Since the discovery of the novel coronavirus (COVID-19) at the end of 2019, life as we know it has changed dramatically. Shops are closing, people are panic-buying essentials, whole countries are being put in lockdown, people are stuck thousands of miles away from home. Social distancing is the new compulsory trend of 2020.
Amidst all this craziness, there is the financial stress that people will experience. While some employees may be able to work from home and be covered by the government’s financial relief package, many business owners are unsure of how to deal with this unprecedented situation, facing and fearing the unknown.
However, all is not lost. There are things business owners can do to minimise risks for themselves and their staff, not just regarding their health, but also to keep their business going until this crisis is over.
I’ve put together some information for you that will assist you in managing your business during the lockdown and planning for the “new economy” that we will be in after COVID-19 has been brought under control. Note that as the situation changes and government assistance packages are rolled out, I’ll try and keep this page updated so that it continues to be relevant and useful. Some of the information below you may already have covered. If so, just click a link to skip to a section that you think will help.
- Why Is COVID-19 Is A Big Deal?
- How Should I Manage My Staff During The Outbreak?
- Government Financial Support For Businesses
- Best Practice Workplace Hygiene For Essential Services
- Continuity & Contingency Planning
- Blue Sky Thinking – New Opportunities
If you think there is information that is missing or incorrect, please get in touch. I’m going to be updating this page over time.
1. Why Is COVID-19 A Big Deal?
There is a lot of misinformation out there about COVID-19 (Coronavirus). I’m not going to repeat it all here in order to explain why it’s wrong but I would like to clarify a few things so that it’s clear that this particular disease is something to be taken seriously.
COVID-19 is not the only nasty disease around. In the last 20 years, there have been outbreaks of Ebola, SARS, MERS, Swine Flu (H1N1) and Bird Flu (H5N1). These diseases arose because an existing virus evolved (mutated) to be able to effectively transmit among a human population.
SARS, MERS and COVID-19 are from a family of viruses called coronaviruses. As some of the names above hint, coronaviruses are “zoonotic”, meaning that they can (rarely) be transmitted from an animal to a person. This is why you may hear talk of COVID-19 originating from bats, which are the number one suspect for the animal of origin. They are called “coronaviruses” because when viewed under an electron microscope, they appear to have a crown or “corona” of club-shaped spikes on their surface. Nothing to do with Corona beer – keep that for the lockdown!
What makes COVID-19 dangerous?
It’s an undesirable combination of factors.
It is highly contagious. COVID-19 can be transmitted by small droplets when an infected person exhales or coughs. This is why it’s important to maintain distance from other people. People carrying COVID-19 seem to infect around twice as many people as those with influenza.
Carriers can be asymptomatic (show no symptoms). COVID-19 can be spread by people who display no symptoms. This may be because they are in the first few days of infection or it may be because their symptoms are too mild to cause concern. Treat all symptoms seriously.
It’s more deadly than “the flu”. Seasonal influenza kills around 0.1% of people who contract it, whereas COVID-19 has a death rate of around 3% overall (this number is changing over time as we can’t be sure how many undetected or asymptomatic cases there are). However, this can be misleading, as the most vulnerable people are those who are “immunocompromised”. This means that their immune system is weakened, leaving them less able to fight off infections and disease. This group includes people with cancer, those with chronic health conditions (such as diabetes) and those undergoing some treatments, such as chemotherapy. Older people are also disproportionately affected by COVID-19 due to weaker immune systems. The mortality rate for our oldest citizens with COVD-19 could be as high as 20%.
Higher hospitalisation rates. China’s experience of COVID-19 showed that hospitalisation rates were around 10x that of the flu and the length of time in hospital was also around double the average for influenza patients. Around 20% of infected people are expected to require some sort of hospitalisation, with 1 in 5 of these people needing intensive care. Bearing in mind that our health services were already under pressure before this outbreak, the added demand from COVID-19 patients will put hospital services under further strain.
This is why the NZ government has taken such extreme measures to combat this virus. This combination of factors are cause for real concern. The more we isolate, the slower the virus will spread. Health services won’t be overwhelmed and collateral damage will be reduced. If we can starve the virus of any new victims, the people who recover will have immunity, it can’t spread and it won’t be able to mutate into something even worse. Remember, it’s not necessarily about you, it’s about protecting all those people who have weaker immune systems.
