Mart and Rob Drake-Knight set up their first small business, Teemill, in a garden shed.

From tinkering with Epson printers to building factory robots from old eBay parts, the pair built the first open-access circular fashion supply chain from scratch.

We will share how they went from building robots in a shed with old eBay parts to running a high tech printing on-demand business with customers such as Google, the BBC and Joe Wicks.

Snap straight to the advice here:

You can base your business anywhere you want

There are business opportunities to be made out of sustainability

You can start up a business with little to no money

Innovating with technology is best done in small steps

Businesses should solve a problem

Shorten your supply chain by forming direct relationships

Prevent silos and build a connected supply chain

The circular economy may require redesigned products

Happy customers equals growth and profit

Look at using renewable energy

Designing waste out of your products and processes

Iterative development is constant improvement

Expect to make lots of mistakes

With experience, you can manage the highs and lows of the business easier

Make sure everybody in the business plays to their strengths

Recruit people in the way it will work for your business

If the problem you’re trying to solve exists, you still have a business

You can base your business anywhere you want

Bex Burn-Callander:

Mart, thanks so much for joining me. Are you on home turf? Are you in the Isle of Wight right now?

Mart Drake-Knight:

The west of the Isle of Wight, just down by the needles. It’s a great place to work. The factory site I’m in now is about a mile from Freshwater Bay, the Isle of Wight surf mecca. Lunch breaks, we can go to the beach and stuff. It’s wicked.

Bex Burn-Callander:

That is amazing, and you surf as well, so you get the ultimate work-life balance.

Mart Drake-Knight:

Yeah, surfing and working. There are a few decent WhatsApp groups if you want to get into surfing here. It’s a nice place.

That’s the good thing about the internet. You can work somewhere like this if you want and grow a meaningful company because you can reach many people worldwide. You can base it wherever you are, and for us, this is home.

Bex Burn-Callander:

How did the journey of Teemill start? Take me back to the origins of the business in 2009.

Mart Drake-Knight:

It’s always nice to talk about it because I think when you’re busy growing your business, we’re bad at stopping and remembering these things. If we were doing it again, I’d probably take more photos!

We started in a garden shed on the east of the Isle of Wight, belonging to my mum and dad. I was 19, and my brother was 21.

It was 2009, so there were no jobs. We were naive, which was quite helpful. We looked at the clothing industry, thought there was a massive problem, and wanted to do something about it.

There are business opportunities to be made out of sustainability

Bex Burn-Callander:

What made you think about the clothing industry, though? I remember being 19 or 20 and not focused on anything altruistic whatsoever. What focused your minds on that?

Mart Drake-Knight:

In the clothing industry, around 60% of clothing is made from plastic. Three out of five T-shirts bought today will be thrown away within a year, and most of that is landfilled or incinerated.

You’ve got a dump truck a second of what is plastic textile waste getting burned or buried, and that’s completely unsustainable.

I don’t know if it was altruism, but it came from a well-meaning place.

We asked ourselves, “Why don’t we make clothes from natural materials instead of plastic? Use renewable energy instead of fossil fuels, and surely you can make clothes from old ones like recycling. Surely that can work.”

We decided to have a go.

Probably the most important thing was that we just couldn’t buy the products we wanted to see in the world.

We just thought, “Why don’t we just make some?” That’s how we got started.

You can start up a business with little to no money

Bex Burn-Callander:

You started in a shed. So, what was your first goal?

What was the first thing you bought, and what was the first thing you did to get this business off the ground?

Mart Drake-Knight:

We had £200. The first thing we did was buy business cards for £100, which was completely stupid.

I don’t know why we did that.

One of the first things we learned was that everybody’s doing it a certain way is part of why sustainability is a problem. So, not having money or resources was helpful for us.

I am a big advocate of the zero pound startup.

In sustainability, it’s relevant because it makes you resourceful and innovative for materials and designing out waste. Increasing utilisation and making more of what you’ve got is one of the most important things about the business of tomorrow

So we said, “Let’s see if we can make some T-shirts.”

We had a website that we couldn’t afford to pay for, so we learned to code through googling. We couldn’t design T-shirts, as I’m not very good at drawing, so we googled that as well.

We decided we would try and make products after they’d been ordered, which was probably the first good idea that we had.

Bex Burn-Callander:

How did you do that?

I’ve seen notes about you taking an Epson printer and then trying to pimp it with extra parts. What was that all about?

Mart Drake-Knight:

The thing about having not much money to spend is it forces you to get hands-on, understand how businesses work, where stuff comes from, and how you make clothes.

But you’re not interested in how businesses work so that you can copy them. You want to go and find out so you can change it and make a better one.

So we looked at how T-shirts are usually made, and it’s just completely insane.

You have screen printing. You cut a hole in a mesh and smoosh ink through it one colour at a time. There’s lots of work to set up the presses and lots of waste, and it only makes sense to order hundreds of T-shirts at a time.

At this time, you have to make T-shirts through mass production, which the current system is built around.

We said, “This is stupid. You should be able to make it in full colour, in real-time, one at a time, with no setup. You only make what people need when they need it without any waste.”

We didn’t know it at the time, but it was quite a good idea because we don’t utilise 40% of all clothing production.

Companies make clothes speculatively en masse, and 40% goes straight through, never sold, in the bin. It’s crazy.

By designing out that waste, we saved the equivalent of 40%. We could see efficiency and a return, allowing us to invest in other things like renewable energy and organic materials.

To do that, we needed to build a new type of factory.

I think there are five or six Teemill facilities now—a network of factories, so it’s serious. Each one’s about the size of a football pitch—two in the Isle of Wight, one in Europe, and two on the UK mainland.

When we first started, we were just trying to make our own printing machines.

We used to cycle down the road to a guy. Every time we got an order, we’d cycle down the road to use this machine. This other guy had to do one part, and then we’d cycle back to our house to do this other bit.

It’s just mad, but I guess what it taught us was it is possible to make things in real-time.

It was an office printer with T-shirt inks in it, and we wrote the code to automate parts of it.

Now it’s more advanced, and we’ve invested in the technology. We can print two full-colour T-shirts in less than the time it takes to make a cup of tea.

What’s different is that we only make what people need using technology when they need it. The thing that came out of the resource-constrained problem we had was that we needed to develop new types of technology to make producing clothes more efficient.

Those efficiencies have driven the growth of the business.

Innovating with technology is best done in small steps

Bex Burn-Callander:

It’s fascinating because developing new technologies sounds quite terrifying, but what you’ve explained is that you started creating new technology by tinkering in a shed with some old printers, which is a lot more accessible for people thinking about trying to tackle problems.

It’s a lot easier to imagine that than where you are now, which is full-scale robotics and high-tech stuff. It all started with this small step.

Mart Drake-Knight:

Yeah, you’re so right about that.

Imagine if someone said to me, “If you want your business to succeed, you need a fundamentally different technology and completely different supply chain design”.

I can’t do that. I’m 19 and from Shanklin.

I will say, though, that it’s never been easier. We were pretty lucky because we were the first generation with high-speed internet, affordable laptops, and access to whatever knowledge you needed via Google.

I don’t think people even 20 years before that had that, plus access to the economy in the sense that we can send stuff all around the world from the island.

