur, once a proposal is accepted. So, for a lot of firms at the moment, if you're doing it all, let's say, manually. It's a Word document. They print it, sign it, scan it, and send it to the client. Client gets it, prints own scan, send back.
"That's the kind of stuff that gets me really excited, because it's kind of mindblowing."
So, roll on the future!
MyFirmsApp is Selected for Great British Scaleup Programme
MyFirmsApp, operators of the largest Global App platform for Accountants, has been selected by TechMarketView to take part in its’ prestigious Great British Scaleup Programme. The Programme is designed to assist fast-growing UK Tech Companies grow even faster by helping them to develop their full potential.
Weekly Insight: AI is the way forward for accounting
Written by Ian Moss. Welcome to Accountex North's Weekly Insight Number 3 and congratulations on reaching February, the end of another self-assessment-crazy January. But don't worry. There's plenty more fun on the horizon: Brexit rumbles on; the GDPR deadline looms; the spectre of automation/Artificial Intelligence hovers menacingly in the background.
On AI, I spotted this headline in Forbes. "Why Artificial Intelligence Is The Future of Accounting". This statement seemed to run counter to a lot of robot scare stories I've come across since taking up my role as Accountex editor three weeks ago.
The author of a new study, Jean Baptiste Su, VP and analyst at Atherton Research, reckons: "More than most other industries, accounting hasn’t seen much innovation since the creation of double-entry bookkeeping - a process of recording both profits and losses - and considered one of the greatest advances in the history of business and commerce. That was over 500 years ago!"
Opportunities and serious challenges
He adds: "We expect that by 2020, accounting tasks - but also tax, payroll, audits, banking - will be fully automated using AI-based technologies, which will disrupt the accounting industry in a way it never was for the last 500 years, bringing both huge opportunities and serious challenges." Sound familiar?
And it's at this point that I realised just how many of these AI articles come equipped with a familiar rider, too. It goes along the lines of... machine learning efficiency needs to improve to avoid errors ... in order that automation can fulfill its promise. When it does, it'll be OK because accountants can take on a more advisory role.
All this is bound to become clear. One day. What does seem pretty clear to me now, though, is that there is a massive difference between automation and intelligence... artificial or otherwise.
And this seems to be overlooked by many observers in the field.
A way to go on GDPR
About two-thirds of businesses worldwide are not ready for the arrival of General Data Protection Regulation, which, in case you didn't know, is on 25 May.
But worry not... that's the headline figure from an EY survey. In Europe that figure rises to nearly two-thirds of companies have compliance plans in place. That's good news, as far as it goes. But that still leaves a third with no strategy...
Called to account on diversity
Diversity and gender equality are big news in so many areas of society at the moment. (Unless, of course, you are the BBC, where there is "no evidence of gender bias".)
Meanwhile, big accountancy firms PwC (they carried out the BBC gender survey), KPMG and EY are among the top 100 inclusive employers, as ranked by LGBT charity Stonewall.
Fiona Wilkinson, ICAEW vice-president, says, “Diversity is a powerful force for good. We know that businesses benefit from strong diversity and inclusion policies and practices that help both attract the best talent as well as a diverse range of clients.
"I urge member firms to do more to promote equality and diversity in the workplace and, whatever their size, to consider applying to Stonewall’s Index.”
And finally...
Drum roll... Fanfare ... Party poppers! It's time to look at the top of Accountancy Age's Financial Power list for 2018. And at number one in the top 50 folk who'll have the biggest influence on accountancy this year is ... Brexit Secretary David Davis. Oh dear.
If you have any comments or content ideas for us here at Accountex, please let us know in the box below or drop me a line at [email protected]
Weekly Insight: Down to Earth in Davos
Welcome to Weekly Insight Number 2. It's that rare time of year where, if one wanted, one could combine one's love of cashmere scarves and helicopter travel with saving the planet. And complement one's dislike of the world's elite by appearing at... a gathering of the world's elite. Yes, it's the World Economic Forum's annual shindig in the picture perfect Swiss ski resort of Davos, this year starring US President Donald Trump.