More reading about COVID-19
2. How Should I Manage My Staff?
As business owners, we want to keep disruptions to a minimum and continue day to day tasks as much as possible. Depending on the alert level the New Zealand government announces for any given period of time, only essential businesses may be able to operate as usual, while the majority of businesses and institutions will have to remain closed.
Any advice given here will be dependent on what options are available to you given your personal situation.
Flexible Staffing & Retention
With everyone’s needs changing, temporary closures of schools and ECE settings or staff needing to stay home to self-isolate or take care of a loved one, you will need to develop contingency plans that allow enough flexibility for staff members to work variable hours and shifts among different parts of the company where possible. That includes providing adequate training for anyone who might need to be working in a different department before additional help is actually required.
Expect and calculate for illnesses that will lessen each employee’s productivity and consider flexible leave arrangements during the crisis. Adjust your company goals accordingly and discuss business priorities with your staff.
Flexible Workplaces
Where possible, ask your staff to work from home to minimise risk of infection. Introduce video conferencing and make use of cloud-based applications to ensure everyone is still working collaboratively despite lack of face-to-face communication. Ensure each staff member has the necessary equipment at home, including computers, laptops, printers and whatever else is needed, as well as access to a remote repair service if technology fails. Plan ahead for potential IT replacements when broken items can’t be fixed or repaired remotely.
Employment Options
Before making any decisions, you should become familiar with the financial support packages that the government is making available to employers, sole traders and self-employed people. There is a wage subsidy scheme available for staff. See the following section on Government financial support.
Redundancies may be inevitable for some businesses to maintain any chance of survival. However, there are downsides to this. If your business needs employees with special skills, there is no guarantee that these people will want to return to your business. They may even become your competitors. Ensure you get advice on the correct process before acting.
Restricting hours could be an option to manage cash flow and to maintain a relationship with your employees while still offering relatively normal service to reduced demand.
Taking leave is an option for businesses that are still able to pay employees but don’t have enough work for them to do now. Some businesses have significant financial liabilities to employees who have worked hard for them through the boom years without taking all their holiday time. This could be an opportunity to reduce that total.
Leave without pay. Not the best option from the employees point of view but it is an option to retain staff. Check on this with your accountant. It would be better to be able to use a wage subsidy to provide some income but the subsidy requires the employer to “try your hardest” to pay 80% of their normal wages.
3. Government Financial Support For NZ Businesses
The government has announced an extensive relief package to support businesses and those earning income through self-employed activity which is already being rolled out. See links below.
Wage subsidy scheme
In order to be eligible for payments, you need to prove that your revenue has declined or is expected to decline by at least 30% over a period of at least 4 weeks between January and June 2020 due to COVID-19. The 12-week subsidy is $585.80 per week for each full-time employee who works 20 hours or more and $350 per week for each part-time employee who works less than 20 hours. The total amount will be paid in a lump sum to employers.
Leave and self-isolation support
Anyone who needs to self-isolate, has fallen ill from COVID-19 and therefore can’t work or is caring for dependants who are sick or in self-isolation, will receive financial support for 8 weeks starting mid-March. Full time workers are eligible for $585.80 per week, part-timers can claim $350 per week. Due to the nature of the current pandemic likely coming in waves, requiring several periods of self-isolation, employers can apply for this scheme more than once.
Business cash flow
To help businesses overcome the financial crisis due to loss in clients, customers and potential shutdowns, the government has announced a range of business cash flow and tax measures. For the tax year 2020/21, the provisional tax threshold has been increased from $2500 to $5000 and the small asset depreciation threshold was raised from $500 to $1000 for the same period. Furthermore, depreciation on commercial and industrial buildings will be an option for the next year.
Tax relief
For businesses that are experiencing significant financial hardship due to COVID-19, the Inland Revenue Department has announced several options to help with tax obligations. If you have any outstanding tax to pay, you can either arrange for instalments or apply to be relieved from those payments based on hardship. The IRD is also offering to re-estimate your provisional tax if you suffered severe losses and to pay out early refunds should you have overpaid.
Business finance guarantee
If your business had a turnover between NZD 250,000 and NZD 80,000,000 at the end of the 2019 financial year, you may be eligible for a business loan that will mainly be underwritten by the government.