There are some great technologies we have, with the team of factories heavily automated.

There are many robots in the factories at essential stages, such as automating parts of the packing process, making it affordable to design our single-use plastic.

But the technology doesn’t have to be from a laboratory or some multinational.

We built our robots with Raspberry Pis, which are like educational computers for kids.

These can cost about £20, and we developed this little clip thing that clips on to them, turning a little kid’s computer into what is like an industrial robotics controller,

The people who build all our robots aren’t formally trained, technology graduates. Adam, who’s easily our best robotics engineer and amazing, worked on a farm before working in our robotics team.

We’re enabling technologies. Tech doesn’t do anything on its own. It’s like a chainsaw sat in a corner.

You need to pick it up and do something with it, and I don’t think enough people are encouraged to have a go.

Businesses should solve a problem

Bex Burn-Callander:

You’ve taken a traditional approach to the supply chain, shaken it up, and come up with something new. How did you do that?

How did you create this new relationship with farmers? Bring in organic? What’s the process?

Mart Drake-Knight:

The hard thing was the most important—having a conscientious approach to technology. But the reason we did that is that we based the business on solving a problem.

I think a lot of people forget that. When they say, “I want to start a business to make money.” That’s not a business.

Businesses should solve a problem for society, and profit is society’s way of rewarding you for contributing.

So, we were trying to fix clothing.

One of the things we met with organic cotton and renewable energy was pushback for trying to do the right thing. It’s cheaper to be bad, and it hurts to be good.

Indeed, that’s the wrong way around.

What we needed to do was to go around the supply chain and find efficiencies.

One of our highest costs was raw material and organic cotton. With the linear economy, we usually give the customer a T-shirt and then throw it in the bin when they’re done. You grow some new stuff, and they pay for it again. It’s stupid.

Why don’t you give it back to me, where I’ll chop it up and re-spin it?

We didn’t know it at the time, but that’s what people today call a circular economy. It’s hard to do because there’s a lot of engineering involved. There’s lots of design because you need to design the product from the start to come back and be remade.

Every product we make is designed from the start to be used again.

We give our customers money off their next order in return for the material. We use that material, chop it up and make new products from that material.

Instead of creating waste, we create new products from it. That’s the circular economy in action.

Fundamentally it saves money because the customer gets money off their next order, and the environment doesn’t have a whole lot of waste and resources ripped out of it.

It’s a win, win, win.

Shorten your supply chain by forming direct relationships

Bex Burn-Callander:

Am I correct that you now have relationships with the farms that grow the cotton, so the supply chain is shorter even when you need more raw material?

You’re not dealing with too many intermediaries. How did you create that direct relationship?

Mart Drake-Knight:

Yes, it’s an interesting question. The weird thing is that people think many sustainable business principles create more expense, but it’s cheaper and better if you get it right.

What most people do is they buy from a supplier, who buys from an intermediary, who buys from a distributor, who buys from a wholesaler, who buys from someone on the ground.

Whereas if you go to the field and buy it from them, you could afford to pay them more and get your raw material for less, plus you can have conversations with them.

Going to an organic cotton farm is fantastic.

There’s a farmer whose whole family has been growing cotton forever organically. There are non-organic farms a couple of miles down the road, as it’s up to you what you do out there.

The amount of insect life is unbelievable. It’s mostly cow poo and co-planting.

If you plant different crops together, and the insects prefer the other ones, you get less cotton, but you can charge more for it, as the ground’s clean. Then you can grow onions and other stuff in the dry season,

You talk with the farmer, and they’ll say whether they can do this or that and the problems they may have.

It’s incredible.

As a designer, you don’t realise how much responsibility you’ve got until you do that.

Linear supply chain sequences can cascade to cause all these problems for people worldwide and create a lot of waste, whereas if you go and ask them, they can tell you the sequences are a complete nightmare.

As a designer, you’ve got the power to stop a linear sequence. I don’t know how designers and brands have been getting away with it for so long. Everyone’s blaming customers, but often they haven’t got a choice.

Designers and brands need to buy differently, choosing to avoid linear consumption and waste, which they can do.

Getting out there as a designer, meeting these people and collaborating, is the best part of the job.

Prevent silos and build a connected supply chain

Bex Burn-Callander:

That is so interesting. To make a fit for purpose product, you must connect to the raw material, customer, and whole production technique, to design the right thing. Nothing can happen in a silo.

All the information must be in one place as a connected system.

Mart Drake-Knight:

But before you build that, why are you making the product?

I think people make products without working that out. They’re saying, “I don’t know, to make money.” That’s not good enough.

There must be a reason for this thing to exist in that form, so why have you used that material? Why haven’t you questioned it?

I suppose it’s been easier for us because we knew why we were doing these things. It’s incredible when you’re going around meeting the people that do this stuff, listen to their expertise, and respond to it.

When we started with traceability, someone quoted what we were doing was game-changing. We just thought it was common sense, which is one reason why naivete is sometimes quite helpful.

We’ve had great advice from people who’ve been there and done it in our growth, but we benefited early on in having a complete, fresh look, as there is no fashion industry in the Isle of Wight.

There’s very little industry here, except for ice creams and Teemill now.

You want to be super curious about how you make things because fundamentally if you want your business to succeed, you need to do something different and better.

That means changing things.

The circular economy may require redesigned products

Bex Burn-Callander:

With this circular economy, you wanted the T-shirts to come back when they weren’t worn or wanted anymore. How did you do that there?

I know you said that you had an incentive with money off, but people can be lazy. How did you get over those barriers to get them back?

Mart Drake-Knight:

That’s a great question.

First, we designed the product, so it made sense to us that we would get it back. That’s the most important thing. If someone makes something with plastic (even recycled plastic), you can end up with plastic polluting and environmental problems.

The reason why a lot of people don’t recover that waste is that it’s no good.

If you design a product so you make it from a uniform material instead of a mixed material where you’re trying to get an egg out of an omelette, suddenly you can look at that as a business owner and go, “I want that back.”

When you want the product back, instead of feeling like you must take it back, you start taking it more seriously.

Many people say behaviour change is the problem, but I think it’s pretty lazy to blame the consumer when they haven’t got a choice about the type of places where products come from.

Then we just incentivised it with money by saying we’ll give you £5 off your next order and made it easy for them.

You scan a code inside the product, get some automated communications, scan it on your phone, which will tell you what to do, and then free post it back.

I guess what we banked on was that there’s one thing that people never do: throw money in the bin. When people started seeing their wardrobe as money instead of trash, their behaviour changed instantly.

Bex Burn-Callander:

This is gold. Take this nugget of gold. You know it’s gold, and we know it’s gold. No one throws gold away.

Mart Drake-Knight:

It’s funny because I wrote an article which is about that. “We’re looking around at these mountains of waste, and we never realised the whole time they’re mountains of gold.”

Sustainability is a gold rush because there’s so much waste everywhere in every industry.

All you’ve got to do is design it out, and your business is more efficient, more competitive, potentially more profitable, and will grow.

Happy customers equals growth and profit

Bex Burn-Callander:

You’ve got twin businesses in Teemill and Rapanui. Tell me about Rapanui.

Mart Drake-Knight:

When we started, we built the brand Rapanui because who doesn’t want to build a clothing brand when they’re 19?

