SMEs: Emerging risks - Tackling the challenges facing SMEs
Small and medium enterprises (SMEs) may be concerned about keeping a competitive advantage - but it’s the evolving workforce challenges that can have the greatest impact on their success.
Taking decisive action to help deliver long-term growth in the face of multiple geopolitical and regulatory disruptions, as well as technology challenges, continues to test businesses. Such disruptive forces are particularly felt by SMEs - required to evaluate and implement future ways of working in order to remain competitive, avoid potential risks, and attract a diverse workforce that is receptive to change in an environment where there is a positive push towards fairness in the workplace. But what are some of the immediate employment challenges facing today’s SMEs?
Flexible working: the financial reality
The reality for some SMEs is that it is getting harder to source, manage, motivate and retain talent while controlling costs. The global workforce has changed substantially as we have entered the fourth industrial revolution with increased use of technology and the migration from traditional employment to freelance status and the sharing economy. In addition, Generation X and millennial employees are increasingly looking for meaningful employment. The number of people over sixty-five is growing at an unprecedented rate, and this age-group are now more likely to remain part of the workforce but with different motivations and needs.
Agile developments can provide solutions to these challenges as they seek to deliver new ways of working that benefit both business and workers. However, while agile working can ultimately save costs, SMEs may struggle to finance the upfront expenses needed. Should a business adopt agile working, then it does provide opportunities to attract and hire candidates from any part of the country, considerably widening the pool of talent available. Done right, agile working leads to a more productive workforce with improved work-life balance and can aid in the retention of staff. There are, of course, risks associated with going agile and it is, therefore, vital that safeguards are in place to protect against such things as data threats, and to ensure the well-being of staff, no longer all working from the same location.
Over recent years, court decisions have acted to widen considerably the application of vicarious liability in a business context. For example, employers have been held to account for losses emanating from the criminal actions of an employee publishing personal data and the actions of employees outside of the workplace and after-hours.
The warning shots fired by such decisions are particularly significant for SMEs. With management teams often required to wear several business hats and never truly being ‘off the clock’, the practical implications of such extended employment relationships create specific challenges in managing the increasing risk of being liable for others’ wrongdoing.
Fairness in the workplace
This year sees the second round of gender pay gap reporting for those companies with 250 employees or more and there has also recently been an ethnicity pay gap consultation. For now, SMEs are not impacted by such compliance requirements but the political climate is changing: the Business, Energy and Industrial Strategy
Committee has already recommended that reporting should be extended to businesses with a minimum of 50 employees from 2020. SMEs should, therefore, take the opportunity in the meantime to understand their likely reporting duties and what will be required of them – addressing any gender pay gap identified.
There are many challenges to SMEs with the evolution of the workplace and the workforce. Indeed, looking forward, the narrative is expected to get louder around the need for business systems to better equip themselves with the active-life, multi-generation workforce – especially in the West.
For the SME, this picture is compounded by the rapidly changing rules around minimum wage, workings hours, status and discrimination, and as the traditional contract between employers and employees is eroded and replaced with a less defined and less hierarchical structure. SMEs have to be alive to these changes and how such influences translate to increasing risks of exposure. Never before has it been as vital to ensure they have the right – and sufficient – indemnity insurance in place.
This article was originally published on Insurance POST