There are some limitations on eligible activities and the loan can only be used to meet liquidity or bridging finance needs due to business disruption from the COVID-19 event. Below are the links to each banks pages detailing requirements.
Small asset depreciation
This will make a really big difference to some businesses. It allows capital purchases from $500 to $5,000 to be written off as expenses for the 2020/21 tax year, instead of being capitalised and depreciated over time.
This is an excellent opportunity to invest in new capital purchases such as website design (no bias there at all) and get an immediate, significant tax-deductible expense. This will stimulate other businesses, allowing them to spend and also reduce your costs, allowing you to spend.
Useful Links
4. Best Practice Workplace Hygiene For Essential Services
We need to be flexible and minimise risks for our staff. For those businesses that remain open, the following guidelines will help keep staff safe and minimise risks of spreading COVID-19.
Displaying new hygiene posters to remind staff of regular hand washing and other hygiene practices to prevent the spread of COVID-19. Don’t rely on old signage, as it has become invisible over time. A Whangarei sign writer is offering COVID-19 signs at cost to local businesses. There may be businesses in your area offering similar support at a time when businesses are under financial stress – ask around!
Encourage your employees to practice physical distancing at work which includes substituting the traditional handshake or hongi with a wave or a simple smile. You could even encourage the “East Coast wave”.
Consider staggered meal breaks or allow staff to have their lunch at their desk to minimise big congregations in the tea room. To avoid overuse of typical germ strongholds such as doorknobs, think about leaving doors open or use door stops which allows people to use their elbows rather than their hands to enter.
Make sure you know who among your staff is most at risk due to age or underlying medical conditions and support them by changing their work hours or workplace. Ask anyone within your company as well as clients, customers and suppliers to stay away if they are feeling unwell.
Minimising contact with clients or customers and notify them of your changes so they still feel appreciated and not ignored. Your staff and customers are already stressed. The last thing you need is for them to take that out on each other!
Useful Links
5. Continuity & Contingency Planning
Nobody knows how long the coronavirus will slow down our economy. Even once a vaccine has been found and life goes back to normal, businesses will be likely to feel the effects for months or years to come.
For many businesses, it may not be possible to continue working at all due to being unable to access their premises. The cost of a commercial lease is obviously a concern and a significant ongoing expense. As you may have seen in the media, there is some legal provision to lower lease payments under certain types of commercial lease agreements. You may also have some recourse under other commercial contracts using “Force Majeure” or “Act of God” provisions.
Don’t ignore your financial obligations. If you think that you might not be able to make payments you normally could. Now is the time to talk about it. Government is working on plans to provide further support to businesses. Get in touch with your bank, finance company or mortgage broker and discuss your options with them. Interest rates are hitting new lows and borrowing has never been cheaper. Even the IRD is waiving penalties for businesses that are having problems paying. Be proactive and ensure that people you deal with know that you’re managing the situation.
One of the most important tools to overcome any kind of business disruption is having a business continuity plan in place. It should outline the most vital parts of your business that you simply can’t do without, such as supply chains. It should highlight any potential risks those areas may encounter and your Plan B, showing how you will keep your core parts running in times of a crisis.
Think about sourcing new supply chains, find new customers using different tools and media approaches and review your marketing strategy. It’s never too late to develop and implement a contingency plan.
- Identify key products and services
- Identify key internal people
- Identify key connections
- Identify essential equipment and supplies
- Consider relocation options
- Consider insurance options
- Identify management options
- Maintain a list of key contacts
- Back up important data
Useful Links
6. Blue Sky Thinking – New Opportunities
As well as reviewing your business as it was, consider that this event is unlike anything else we have seen in our lifetimes. Use this time to look for macro trends that will affect your business in the future. Macro trends are a long-term shift in direction that affects a large population. In this case, we have a number of different things that could effect significant paradigm shifts.
People get used to staying home more and working from home
I wouldn’t want to be a commercial landlord after this. Not only are they taking a beating with demands to lower their leases but there’s a good chance that their tenants have realised that they like working from home and actually don’t need a commercial premises.
On the other hand, spending more time at home will make people realise that there are a lot of jobs to do. Perhaps they think that they should spend more money on their homes to make them more enjoyable and more comfortable. This thinking is likely to flow on to numerous businesses such as builders, electricians, plumbers, roofers and house washing companies. Judging by the crowds at the DIY stores just before the lockdown, this is a fairly predictable reaction.