Then we realised this might be a good thing that we’ve built here.

We realised that we could fundamentally change things with the technology we’ve got. We could make products from natural materials using renewables, designed to be remade without single-use plastic. And it was affordable.

We knew that we needed to scale Rapanui and were serious about making a difference. If you’re serious about a big problem, you need a big solution. You want everyone in the world to wear Rapanui, yet we struggled to get everyone in Shanklin to wear Rapanui.

We needed to share Rapanui, so we and put it on the internet as you do and gave it away for free on our platform, which is Teemill.

Teemill lets anybody build a free website and design their own T-shirts, all for free.

When they get an order, our technology and factory systems print them in real-time, ship them directly to the customer, and send the profit. There are about 10,000 brands from small to big, from BBC and the legend that is Joe Wicks down to just people like us.

What’s different is that they can do what took us 10 years in 10 minutes and start circular from day one. That’s how we’re trying to scale our solution.

Bex Burn-Callander:

You said it’s about having a problem to solve and not about making money, so it would make absolute sense to give this service away for free and let everyone else do it.

If you were thinking about profit, margin and what’s in it for me, it doesn’t make so much sense.

But how did that feed the growth of the business? Is giving something away for free good for business?

Mart Drake-Knight:

It’s funny because it’s counterintuitive. But a business profits because of the good that it does. The customer is better off first, and then they pay you. That’s what’s supposed to happen, but it’s incredible how many businesses say, “Well, we need to get paid and then maybe we’ll do something for the customer.”

It reminds me of Dave Grohl.

He said, “If you want to be a rich rock star, go to the garage and rock. And if you rock hard enough, eventually, you’ll be rich. But if you want to be a rich rock star and you try and get rich, you’ll never rock.”

It’s kind of like that.

It’s not—who cares if we make a profit? Because if we don’t make a profit, we won’t survive.

But the mission is why we’re here and why we need to profit to survive, not the other way around. It just doesn’t work.

Look at using renewable energy

Bex Burn-Callander:

You talked about finding efficiencies in the business, which pays for cool stuff like renewable energy.

Talk to me about this renewable energy journey, where you started and where you are now.

Mart Drake-Knight:

I studied renewables, such as wind turbine technology, and it was pretty frustrating it wasn’t more popular. From an engineering point of view, why do we use coal? It doesn’t make sense.

So we like direct action.

That’s one of the things that people don’t tell you about growing a business. If you’ve got a business, it’s successful, and you’ve got money, you can do a lot. So we bought a load of solar panels and planted a million tons of carbon-free trees.

You can buy change, which means renewable energy powers Teemill. I think we’re carbon neutral and got the Carbon Trust to study us. It will be certified soon.

Renewable energy is a bit more expensive per kilowatt, but we have technology and software that turns things in factories on and off, such as lights. If renewable is 15% more expensive, the trick is to see it as a connected system and find that 15% in efficiency savings from other places.

Honestly, it’s not that hard and almost a slightly disappointing answer to your question. How did we solve the renewable energy problem? We did it because we wanted to.

There’s on-site solar, so the lights here are powered by our solar array. In some places, we have wholesale power purchased from companies like Good Energy. In India and Spain, there’s solar and wind turbines as well out there.

There’s a wind turbine factory on the Isle of Wight, so there’s the proper infrastructure. It’s not cripplingly expensive and easy to do.

Solar panels are things you can contract someone to buy.

The technology costs money, but not a lot of money. People love it. Businesses can sort out environmental issues directly by buying more renewables and fewer fossil fuels. It’s a way that businesses can do something about sustainability issues directly,

Bex Burn-Callander:

On that point about sustainability, I’d like to get a complete picture because I think it might be inspiring for anyone who’s starting a business and thinks, “What are all the things I could do?”

You mentioned planting trees. You’ve got the solar farm and buy renewable energy from a provider. You do the organic cotton and the circular economy, so the cotton gets remade into new T-shirts.

What else is in that mix? Did you say plastic recovery?

Designing waste out of your products and processes

Mart Drake-Knight:

Yeah. David Attenborough’s got the answer because he is who we should all be listening to. I think some kid asked him, “What should we do?” And he goes, “Don’t waste.”

If you can design stuff out, that’s the best thing you can do. In our business, designing out can feel quite hard.

There’s a difference between design and decoration. A lot of businesses, when they get their product, say, “Here’s my product. Here’s some packaging. Here’s some extra packaging. Here’s some material. Here’s a flyer. Here’s this other thing.” And they add and add and add and add.

Taking away is one of the best things you can do, and it’s cost-effective not to spend money.

Something called swing tags is a relic of resale. You tie them on to the clothing to display product information—got rid of those. Super annoying, and nobody likes them. Neck size labels—got rid of them.

You can design stuff out of your business, removing waste to save money. Waste is where sustainability and the economy line up.

If you have a Venn diagram, you’ll overlap sustainability and economy, with waste is in the middle. If you hunt waste, you can find many exciting opportunities. I think that’s pretty much true for pretty much every business.

If you save time and money, you can use that money to pay for stuff.

It’s true that plastic-free packaging, like paper packaging, is 10 times more expensive than single-use plastic. You can’t change that because recycling is more expensive than plastic, but you can make the packing time much faster.

This saves time and money, which we can use to buy more sustainable packaging. So go hunt waste.

Iterative development is constant improvement

Bex Burn-Callander:

Am I right in thinking that even with the dyes you use, you’ve looked at every element and reconfigured it so that it’s less wasteful and impactful on the environment?

So what’s different about the dye?

Mart Drake-Knight:

That’s a good question. Inks and dyes are the two sides of this, and it’s about the chemistry.

Inks are an interesting problem. We wanted to use water-based inks because they sound better. Then you have a synthetic or polymer-based ink that dries with one-seventh of the energy, which is better. But then, if you can get that energy from renewables, it doesn’t matter so much.

So, you flip flop. It’s not like you get up in the morning and go, “There you go, done.”

Some of these are problems for a reason, and it takes time to solve.

There’s a philosophy we use, which is called iterative development. It’s not like you’re ever just done. It’s a constant improvement process.

A lot of the ideas that we get are from Japanese car manufacturing books. One is called The Toyota Way, which is excellent, and they’ve even got specific words for things. There’s the word kaizen, which means constant improvement—you do that with everything.

Water-based inks are compatible with the organic standard. We can do that affordably because we’ve got renewable energy-powered driers, so it dries for free.

In the dye house, it’s water that’s the problem because it’s so wasteful to yank water out of a river, dye it, treat it, and then just mainly pour it back in the river. I think there’s quite a lot of TV programmes about these blue rivers.

The solution is to recover the water, distil it like at school and put it through sand. Then the wastewater’s clean enough to drink.

I think there’s a video on our website of me drinking this distilled water. We’re just reusing the water we’ve got, which is cheaper. So again, reusing what you’ve got removes waste, solves the sustainability problem, and saves you money, so your business can grow.

Bex Burn-Callander:

I remember you telling me that nothing can compete with reusability. There’s absolutely nothing that’s cheaper than reusing, which is why it should just be the first port of call for any entrepreneur.

Mart Drake-Knight:

It’s how nature works, right? Everything is reused. Waste from one process is fuel for the next.

