Unit 4 - Management 2

Unit 4 Management 2
www.businessleavingcert.com
Copyright 2012
Part 1:
Managing Business and Household Finance
Finance = The money a

company needs to run a
Business.
Uses of Cash flow Forecast / Budget

Cash flow forecasting/ planning is v.important to a
Business as it highlights problems in the Business, and
encourages the firm to be proactive in preventing and
reducing future financial difficulty.
Household Income: Child Benefit, Salary, Pension,
Social Welfare
Household Expenditure: Fixed (must be paid,
amount stays the same) e.g. car tax, Irregular (must
be paid, amount varies) e.g. ESB, Discretionary (nonessential spending) e.g. Holidays.
Business Inflows Sales, Debtors, Grants, Share
Capital, Investment Income
Business Outflows Purchases, Creditors, day-to-day
expenses, tax, dividends, repayment of interest & loans
Why Prepare a Cash Flow

Forecast / Budget?
Ensure Business is in a liquid position, i.e. a position to
cover debts as they fall due.
Highlights time of High Expenditure thus the
Business/Household can take action in advance to ensure
they can cover costs e.g. Saving
Highlight times of cash shortages where additional finance
may need to be sourced e.g. Bank Overdraft.
Highlight times of cash surpluses where investments may
be made.
Allows you plan for the future & helps save.
Can be used to compare previous years.
Keeps track of all money in and out of the HH or business
i.e. Good Cash Management
Serves as an aid when dealing with the bank part of
Business Plan
Possible Cash flow Problems

Increased cost of raw materials or increased
Production costs (Purchases increased but Business
didnt increase price)
Payments due to creditors, loan repayments, interest
due, tax/insurance due
Employees working overtime, Business may have
hired staff therefore higher wages, or there may have
been an increase in wages due to inflation.
Delayed payments from Debtors (owe us)
Inefficient Stock Control system leading to money
tied up in excess stock.
Bills may have been due from last year.
May have purchased fixed assets by cash.
Possible Solutions to Cash flow

Problems:
BORROW, but this may have a negative effect in the long run
(more interest repayments)
Examine Stock Control System and ensure stock levels kept at
optimum
Provide incentives for debtors to pay on time e.g. Discounts
Reduce Costs where possible e.g. Computers shut down, reduce
manpower, overtime freeze
Reduce employee bonuses/ dividends to shareholders
Spread out expenditure where possible (lease rather than
paying cash up front), cut back on discretionary spending.
Source cheaper suppliers, while maintaining high quality
Outsourcing certain function than doing them in-house e.g. IT
Increase Productivity or invest in advertising to increase sales
and profits
In months of surpluses try and pay part of bills in advance
Conduct market research in how to satisfy customers more
efficiently
6
Factors to be considered when choosing Sources

of Finance
A.Collateral required and availability of Collateral to
Offer (Security offered by borrowers in case they cant
repay money owed e.g. buildings, land, stock. These can
be repossessed by the lender)
B. Amount, Access, Reason how much is required, how
available is it and does the source match the reason
C. Effect on Cash flow, Profits and TAXATION
D.Effect on Business CONTROL
E. Time urgency of the finance and length of time its
needed for
F. Effect on credit rating/ future sources of
investments and the GEARING POSITION (whether
the company is mainly financed by debt or equity)
G.COST, as different interest rates, APR (Annual Percentage
Rate) exist and legalities i.e. Authorised Share Capital
FINANCE
Short Term (up to 1 year),
Medium Term (1 5 years),
Long Term (5 years and up)
Short term sources of Finance:

USES (stock, wages, and
expenses)
Explanation
Advantage
Disadvantage
Bank
Overdraft
Trade
Credit
Permission from a Bank

to the account holder
to withdraw more
money than is in the
account, up to a certain
limit.
When a firm buys stock
on credit from its
suppliers but does not
pay for 1 to 2 months
Easy to obtain
and no security
required.
Rate of Interest is
high can be up to
12%
Happens
normally in
Business and no
security required
Business may lose

out on cash
discounts. Late
payment can lead
to damaged credit
rating (see credit
control)
Amounts involved
are small and
services may be cut
off for late
payment.
Costly: Discount
taken can be large9
Accrued
Expenses
Firm gets certain

services e.g. Electricity
and pays in arrears
(after)
No Cost
Factoring
Debts
Selling debts to a
Firm gets what it
factoring firm at a
is owed from its
Medium term sources of

