Kelrick Properties boss: "The devil is in the details" when it comes to Covid-19
In an exclusive interview with The Parliamentary Review, MD of Lancashire-based estate agent Kelrick Properties Richard Lee explains that in spite of the supposedly positive view of the policies announced by government, there remain gaps where the chancellor's package of financial measures cannot help certain market sectors.
Firstly, I am a member of a letting agent group on Facebook. This is one of the comments I saw from another member:
"I pay myself a £10,000 salary and dividends where I can (my staff earn more than me by the way). I am employed on PAYE. So, as it stands, I can't claim anything due to taking a small salary and I obviously can't furlough myself as there would be no-one left to run the business. I take it I have no other options? Makes you think whether it's worth it, I earned three times as much as I do now when I was employed by a large company. I now carry all the risks of business and have to front the money to furlough others and increase my own workload in the vain hope I'll survive (I will, just I hope), cover the costs of the business (I will get the £10,000 grant which will go someway to helping costs short term) but for what, the vain hope that one day I'll make more money than I did employed.. in a an industry that is constantly being battered, with slowly shrinking profits."
This is an example of how most of the small business owners I know in the property industry are feeling. That includes me.
We are in the process of furloughing most of our 12 staff members, which leaves just my wife and I to keep the business afloat, while being unable to afford to live ourselves. As directors, we will be left with a huge amount of debt for years, whereas public sector workers we know have been sent home for three months on full pay -- how is that fair when we are "all in this together"?
Is there going to be any further help for directors of companies? I feel that directors should get 80 per cent of their basic salary plus what they have taken as dividends over the last three years (similar to the self-employed model of help). It can’t be right that our employees will earn more than us for doing zero work during the crisis.
So, as company directors, my wife and I will be eligible for just £575.20 per month if we are furloughed (the government has shut down our business) while our employees are eligible for up to £2,500 per month. So, why are the small business owners being penalised for employing staff? It was exactly the same in the 2008 recession -- zero help for small business.
Company directors really are getting minimal help. We paid ourselves £719.00 per month in “wages” -- some of our staff are paid as much as £2,500 per month in “wages”. It is plain to see that company directors' pay is manipulated to adjust profit for the business. It would be an insult to one's intelligence to not include this “profit” within the “wage” of company directors, just because they are paid as dividends rather than a “wage” -- it really is nothing more than semantics. However, this is the government's criteria. This is happening nationwide; the government knows full well that small companies’ directors are paid in this way.
The situation is that if my wife or I are furloughed we will receive the princely sum of £575.20 per month, while our employees will receive up to £2,000.00 per month. Furthermore, the support offered now appears largely to be to obtain loans to cover your losses, which you will have to pay back for years to come. It is government that has caused our profitable business to now operate at a loss as government has imposed a nationwide lockdown.
Business owners are getting penalised for government’s action -- it’s a disgrace. We are now in the position whereby we have furloughed staff who are now at home doing nothing and are permitted to do additional paid work to subsidise their loss, while we have to do all the work of our former employees and have no choice but to lose vast sums of money.
How are we, as company directors, now expected to pay our own personal bills? Furloughed employees are left in a very easy position, as are all those public sector workers on full pay with overtime.
Government has absolutely no clue how to end the lockdown period; they are backed in to a corner now and do not know how to get out of it. They are now slowly bankrupting UK businesses.
Another point to make is that business is expected to pay out the wage of furloughed staff and claim this back some weeks later from the government, even though it is likely that most businesses will have cashflow issues given the significant reduction in revenue.
Why are some public sector workers who are considered in the “at-risk group” being sent home to do absolutely nothing and getting 100 per cent of full pay even if it exceeds the £2,500 per month cap? Why are their wages not being reduced to 80 per cent of full pay and capped at £2,500 per month? Why are they not being furloughed like the rest of the population? We are all in this together, except when we are public sector workers who don’t have to endure any hardship and get full pay for doing nothing.
Moving to the insurance sector, we actually have business interruption insurance which includes disease outbreak at the premises. This was taken out to ensure that if we were unable to trade for any reason, our revenue would be covered for up to 12 months. It is being mooted that the insurance cover won’t pay out because insurers will state there was no disease outbreak at the premises.
Strangely, though, insurers won’t be reducing car insurance premiums to take into account very few vehicles on the road, or lowering premiums on home insurance while there are fewer house break-ins as a result of most people remaining at home. Of course, their profits will increase as a direct result of this fact. Will government be intervening in regard to business interruption insurance to ensure that businesses that paid for this type of specific cover don’t lose out?
Overall, it just feels like the business owners in this country -- who are constantly told that they're the "backbone of the economy" -- are being left behind by these financial measures. Business owners are the people who will be expected to pick up the pieces once this is all said and done, helping to repair a broken economy, provide employment and income for furloughed staff again and again once this is all over.
Surely the Treasury should bear this in mind when they're considering how to treat business owners? We're not asking for more than what anyone else is eligible for -- 80 per cent of our normal income, up to £2,500 a month. This would just put us on a level playing field with the people we are going to support through this crisis -- it's not an unfair thing to ask for.
You can read the Kelrick Properties best practice article here.