Think about an old organic biodegradable T-shirt. If you designed it from natural materials and it’s compatible with nature, it will be a house for a woodlouse or something. You’re welcome, Mr Woodlouse.

But seriously, take it in a business context.

Imagine we have got competing bicycle brands. I might say mine’s going to be slightly cheaper. But if they’re disposable bikes, you’re pitching a bike, driving it to work, and throwing it in a bin. You buy another bike, you drive it back home, and you throw it in a bin.

Then I just come in and say, “My bike is 5% more expensive, but you don’t need to throw it in the bin anymore. It gets reused and reused and reused. I’m going to beat you.”

We see that everywhere.

With space rockets, SpaceX is dominating because of reusability, and that’s what we’re talking about with waste.

If you’re in a business that makes stuff and your customer throws it away, someone in your sector is going to make the link and go, “Hang on, what they throw away is our raw material, plus they’re our customer. We can reengage them by getting that stuff back.”

They’ll do it, reactivate the customer, cut their materials cost and win. What you want to do is make sure that person is you.

Bex Burn-Callander:

Have you seen that Teemill as a catalyst for change? These people come to you and build whole T-shirt brands on your technology.

Are they doing any cool stuff that’s pushing things even further?

Are they doing anything inspirational where you say, “Wow, I didn’t even think that was a way you could go with this?”

Mart Drake-Knight:

That’s the best thing about it, and to be honest with you, kind of unexpected. That’s why the iterative approach makes sense because if you just take it one step at a time and keep trying to improve, all sorts of weird things happen.

Some of the brands built on Teemill are awesome. Or people like Joe Wicks. A lot of charities that used Teemill made millions of pounds for charity last year.

Joe Wicks did something with NHS charities, selling tens of thousands of T-shirts. He raised hundreds of thousands of pounds using Teemill. Incredible. We came into work, and it was, “Whoa, who’s Joe Wicks?”

It’s excellent when famous people use it because it feels like it’s encouraging people to do something.

If you’re a young person, it’s easy to look around and think big businesses are taking the biscuit a little bit. But BBC Earth, for example, switched all their mass production for Blue Planet to Teemill. They have backed it and stuck by the circular economy.

They care, and that’s encouraging.

And then probably the highlight of my career was when the Chuckle Brothers built a Teemill store. You can’t top that, can you? It’s all downhill from here. That was the greatest ever. I almost said, “That’s it, you can’t get better than that.”

What gets me and everyone in the team out of bed in the morning is when young people build brands and use them for issues they care about. What we want to do with the business now is enable technology.

It’s incredible seeing how people are doing using tech to do good things.

Expect to make lots of mistakes

Bex Burn-Callander:

Have there been any times when you’ve got it wrong?

Any massive mistakes that you had to fix?

Mart Drake-Knight:

Quite the opposite. The whole thing has been a complete disaster from start to finish, but that’s growth.

That’s what no one tells you.

The whole thing is mistake after mistake after mistake. If you drew an X, Y graph, at the end is all of the stuff you’ve learned and at the start is all the stuff you’re going to learn. You’re going to be wrong most of the time.

All sorts of stupid stuff. Starting with the business cards—what were we thinking? I’ve probably still got them. It’s an internet business. What do you need business cards for?

And then the place burnt down, so that was bad.

The business was just getting going, and we’ve got this big factory. We were in a shed, then we were in a garage, and then we got a factory the size of maybe three or four tennis courts, sort of size. We felt we might have just about survived. We might not go bust.

And then I was walking back from lunch, and there was a lot of smoke over the top of the town. “Oh, there’s a fire. Let’s go and rubberneck.”

We’re walking down to figure out who’s on fire. It was our building, and everyone was outside.

But we didn’t start it.

Next door, someone was welding next to a barrel of diesel, and the whole place went up. I think it was the biggest industry fire on the island in the last 100 years. It was huge—seen from space.

Questions like how do we rebuild from this? That’s the job every day because things will go wrong.

You’ve got to be the person that figures out how to get over an ongoing series of obstacles. That is the way. That is the path.

We had insurance, but there were delays, so you need to call and work with your customers, explain why stuff will not arrive, and try to make lemons out of lemonade.

So, we took a lot of pictures and made a joke about it.

You know the film Apocalypse Now? So we used “Apocalypse Cows” and said, “Can you please order this T-shirt, so we don’t go bankrupt? We’ll send it when we’ve rebuilt.”

And everyone’s said, “OK.”

You try and make some sales out of it.

You find a way, and it’s constantly non-stop. You’ll make mistakes all the time with everything—technology and the team. Sometimes you might say the wrong thing.

The trick is confidence, which comes from ability, which comes from the things you’ve learned, which comes from the mistakes you’ve made.

You need to be good at going, “OK, I’m wrong. This is a mistake. What am I going to do about it?” That’s what you need to do every day. You do that for long enough. You get good.

With experience, you can manage the highs and lows of the business easier

Bex Burn-Callander:

Do you get tired?

Hearing you talking about having to constantly wake up every day and think, “How can I make things better?”

Where do you get your drive and energy? Do you ever want to give it up?

Mart Drake-Knight:

It’s a good question. I think anybody who said no would be lying. You’re only human.

One of the hardest things is to disconnect the business from yourself. Many founders will probably say, certainly in the first 10 years, especially if you care about stuff, you’ll take things personally. I certainly do.

I find it very hard if someone criticises the business or writes some horrible review, and they know what they’re doing.

When people do that, they’re doing it with the intent to cause harm for whatever reason it might be. They might be frustrated or trying to write some article to get some traffic to benefit from—whatever.

It can be upsetting and tiring.

I think progress is the reward, though. When you see progress, and momentum, that brings encouragement. I think having people around you helps.

Through our situation on the island, you don’t have a university or anything like that, so many of our team were vocationally trained and have been with us a long time. That was one of the best things that we did.

Half of the management team used to be apprentices or trainees. You’ve got people who appreciate and want to be in the business, and so I think it’s kind of like you’re working for them. If you have a bad day, those people can cheer you up.

There are some things you just can never get good at, and you need other people around.

I’m rubbish at stuff like the spreadsheets. I can do accounting, but I don’t like it.

With enough experience, those highs and lows become manageable. You’ve seen it all before—it’s never that bad. We’ve had worse—the business burnt down. Come on.

Bex Burn-Callander:

Yeah. Keeps a perspective on things when you’ve seen your business burn to the ground.

Mart Drake-Knight:

And the other way round. If you have a big month, OK, but next month it could burn down, so let’s not get too excited.

I think things settle. There’s only one way to get to that point—time.

Make sure everybody in the business plays to their strengths

Bex Burn-Callander:

Talk to me about the dynamic between you and your brother, Rob. You started this thing as kids and have built this business together.

How important has that trust and bond? How have you worked all that with your dynamic?

Mart Drake-Knight:

I’m still a child. I haven’t worked out what I’m going to do when I grow up.

Well, it’s good to work with your brother because there’s a lot of stuff you don’t need to work out. You know each other.

One of the best things we did was divide our responsibilities.

When we both did a bit of everything, we used to tread on each other’s toes. One of the best things we did was say, “You do that, I’ll do this”. We learned to defer to each other on those things. It was a decision we made early and really helped.