People have the time to come up with new business ideas
Boredom sparks creativity. Being stuck at home provokes people into questioning where their life is going and whether or not they are happy with their work situation. This enforces “alone time” will spark a whole new range of new business ideas that will underpin new growth in our economy.
This time to think might also reflect on their view of their education, relationships, finances and work. In turn, we can expect a boost in interest for educational services, divorce lawyers, financial advisers and services relating to business.
Some people will realise “how short life is”
Why not buy those things that they always wanted or travel to those places they always wanted to go? People with money will be more likely to spend it on themselves. High-cost luxury items will likely see an upturn in sales. That may be things such as custom jewellery, cosmetic beauty treatments, cars, boats or tourism, which is a major part of our economy and likely to be depressed for months to come. It will take some time for the virus to be controlled on a global scale, even if we manage to get it under control quickly here in New Zealand. This means that international travel will be severely limited. However, we can expect to see an upsurge in domestic travel bookings as Kiwis choose to play it safe and holiday here. Once we’re back to normal, it’s your job to spend your money within our borders. Go and visit somewhere you’ve always wanted to go.
Other people will realise how unprepared they are
If you’re selling anything that makes people feel more secure, there will be a positive reaction to your business. This event will be a real boon for financial planners, insurance brokers, the health and fitness industry, security consultants and lawyers.
Online businesses will get a massive boost
It’s like an experiment to create a massive enforced training camp for online shopping right now. Netflix has had to throttle its bandwidth in Europe due to the sheer number of people using their services. There is likely to be a similar boost in online gaming and shopping.
If your business is online (why wouldn’t it be?), you should be considering how you’re going to take advantage of this marketing opportunity. As odd as it seems to those of us that are already “connected”, there are a lot of people who just don’t use the internet for anything more than email.
My 83-year old father has just done his grocery shopping online for the first time ever. Who knows what could happen next? It’s only a matter of time before he discovers he can order single malt whiskey online!
I think that this time to discover what is available online will open a lot of people’s eyes to hobbies new and old, such as; home brewing, wine-making, gaming, bone carving, gardening, photography, sewing, meditation, exercise, cooking, archery, scrapbooking… etc etc. Someone has to provide for these people.
Not all businesses will survive
Unfortunately, some businesses will be so overwhelmed by this event that they will have to make severe cutbacks. Some will be forced to shut down. Air NZ has seen revenue cut by around 90%. Without government support, this would have seen them go under. Smaller businesses will not be so lucky. Most of us will see some drop in revenue in the short term. Now is the time to ensure that you will be in a strong position to bounce back once things return to some semblance of normality.
There’s a saying; “He who has the gold makes the rules”. In this case, it will be; “Whoever is left with gold, can afford the marketing”. If your business comes through this but can’t afford to kick your marketing back into gear, then all that time you haven’t been reminding people you exist will count against you. There is a “cone of opportunity” that will gradually close down for the chance to pick up new customers or gain other businesses customers if they haven’t responded quickly or effectively enough.
There will also be opportunities that arise due to the misfortune of other businesses that aren’t able to come out of this situation intact. You may be able to acquire stock, plant or equipment from other businesses that weren’t so well prepared as you were. They may wish to get out of the business entirely or sell off a part of their business to stay afloat. At the very least, the surviving businesses will see fewer competitors in their market sector.
There are still things you can control
This is a chance like no other. When was the last time you had this much time to work on your business instead of in it? When will the next time be? This is a good time to review your business plans and work on your own personal skills.
There are many areas where you have control over how your business fares during this time. One of them is communication with your customers. If your workload has lessened, this is an excellent opportunity to make contact with your customers and enhance your relationship with them. If you have even more time, you can check in on people you wish were customers! The idea is not to hunt for business but to genuinely show that their personal wellbeing and their own business is as important to you as the business they have given you.
How long this will go on is unclear. How well prepared you are when it ends, is up to you! As always, if we can help with your Website Design, Hosting, Search Engine Optimisation, Google & Facebook Ads, please get in touch.
Hopefully, this blog has provided a little light at the end of the tunnel. It’s not all doom and gloom. As well as protecting your income, remember to take the time to look after your loved ones. That’s why you’re doing this, isn’t it?