A key-person is someone who your business relies on to be successful.
The key person might be you, the business owner, or it could be the sales manager, whose contracts and relationships with the customers keep sales on target and therefore the business is profitable.
So, who are the key people most likely to be?
- Owner
- Managing Director
- Sales Director
- Finance Director
- Product Designer
- Production Manager
- Specialist Staff
- Technical Staff
How do you protect your business from the damage that could be done if your business was to lose a key person?
Firstly, it’s important not to overlook actually retaining these people. This could be as simple as, how do you stop them from leaving, or looking elsewhere? Aside from getting their pay levels right and creating a good working environment for your employees, it could be valuable to consider other ways of increasing the appeal of your staff’s overall ‘package’.
Employee benefits are a great way to do this. This can be something as simple as Death in Service, which gives your employees the peace of mind of knowing that if they were to pass away, their family would receive a cash lump sum. It’s relatively low-cost to set up, as the cash sums tend to be reasonably low, for example, 1- or 2-times salary. Death in service is probably the most common employee benefit, but there are other things like enhanced sick pay, private medical insurance, and voucher schemes that might appeal.
- Enhanced Sick Pay
- Private Medical Insurance
- Dental Care
- Death in Service
- Voucher Schemes
Additionally, you could increase your employer contributions into the workplace pension you have set up. Any business with at least 1 qualifying employee should have a Qualifying Workplace Pension. The minimum employer contribution is currently 3% and employee contribution is 5%. Maybe an employer matching contribution up to 4 or 5%, if it was affordable, would go down well? This would really help to boost the pension- with contributions of 10% per year going in, it would show a ‘supportive’ side to the employer, and it would reduce the business’ tax bill, too.
A final idea to leave with you on retaining staff is the idea of awarding shares to employees as a reward for loyalty. This would require mention in your shareholders’ agreement to ensure the business is protected, but it’s a great way of making sure your most important people are firmly part of the team and want to participate in the success of the business.
So, you’ve done all you can to retain the right people, but sometimes this isn’t always possible. Some things are beyond our control. The death or illness of a key person can have a devastating impact on the future of your business.
This is something that you can protect your business from, by insuring your business from the financial impact of the loss of a key person. This can be arranged in whichever way suits your business, be it a regular income to your business if a key person is off sick, or a large cash injection if you were to lose a key person permanently due to death or a very serious illness. Whichever way works for you, you can ensure that the business has an additional income source at a difficult time. You can use it to recruit and pay for a replacement, pay a temp agency, or simply to boost your cash flow at a time when turnover may decrease due to the missing member of the team.
The level of cash your business needs it up to you. The insurance that provides this- Key Person Cover- can be tailored to meet the business’ needs.
If you wish to discuss the contents of this blog post please contact corryn.wild@three-counties.co.uk or telephone the office on 0191 230 3034.
Disclaimer: The above content does not constitute financial advice. Your circumstances may differ from those outlined and you should seek advice which is relevant to your own situation.