Bex Burn-Callander:

Was there a natural delineation in that you both had skills and they were different, or did you have to say “OK, you take this bit, and I’ll take this bit”?

Mart Drake-Knight:

With us and what we’ve learned about our team, it’s essential to play to your strengths and not put someone in a position where it’s not their preference, or they’re not comfortable just because they’ve got to do it.

I suppose we’re fortunate that we have slightly different characters.

Rob’s good at business administration, finances, business, great with people and negotiating.

He loves doing deals.

If he could get up, have his cornflakes, and then negotiate 1% off a consumable somewhere, he would be in heaven.

Whereas me, I don’t want to worry about money.

I got this idea, and we need to build it. I won’t sleep for three days, but I will build something if I’ve got all the tools and equipment. I can’t do the other stuff.

That complements each other in an innovative applied engineering sustainability business because I can do the first bit, and he can do the last bit.

That’s especially true as the business grows.

We have this philosophy. I think it was in a book called Good to Great by Jim Collins where he said, “Get people on the bus that you know are good eggs, have the same values as you, and believe in your mission.”

Where they sit specifically is something that might change, and you’ll find what they’re great at.

I think figuring that out as we went was smart. If we’d have set it up and gone, “We’ve got to do this, and you’ve got to do that,” we would have probably fallen out and not be doing this now.

Recruit people in the way it will work for your business

Mart Drake-Knight:

Interestingly, we spend a lot more time on recruitment, which is a good idea, but it’s slow as it might take months to find the right character.

We prioritise values, attitudes, and potential. You can teach the rest.

There’s a certain number of technical tests in engineering, but it’s mostly about problem-solving.

How much of a self-learner or determined you are, and whether you’re a problem solver. There are multiple interviews, but they’re mostly built around establishing people’s intent, values, and alignment with the way we work.

And so, if you’re a little bit weird, don’t wear the right clothes and haven’t got any experience, we don’t care.

But if you’re respectful and wants to learn, good with empathy and capable of picking yourself up with a bit of grit, saying, “OK, I’m wrong, but I’m going to try again.” That’s more important to us.

It’s an interesting part of the journey. It’s kind of weird.

You go from zero to 10 people, and then you’ve got to learn the whole thing all over again when you go from 10 to 100.

Bex Burn-Callander:

I love you prize things like empathy, but I think one of the great unanswered questions in business is how on earth do you sit in front of someone and know whether they have that?

What question do you ask to find that out?

Mart Drake-Knight:

I don’t know. It depends on different roles, but I think everybody has their way of doing it.

I think what matters is the outcome. Are you getting that person in because you think they can help you hit your target in the short term?

Or are you doing that because you want to help brands on waste, and you think this person will be a long-term asset on that mission, although it will take six months’ investment?

If you know your mind, you can find the right questions.

If the problem you’re trying to solve exists, you still have a business

Bex Burn-Callander:

What about your ambitions?

Because you talk about this journey, so where is Teemill going to go after this? What is the goal?

Is there an ultimate goal, or is it to keep going? What would you love to happen?

Mart Drake-Knight:

If you start with a problem, you only stop if it’s not a problem anymore. If I was appointed CEO of some charity, your goal is to fire yourself when you’re not needed, as the root cause of all the problems that charity is trying to help is gone.

We’re not there yet.

Less than 1% of clothing worldwide is recycled back into clothing, so we haven’t touched the sides. It’s terrible that there’s still a dump truck a second in a landfill. We’re only on a few tonnes a month remade back into our stuff.

We need to scale it.

What we’re trying to do now is working internationally. We’ve shared the tech on the supply side. We’re sharing the free website builder and store tech for people who want to participate in the sales side.

We’re now giving the production technology to other factories who want to modernise, get into sustainability, and supply businesses in a circular way. So, it’s been quite fun.

We’re doing something in Prague that’s a French joint venture thing, where we’re giving them the software, technology, and capability to implement inside the EU.

The Teemill world tour next? Teemill LA, I think, is on our whiteboards.

I think it’s just trying to make sure that we live up to the challenge we set ourselves. Genuinely make Teemill somewhere good that works for our customers and has fantastic tech.

We’re building newsletters now. You can mail your whole database, and we’ll be focusing on that.

I think from that the growth will come. In our business, growth is linked to circularity and sustainability.

We’ve got work to do.

Bex Burn-Callander:

And what about going beyond T-shirts? Because you could do lots of other things, right?

Mart Drake-Knight:

You teed me up there about something I’m so excited about. Jigsaw puzzles!

It’s a great divide—a marmite subject. Half the team think it’s the best idea ever and half of them think I’m a total idiot because we built a miniature jigsaw factory.

You can use Teemill technology to print anything. It’s real-time print production to order technology. T-shirts we’ve dealt with, but you can apply the tech to other stuff.

We do stickers and art prints, but yeah, I’ve just done a Teemill jigsaw.

I have it in this building, and it’s blowing minds. Watch out, jigsaw market with all your plastic and all your waste. We’re coming for you.

I thought “Jigsaws would be funny”. Like your face on a jigsaw would be a sick Christmas present.

And then I thought, “I’m sure I can build a fully automated jigsaw factory.” Paper in, jigsaws out the other end. I designed it just for fun and thought, “Oh no, this is a stupid idea.”

But I googled it and saw it was a £100m market. Who’s buying all the jigsaws? People are at home doing them.

Bex Burn-Callander:

You can only have so many jigsaws in your home, and once you’ve done the jigsaw a few times, is there still any desire to do the same jigsaw again?

Mart Drake-Knight:

It’s a hobby. People buy jigsaws all the time. Anyway, it’s led to waste. It’s super unsustainable, so why not?

To answer your question, we’re just looking at the tech. It’s just a bit of fun, but it is a serious bit of fun. We’re looking at the technology, saying, “How could we apply this to other industries to design out waste and give people a real choice about recyclable products that can make a difference?”

And if we can do that with our software and technology, why not?

Often, we do stuff to pilot it, and we’re doing jigsaws to see what happens. Anyway, I’m excited about it if nobody else is.

Bex Burn-Callander:

I’ll be there. I’ll be printing my whole family’s faces on your jigsaws. Mart, I think that’s probably a good place to stop, but, my goodness, I feel like I’ve learned so much in this.

So many valuable and practical points in that chat, and I love that point that you can’t beat reusability. Look for ways to design out any waste. Find the savings in efficiencies and plug that back into making a more sustainable business.

Inspired by this story of sustainability?

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The post ‘Can you start up an eco-brand with £200? We did!’ appeared first on Sage Advice United Kingdom.

Flexible working is the new, well, way of working.

The coronavirus pandemic has exacerbated the need for employers to offer a clear, well-documented policy to attract new talent and keep your workforce performing at their best.

We know that when employees are better able to balance their personal lives alongside their work requirements, they are more productive, more enthused about their jobs, and more likely to go beyond for your business’ success.

Though a common desire among the workforce marketplace, flexible working is still a new space to navigate for small businesses.

Here, we break down the elements of a flexible working policy, how to set it up so it’s easy for you to manage, and how to build your staff’s confidence in this new way of working.

Here’s what the article covers:

What is a flexible working policy?

How to write a flexible working policy

Cloud software to make flexible working happen

What is a flexible working policy?

A flexible working policy is the set of formal guidelines that govern how your workforce will plan and document their work schedules.

