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What happens after a recession & how does this effect selling my business

Written on the 8 December 2021

Mr Garth Griffiths National President of the Australian Institute of Business Brokers (AIBB) said to-day, “Many people are naturally deeply concerned about Australia falling into recession as part of the global economic downturn.” He said “Governments are constantly trying to develop stimulus packages to revitalise the slowing economy and no matter what initiatives they come up with, there are no guarantees that anything will work. Nobody has a perfect solution. To some degree it’s all trial and error.” Mr Griffiths whilst addressing the AIBB’s National Executive said  “Despite governments best efforts the real concerns are not so much a question of how we soften the immediate blow but rather what steps we should take now to minimise the long term impact. Mr Griffiths expressed a concern about the rapidly rising unemployment numbers saying “In real terms the numbers of unemployed ar e far greater than those publicised. If you consider those individuals who may be normally employed but have now been retrenched but can’t be registered as unemployed because their partners in marriage are still working. There are many people now working part time, those who’s employers have offered part time work as opposed to retrenchment.. Then there are those many long term unemployed that have after a year or so just given up trying to find a job.”

Mr Griffiths said “If we assume real unemployment was going to be closer to 20% than10%, we as a nation desperately need to apply our thoughts to the likely consequences of this new phenomenon. Mr Griffiths said “The most obvious consequence of mass unemployment is that when the recession draws to an end and business seeks to expand, it will find it almost impossible to employ skilled or suitably trained staff. Not only will we likely experience a repeat of the brain drain, it could well flow through to most sectors of industry and commerce.”

“So how can this likely problem be averted, you may well ask?” Mr Griffiths said.

“If any good is to come out of this experience it will be the result of sacrifices made by all concerned namely Governments, Employers, and Employees but it must be emphasised that in these times if we don’t make planned sacrifices now, the consequences could be catastrophic for many businesses and employees both in the short and long term.

Mr Griffiths said “There are many issues that need to be addressed now. Issues that if addressed properly could help put Australia in a much stronger position so as to compete internationally and curtail the tendencies we are now experiencing with major companies taking their manufacturing offshore. Mr Griffiths said “It’s all about making Australian businesses more cost effective in comparison with other countries and some of the ways to do that is to rethink the ways in which we now employ staff.

Some of the contentious issues worthy of consideration are the impacts on unemployment and small business generally. They include things like 4 weeks paid annual leave, shorter working hours, 17.5% holiday loading, sick leave entitlement, long service leave, payroll tax and I’m sure there are many others. Mr Griffiths said that all terms of employment needed to go into the melting pot so as to see if better and more cost efficient alternatives were available which in the short term might save jobs and in the long term create even more employment. Let’s take each of these issues one by one. First there is the issue of 4 weeks annual leave. Is 4 weeks annual leave too much? Is it an impost on small business? The real problem is that we once, not too long ago, received 3 weeks annual leave, but at a time when unemployment was high the government at the time in their wisdom thought that by creating an extra weeks annual leave, unemployment would be reduced and so it was. Now, having said that, it would be very easy for the current Government to extend the current 4 week annual leave provision to 5 weeks. If this was done it would reduce unemployment immediately. The obvious problem is that business can not afford to be paying 4 weeks annual leave let alone 5. Business needs to see annual leave entitlements reduce not increase. The obvious consequence of reducing annual leave entitlements is that it would inflate unemployment. Perhaps a good common sense solution would be to reduce paid annual leave from 4 weeks a year down to 3 weeks a year, but, compel all employees to take a further 2 weeks unpaid annual leave. This would go a long way to alleviating some of the pressure on unemployment.

The next issue is one which has already begun to emerge and that is that instead of a business retrenching 20% of its work force the collective decision of all its employees to work 20% less. That is, all employees agree to work a 4 day week instead of a 5 day week. This is a good example of the thoughtful sacrifices employees can make for the long term viability of the businesses they now work for Mr Griffiths said.

Another payment to employees that is unusual is that of the 17.5% holiday loading. This is something that was introduced as a means of compensating miners who were seen to be disadvantaged when they took annual leave because they were deprived of participating in productivity bonuses. When the miners managed to negotiate this 17.5% loading so to the rest of the Australian workforce benefited. But now we should ask “Is it an impost on business? Is it something we really don’t deserve?”

I guess it is just one of the issues that should be aired in some discussion or open forum Mr Griffiths said.

Workers compensation is another cost that puts undue pressure on business. I do however recognise the importance of providing a safe working environment and this is something that is difficult in which to find the right balance. There was a time when there was little prospect of suing an employer and it may be that this issue together with sick leave entitlements and even long service leave should be reviewed collectively. What if it became compulsory for all employees to prove to their employers that they each held a comprehensive sick and accident insurance policy? It may be that it is better for all concerned to consider an increase in every salary on the basis that employees all protect themselves and cover their own individual risks with appropriate insurance cover. Just as sole traders and professional people in small business and private practice have to do now. Long service leave was something that was in existence long before the introduction of compulsory superannuation and in many respects then seen as a reward to the employee for their loyalty. There are some who would argue that employers are now paying a contribution to employee’s retirement which in many respects parallels the intentions of long service leave except that it is instantaneous and does not come with any qualifying period. It is also quite a bit more lucrative for the employee Mr Griffiths said.

Mr Griffiths went on to say “Perhaps one of the most disliked and seemingly unfair taxes is that of Payroll Tax. Instead of encouraging business to employ people we find that in this country we impose a tax on employers as they dare to employ more staff.

This is a good example of how governments can participate in helping business become more competitive. They need to seriously consider how they can sacrifice this unjustified tax and hopefully announce it’s cessation as soon as possible.

Mr Griffiths said he believed that all parties’ concerned need to come to the negotiating table as soon as possible and start addressing issues like these. It could well be that if these issues are not addressed now; the opportunity to better position Australian Business and the Australian Workforce will not re-emerge until it’s all too late.

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