There were many breathtaking ironies on display up in the Alps. But my eye was drawn to an interesting and timely WEF report on the future world of jobs. Because it's virtually impossible to look at any accountancy website or publication at the moment without being greeted by an article on robots, artificial intelligence, automation, job threats, or all of the above.
So it's good to see that the issue is being addressed by those who are "committed to improving the state of the world." The WEF study is all about re-skilling amid the "Fourth Industrial Revolution". It takes an ingenious data-driven approach and attempts to map out future career pathways for workers who have 'lost their jobs to robots'. So, if you're an out-of-work cashier, it gives a "suitability score" if you were to retrain, say, as a locksmith or a geothermal technician. You will appreciate I am just giving you a flavour, here.
Perhaps unsurprisingly, given how the accountancy sector is being transformed by technology, one of the "at-risk" career areas the study looks at is accounting, bookkeeping and auditing. The picture painted is not immediately rosy. But the term "stepping stone" role is used. Which in a nutshell means a career transformation may not be entirely straightforward, or linear in today's money.
Patience, it appears, will remain a virtue in the future.
Financially speaking, Musk and others are on a different planet
Tomorrow's job security appears not to be on the mind of space-rocket entrepreneur Elon Musk. KPIs, though, are. According to Bloomberg, he could rake in up to $55.8 billion over 10 years, if all goes to plan with his electric car company Tesla. That is if the group's market value hits $650 billion, or just about everyone in the world buys one of its vehicles.
One eminent compensation consultant described the package as "breathtaking."
As Bloomberg notes: "If the award fully vests, Musk would own a 28 percent stake in the company worth about $184 billion, vaulting him to the top of the Bloomberg Billionaires Index. Amazon’s Jeff Bezos currently sits atop the index with a $111.5 billion net worth as of Monday’s close in New York. Musk’s stake in SpaceX constitutes about half of his current net worth of $21.5 billion."
Are these folk already on a different planet?
Tension builds in Power List countdown
A tantalising drip-drip approach has been adopted by Accountancy Age in revealing its Financial Power List 2018. The team is ranking the 50 individuals "who we believe will have significant influence on the direction of the accountancy industry...".
The full 50 will be released on January 31. So far it's been a five-a-day diet. Good to see that Public Accounts Committee chair Meg Hillier is in at 26 after her hard-hitting start to 2018 with a report on the HMRC's digital transformation woes.
Who'll be at No 1?
Tax returns deadline and other issues
Our Media Partners at accountingWEB have highlighted (you'll never guess) software problems as the January 31 self-assessment deadline looms.
John Stokdyk writes: "HMRC’s programmers are aware of the issues brought to their attention [by BTC Software] but do not have time to fix them at this point in the tax year. Even if they did correct the exemptions, software developers would not be able to pick up and implement them in time.
"Instead, they are advising taxpayers and their agents to go ahead and file with the erroneous figures and pay the tax due – but alert HMRC of the situation. BTC suggested the best way to do this is in the additional information box on the main tax return form (SA100 box 19).
Tax pain in Spain (and elsewhere)
So, if you can't beat 'em... Tax difficulties are common, especially if you're a singer or footballer, it would seem.
The Colombian popstar Shakira has allegedly not paid all her dues in Spain. She lives in Barcelona with Barca footballer Gerard Piqué, and the couple’s two sons. Recently her name cropped in the Paradise Papers, an offshore finance probe in the Bahamas, where she used to live. Her spokespeople say everything about her finances is fine and dandy.
Shakira's situation follows Spanish taxation travails for Ronaldo, Lionel Messi and Manchester United's coach, Jose Mourinho.
But wait, it's not just Spain. Brighton and Hove Albion footballer Glenn Murray was arrested this week on suspicion of tax evasion in the UK.
Who's next?
Watch out for next Friday’s Weekly Insight. In the meantime, if you have any comments, or content ideas for us here at Accountex Insight News, please let us know in the box below or drop me a line at [email protected]