You’ll want to keep this highly publicised for everyone in the company to see, perhaps as part of your onboarding process and somewhere easily accessible for reference.

You want to be clear about what the term flexible means for your company. This could mean working from home sometimes or working a non-traditional work shift. Your policy should:

• Layout the available work options
• Detail the steps for selecting and changing a work schedule
• Specify expectations and responsibilities in terms of communicating updates, completing work tasks, and any other considerations that affect what should happen while on company time.

How to write a flexible working policy

Because there are so many ways for your company to interpret flexibility for your workforce, there’s no one-size-fits-all policy.

There are, however, common considerations to capture the general direction your policy should go for your business’ purposes. Here are three of them…

1. Why does your company need a formal policy?

Think about what you want to communicate with your flexible working policy.

Do you want to show that work flexibility is a high priority within the company culture? Do you want to set the precedent of work/life balance for new hires?

Considering this will help set the framework for your policy.

2. What kind of flexibility can you support?

Remote working and flexible working are excellent recruiting and retaining tools, but only if you can provide them as a seamless experience.

If you don’t have the technology and processes in place to support the flexibility you’d like to offer, you’ll need to plan for implementing a solution.

3. How can you collect feedback on your policy?

Whatever your goals are for your flexible working policy, it will be most effective if you include feedback from managers and staff.

As you decide what elements to include in your policy, be sure to factor in the opinions of those who will be impacted.

Cloud software to make flexible working happen

There are a lot of moving parts to flexible working. If your policy includes remote working, you’ll need to be able to get your employees up and running to do their jobs quickly and without hassle.

If your flexible working policy means flexible shifts, you’ll a bird’s eye view of the shift schedule so you can plan for appropriate coverage.

Cloud HR software can do this and more.

Ditch manual processes

Keeping track of everyone’s availability is a headache when using spreadsheets. They’re clunky to manage and prone to manual errors.

Lighten your load with automated data processing built into cloud HR software.

Automated data processing lightens your load by removing manual processes and replacing them with digital workflows, giving you complete visibility of your workforce.

Instead of pouring over sticky notes or emails to track employee absences, your employees can submit requests through a mobile app that’s much easier to manage.

You can also limit the number of shifts employees can request on or off automatically by declining requests after so many are submitted.

Self-service

With more employees working remotely, the ability to view and change employee information any time, from anywhere is more important than ever.

Employees can manage their own time off on-the-go with mobile-optimised HR solutions.

They can use the same app to complete performance reviews and complete engagement surveys all from one secure, online system of record.

Communication and engagement

Help your people stay connected and informed wherever they are and whenever they work.

In a world of remote and disparate working, there’s a greater need for that sense of belonging and connection at work.

In the absence of face-to-face time, there needs to be even more focus on communication.

Need to make a company announcement?

HR software enables you to communicate effectively through targeted, personalised messages to specific groups of employees or send updates directly to employees’ work mobiles so everyone is informed and engaged.

This also includes allowing employees to submit feedback to you so communication goes both ways – an important factor in employee engagement.

Continuous feedback

The world of work is always changing. Frequent and continuous feedback gives you regular, up-to-date insights into how your people are doing.

This enables you to constantly improve your processes, and respond to and improve experiences for your staff.

How annoying is it when you complete a survey only to wait two months before you hear anything back?

Continuous feedback and regular engagement surveys allow for a rapid ‘you said, we did’ approach to engagement.

Final thoughts

Migrating to cloud software for HR and payroll helps you to better create and manage a flexible working policy and to become a better people leader in general.

As you eliminate manual processes and arm yourself with tools to understand what your staff needs, you have more time to address their roadblocks and help them to thrive at work.

And when you do that, your workforce feels respected and appreciated, and more personally invested in the success of the company.

Your people will become empowered to give the best of their skills and take pride in their contribution to your business.

Editor’s note: This article was first published in February 2021 and has been updated for relevance.

The post How to support flexible working so your workforce can thrive appeared first on Sage Advice United Kingdom.

Remember when Black Friday was just a day? Well, that’s all changed now.

Many retailers will be preparing early Black Friday deals, giving the entire month of November the Black Friday treatment.

Since some shoppers might not pile into stores like years past due to coronavirus (COVID-19), you’ll need to get creative with how to connect keen sales shoppers with discounted merchandise.

For example, you may want to take an e-commerce approach and sell your products online (if you’re not already).

What are the core areas of consideration for your retail business if you’re looking to win big during this busy selling season?

Here’s where you can leverage technology to create bandwidth and make Black Friday frictionless and profitable.

Black Friday shopper behaviour for stock management

Accepting payments for Black Friday sales

Managing payments security during increased traffic

Hiring Black Friday staff

Final thoughts on preparing for Black Friday

Black Friday shopper behaviour for stock management

Though shopping in-store is pretty much off the table, you still need to stock up for elevated sales.

Look at your data from last year to gauge how much inventory you need to account for in-store sales that will now take place online.

Investing in that kind of insight is important for creating the capacity needed to manage high demand during peak trading season.

You can ensure you have enough inventory for the influx in demand during Black Friday and into the Christmas shopping season.

Accepting payments for Black Friday sales

Generational preferences and how comfortable shoppers are with payment technology will also factor greatly into Black Friday.

Today’s customer journeys are increasingly varied, and can be immediate or extremely complex, especially for younger customers.

They can range from impulse purchases on shopping apps to lengthier, highly considered purchases involving multiple channels for product research and price comparison – even during Black Friday sales.

You need to integrate the payment process into your omnichannel customer offering for a frictionless Black Friday experience.

To do so, you should consider the customer’s expectations at each point in their journey and ensure your payment technology can accommodate any scenario of sale regardless of channel or preferred payment method.

Retailers of any size will stand out by offering simplicity, convenience and durable, well-defined value in their approach to payments.

One in-store example that has expanded among retailers is self-service technology like Zara implemented in 2018 to eliminate its infamously long queues.

For online retailers, a diverse offering of payment methods is critical to customer experience.

We know from a research over the years that consumers generally can be up to four times more likely to complete a purchase if they see a wide variety of payment types presented to them at checkout.

Demand for mobile payments and digital wallets is growing, so it’s worth exploring these as part of your payment methods.

Managing payments security during increased traffic

You should also consider the security of your customers’ financial and personal data, and factor in protection against fraud.

One example of technology that supports this is tokenisation, which allows safe storage of your unique card details providing access to the original payment information regardless of the contact point.

Shoppers have grown more willing to use new payment technology but they’re still concerned about the safety of their personal information.

Research shows 62% are generally welcoming towards added authentication measures for online payment security as mandated by PSD2.

New authentication technologies will revalidate repeat purchases or return shoppers to the website and make their experience even more frictionless.

Hiring Black Friday staff

Even with everything else in place, you’ll still need to ensure you have enough staff coverage to deal with stock management and preparing items for delivery.

Insights from a business management solution can tell you how many additional staff you’ll need to hire. It can also help you with hiring and onboarding and managing schedules.

Adding more staff – temporary or full time – means more payroll admin of assigning employee types and calculating accurate pay and benefits for each.

Doing this accurately will be more challenging during the busy Black Friday season, especially if it’s done manually.

Payroll integration technology with time tracking and attendance functionality can make peak season staffing easier.

Connecting your time and sales data is important for reconciliation purposes, eliminating data errors, and reducing payroll fraud.

Keeping track of this data can also help with planning for other peak trading seasons.

A business management solution equipped with automation can make this easy and error-free for any size staff.

Final thoughts on preparing for Black Friday

Black Friday is a fast-paced selling season. Even more so now than ever, if your customer doesn’t get the experience they expect, you might lose a future sales opportunity.

Utilise new technology for business management to stay on top of cash flow to purchase enough inventory, manage stock, manage staff coverage and scheduling, and keep things running smoothly at the online checkout.

Editor’s note: This article was first published in October 2019 and has been updated for relevance.

The post Black Friday: How your business can prepare for the biggest one yet appeared first on Sage Advice United Kingdom.

We live in a fast-paced world, and we tie a lot of things we do to apps on our mobile phones – from grocery lists and ordering takeaways to banking and more.

With our devices in close proximity, we tend to spend a lot of time on our phones.

But in addition to using them for personal activities, there’s a wealth of apps that can help you manage work tasks from the palm of your hand.

And that includes HR requirements.

This is ideal, especially as it means you and your employees can use HR software and a related HR mobile app to quickly and easily complete people-related tasks.

And that means the likes of leave management, expenses and staff performance can be dealt with without the need to be in front of a desktop PC or Mac.

In this article, we highlight the benefits of using an HR app, how it can improve the employee experience and HR tasks that can be managed.

Here’s what we cover:

Benefits of using an app

Why a mobile HR app can improve the employee experience

HR tasks to manage with an app

How a mobile app makes life easier all round

Final thoughts on using a mobile HR app

Benefits of using an app

Managing your people effectively is important.

The ability to do it anytime and anywhere can help you to stay ahead. And with remote working and hybrid working on the cards for the foreseeable, using an HR app will help you to stay on top of things.

Why wait until you’re back in the office or in front of a computer? If you need to work on an HR task, you can use your phone to do it.

Tasks can be completed in a matter of minutes with a few simple taps of a button.

But it goes the other way too.

Your employees don’t need to be in the office to access their HR documents. Instead, they can simply use their mobile phone.

This is ideal especially if, for example, they want to check what their holiday allocation is for the rest of the year, view their latest payslip, or need to book the morning off so they can attend a doctor’s appointment.

Why a mobile HR app can improve the employee experience

With your people being your company’s most important asset, doing what you can to improve the employee experience will be one of your top priorities.

To help you achieve that, below we highlight three reasons why a mobile HR app could play a key role.

1. We run our lives on our mobile devices

We live in a time where most of the information we consume comes from our mobile devices.

They’ve pushed us so far forward that the idea of not owning a mobile phone is unthinkable. From booking holidays to ordering food and watching programmes (not to mention making phone calls…), a mobile phone is an essential piece of kit for our daily lives.

An HR app allows you to extend this communication trend into the workplace.

2. No employee is left behind

Not all employees are sitting at a desk.

There are certain industries such as construction, hospitality, leisure, logistics, retail and transport where many employees are out in the field and don’t have access to a work terminal during the day.

Here, a mobile app can make a massive difference in terms of improving their experiences.

With an app, you won’t leave any of your employees behind. Everybody is in the loop and your employees will have the same access to vital HR services wherever work takes them.

3. Reduce risks of exposing or losing sensitive data

If your business is relying on the old way of doing things, you could be exposed to losing sensitive data. Excel files could be accidentally deleted. Vital files could be overwritten. Emails could be hacked.

However, by using a mobile approach, you could avoid these issues.

With an HR app, your company data will be stored in the cloud. And that means your employees will be able to securely access what they need from their mobile phones.

HR tasks to manage with an app

As you know, there are numerous HR tasks to complete on a daily, weekly and monthly basis. But, when it comes to staying on top of everything, a mobile HR app can be your friend.

Here’s a selection of people processes you can use your HR app for.

• Core HR: Your key tasks on a phone? Done. Via a simple dashboard, you can see who’s in the office and who is off work, look at the full employee list, take a glance at employee emergency details and view expenses.
• Expenses: Now, you can easily check your expenses history. It’s also easy for your employees to submit their expenses and for you to approve them, with your phone in one hand and a coffee in the other.
• Leave management: Approving time-off requests just got easier (as did submitting them – your employees will thank you for that). And it’s easy for you to quickly check who’s got time off and when.
• Payroll: Your employees have the power to view and download their payslips, meaning you don’t have to print them off and send them across instead. Same goes for their P60s.
• Performance measurement: Want to see how your employees are getting on? Now, you can easily view feedback on your phone – and quickly send updates on performance to your employees too.
• Timesheets: Forget the old days of your employees having to physically clock in and clock out at the start and end of the day. Now they can use their phones to do that – and you can check the hours they’ve submitted and the time they’ve worked.

How a mobile app makes life easier all round

Access to information

Through a mobile HR app, employees can access information whenever and wherever they need it.

You can access documents held in the cloud, such as payslips and benefits information, which can be a laborious task on a desktop computer, or even a mobile browser.

You may not remember your login details offhand, and a mobile app on a smartphone is handy in that you may not need to type in a complicated password to get access.

Easily offer support to your employees

Your HR team could spend the bulk of their day answering repetitive employee questions about the likes of annual leave, benefits and payroll. This can take away time from more important tasks, such as working on projects that improve employee retention rates.

With an HR app, often employees can self-serve and find answers to their questions on their own at any time.

They wouldn’t even need to speak to anybody from the HR team. Using just their phone, they could track their leave balances, check the status of their time-off request, view their payslips, and submit expenses.

They could access information quickly without occupying too much time.

Overcome communication gaps

A mobile app provides HR with a valuable communication tool for pushing instant notifications to employees. This also gives you another medium where you can build employee-organisation rapport even outside office hours.

Keeping employees constantly in the loop increases their morale and will help HR create a better and more productive workplace.

Tracking expenses is a breeze

Often expenses still involve endless emails, spreadsheets and maintaining copies of receipts after submitting an expense.

With mobile technology, your employees could to submit an expense by simply snapping a photo of the receipt, which would mean no fiddling with emails, attachments and backup copies.

On the receiving end, a manager could approve the expense submission with just a couple of taps.

This entire process happens in real-time, wherever you are in the world. Submitting and tracking expenses on the fly could save HR and employees a lot of time.

Real-time updates and alerts

Do you want to increase the productivity and efficiency of your workforce? Transparency works.

Everybody works harder and more effectively when everyone’s on the same page — from the managers to individual team members.

Some apps also make it easy to create and integrate shift schedules into a project. You can then schedule changes to every affected employee’s mobile device, so everybody knows who’s working when.

Final thoughts on using an HR mobile app

If the past year has taught us anything, it’s how crucial digital communication is for work. And this is even more relevant if you have a remote or hybrid workforce.

Using a mobile HR app is a great way to improve the efficiency of HR and other areas of your business.

You and your employees might already be using mobile phones and tablets to complete work tasks, so adopting an HR app to manage your people processes will be a useful addition to keep you and your team up to speed in this fast-paced world.

Editor’s note: This article was first published in June 2021 and has been updated for relevance.

The post How using an HR mobile app will change how you manage your people appeared first on Sage Advice United Kingdom.

In September 2021, the UK government announced the health and social care (HSC) levy.

As with any change in taxation, the introduction of the levy provides an opportunity to empower and educate employees when it comes to salary payments so that they feel more in control.

In this article, we highlight details of the new health and social care levy, what it covers, what it means for National Insurance contributions, and what it means for you and your employees.

Here’s what we cover:

What is the health and social care levy?

What does the health and social care levy cover?

2022-2023: HSC levy’s increase in National Insurance contributions

2023 onwards: How to apply the HSC levy to wages

The HSC levy’s impact on payroll for employers

HSC levy’s cash flow considerations for employers

What the HSC levy means for employees

Final thoughts on the health and social care levy

What is the health and social care levy?

The HSC Levy is a new and additional type of personal income tax. The chief way it’s funded is from earnings – that is, deductions via PAYE in the case of full-time employees.

As such, the levy is potentially payable by the majority of the UK’s working population and, unlike many tax increases, it impacts most salary grades for those over 25 years old.

It’s very similar to existing National Insurance (NI) in form and function, and in fact is funded by an increase to NI contributions (NICs) in its first year (the 2022/23 tax year).

However, there are a handful of quirks that mean it’s not exactly the same as NI, so care must be taken. We discuss these below.

The HSC levy is also part-funded by an increase to dividend tax, which as the name suggests, affects those that take dividends from companies.

As such, this doesn’t affect payroll for the majority of employees. It may affect those that own their own company for which they’re the only employee and who take dividends in addition to a salary.

What does the health and social care levy cover?

The HSC levy is a new and permanent tax intended to pay for increasing NHS costs, plus the increased costs of adult social care.

The government doesn’t believe these can be covered by increases in borrowing. Therefore, it’s introducing a third type of income tax that eventually will run alongside tax and National Insurance deductions.

2022-2023: HSC levy’s increase in National Insurance contributions

The HSC levy will be introduced as of April 2022. For this first year, until April 2023, it is funded by a temporary increase in National Insurance contributions.

From the second year onwards (April 2023), it will be identified on wage slips and within payroll software as a separate deduction alongside income tax and National Insurance.

Both employer and employee National Insurance contributions (NICs) are increased by 1.25%, making for a total of 2.5% per employee.

This effectively means that employee pay is cut by 1.25%, while the cost of payroll for that employee increases by 1.25%.

Here’s how the increased NICs for April 2022–April 2023 pan out:

• Employer NICs: 1.25% increase in Class 1, 1A and 1B National Insurance Contribution (NIC) rates, taking them up to 15.05% (from 13.8% currently).
• Employee NICs: 1.25% increase in Class 1 NIC rates. This takes the rate up to 13.25% for earnings below the NIC Upper Earnings Limit (from 12% currently), and to 3.25% above that limit (from 2% currently).

2023 onwards: How to apply the HSC levy to wages

From April 2023, the temporary levy increase of 2022/23 will no longer apply to Class 1, 1A and 1B NIC rates. Instead, an entirely new HSC Levy will be identified on payslips and remunerated via an update to the PAYE system.

This is as follows.

• Health and Social Care (HSC) Levy: Payslips will identify an employee contribution of 1.25% of before-tax salary, while employers will pay 1.25%, making for an aggregate of 2.5% per individual. The way this is processed within payroll software will be very similar to Class 1 NIC payments.

There’s an important note for older employees.

When the HSC Levy becomes a discrete tax as of April 2023, it will differ from National Insurance contributions in that it will apply to individuals above the state pension age who have employment income above £9,568.

Notably, the HSC levy does not apply to people of pensionable age prior to this, when the levy is collected via an increase in NICs.

At the other end of the spectrum, if an employee enjoys a zero rate of secondary Class 1 NICs then the HSC levy shouldn’t be applied. Examples of such employees include those under 21 years old and apprentices under the age of 25 years old.

Furthermore, certain types of employees at freeport sites and former services employees in their first 12 months of employment might also enjoy a zero rate of Class 1 NICs.

The HSC levy’s impact on payroll for employers

Beyond cash flow concerns, which are detailed below, the main considerations for employers relate to ensuring payroll software is configured in time for the coming changes – including updating, if required.

As of April 2022, you should check that the NI contribution categories and tables within the software are updated with the new rates, as discussed above.

And then, in April 2023, these should be reverted to the existing NI rates.

As of April 2023, you should ensure the new HSC Levy is applied to salaries as and where appropriate.

Because the addition of this third type of tax is a significant change in how payrolls are handled, your payroll software may need a feature update to handle it.

Cloud payroll software will almost certainly be updated in time, but if you rely on older desktop-based software then you may need to apply a patch, or even upgrade to a newer version.

HSC levy’s cash flow considerations for employers

Depending on your business, you will probably find most employees are eligible for the HSC levy, it can be considered an effective 1.25% increase in payroll costs for most businesses.

Associated costs might include the following:

• Reconfiguring, updating or upgrading payroll software. This can be done in-house, in which case staff time and training may need to be budgeted for, or it might require the help of an outside agency.
• Potential pay increases to absorb the cost of the 1.25% reduction in salaries. However, as we discuss later, there are potentially other ways to mitigate the impact from an employee perspective. Pay reviews can be moved closer to the April 2022 introduction date to help manage the introduction of the levy and its impact.
• Communication and education among the workforce. This might include communication with offsite employees or mobile workers. All communications should be timely and, to ensure coverage, may have to be by more traditional methods such as post, which is significantly more expensive compared to electronic communications.
• Internationally mobile workers present technically challenging issues. Assignment costs should be monitored where individuals are subject to UK NICs – that is, where in-bounds are unable to remain in their home country social security system, or out-bounds remain within NIC while working overseas. It should be decided sooner rather than later whether and how assignment policies can be amended to best manage the social security costs.

What the HSC levy means for employees

Applying the HSC levy means an effective 1.25% cut in take-home pay for employees it applies to. Businesses may consider folding this consideration into annual pay reviews.

To help employees understand that the levy is something not within the control of the business, consider empowering employees to gain a greater knowledge of their salary by offering tools such as mobile apps.

These also allow employees to take control over their working hours, absences, and more.

Communication should be planned for periods leading up to the introduction of the levy, aiming to educate about why the levy was introduced, and what purpose it serves. There will be a tendency to blame the business for the decrease in salary, and basic education can combat this.

Additionally, to soften the blow, businesses may consider focusing on salary sacrifice schemes.

Many employers already offer pension contributions by this method but schemes such as bikes for work and training can be ways to reduce taxable pay, and therefore reducing the HSC levy’s impact on wages while delivering a desirable non-cash benefit.

Not all salary sacrifice offerings can be used to reduce taxable pay, though.

Final thoughts on the health and social care levy

The HSC levy comes at a time for businesses who, in April 2023, might find themselves also having to deal with a scheduled increase in corporation tax that was announced earlier this year.

The time between now and the introduction of the levy — both in 2022 and 2023 – provide some time to look at your business structurally and prepare for increased demands on your salary.

The other side of the coin, providing for your employees, also needs to be addressed ahead of time so that there can be no confusion or surprises.

The post What the new health and social care levy means for employers appeared first on Sage Advice United Kingdom.