Finance: USES (vehicles,
machinery, office equipment)
Term
Loan
Hire
Purcha
se
Leasin
g
Explanation
A loan with fixed interest

and principal repayments
Advantage
Interest payments
are tax deductible
for a firm
A finance company pays
Have use of the
the seller and the buyer
asset before
pays the finance company owning it. Interest
in instalments over agreed payments are tax
time. Dont own the good deductible. If 1/3
until final instalment is
of payment made
paid
HP need court
intervention to
repossess
A finance company pays
Use of modern
the seller and the buyer
assets without
pays the finance company buying. Can
the rental payments
upgrade if
Disadvant
age
Bank often
requires
security
Can be an
expensive form
of financing as
high rate of
interest
Never own the

asset (may
have
10
opportunity to
USES (Purchase of Land,

Buildings, Large Capital
Expenditure)
Explanation
Advantage
The firm sells shares
Does not have to
Share
Capital
Retained
Earnings
Long-term
Loan
Grants
(part ownership) in the

firm. Shareholders get a
share of the profits
(dividend)
Past profits of the firm
that have been retained
for future development.
be repaid.
Interest-free
finance
A loan over 5 years

secured on the fixed
assets of the business.
(Fixed Interest long term
loans = Debentures)
Non-Repayable amounts
given by the
Government/ EU to
Businesses
Interest
payments are tax
deductible. No
control of the
company is lost.
Do not have to be
repaid
A free source of
finance since it
does not have to
be repaid
Disadvantage
Loss of control by
the original owners
Shareholders may
be unhappy if too
much is retained
and not paid as
dividend.
Security is required.
Long term loans
increase the
financial risk of the
Business.
The firm may have
to create a certain
number of jobs.
11
Why is it important to match the

source of finance with the reason
why it is needed?
To give the business time to raise the finance required, e.g. If
purchasing fixed assets worth 250,000 a Business should use a long
term source (e.g. a long term loan) as it would allow them more than
5 years to repay.
To keep repayment costs to a minimum with regards to interest, e.g. If
a Business was to purchase a delivery van worth 20,000 they should
choose a medium term source (term loan) as opposed to a long term
source as they will be able to repay within 5 years with interest.
In choosing from options available within a finance category e.g. Short
term, the Business should look at the reason and decide based on
cost. E.g. where Business needs 2,000 to purchase raw materials
they should buy on credit as opposed to a bank overdraft because the
cost of Trade credit is free whereas interest is charged on an
overdraft.
Short term sources include: Bank overdraft, trade credit and accruals.
Medium term sources include: leasing, hire purchase and term loans.
Long term sources include: equity capital, long term
loans(debentures), grants and venture capital.
12

What would a bank consider
before granting a loan?
Purpose, amount, timescale

Repayment amount including interest
Credit rating, previous bank record
Ability to repay / Income
Collateral Available e.g. deeds of house/asset
Business Plan: assessment of business and its
finances
Owner Investment: Bank more willing if owners are
investing themselves
Legal Constraints, i.e. articles of association may
specify the level of borrowing
13
Info required to open a Current Account:
Business: Name of
owners/directors, nature of business,
copies of annual accounts,
memorandum of association, name
of those who can sign cheques
Household: Personal info,
Occupation and name of employer,
Income, Proof of ID
14
What is Venture Capital?

Definition: Venture Capitalists invest buy
Equity Shares and Participate in Business
where the risk is high but the potential profits
are good if successful e.g. Dragons Den
Suitable for
start-up companies who need seed capital
(to grow) - risky
development capital for expansion less risky
management buy out
provide financial expertise / representative on
B of D
15
Grants
Definition: non-repayable money given by state
agency, no interest charges, contains certain
conditions e.g. employ x no. of people.
Types of Grants
Business Enterprise Grants County Enterprise
Boards (small business support)
Training Grants FS (training of skills needed
e.g. IT)
Feasibility Study Grants Enterprise Ireland
(market research of new products)
Capital Expenditure Grants IDA (for purchase of
Machinery & Buildings etc.)
16
Part 2:
Insurance
Insurance: protection
financially from certain risks
occurring
17
Risk =
the possibility of an event

occurring mainly something negative
and the consequences of this, e.g.
theft, fire, accident
Non-Insurance Risks: you cannot
insure against these risks occurring.
speculative risks share
investments where value can rise or
fall, a company making a loss
fundamental natural disasters,
e.g. volcanic eruption
18
Key Definitions
Insurance Broker: sources contracts of
insurance from a number of insurance
companies on behalf of their customer and finds
the best deal.
Insurance Agent: works for one insurance
company and sources an insurance contract for
their customers.
Actuary: Calculates how much the premium
should be, taking into account details of the
good being insured and applicant.
Assessor: Investigates the damage then
calculates the amount of compensation to be
paid taking account of all relevant information.
19
Key Definitions
Quotation: this is the price offered by the
insurance company to cover a particular
risk, taking details of the risk and the
applicant into consideration.
Proposal Form: application form for
insurance with questions about the
person/business and that which they wish to
insure.
Premium: this is the fee paid for insurance
the higher the risk the higher the
premium; it comprises basic premium +
loadings deductions.
20
Key Definitions
Loading: this is the amount added to the basic
insurance premium due to increased risk, e.g. age
of person, their hobbies etc.
No Claims Bonus: this is a reduction in the cost of
insurance if no claim for payment has been make
over a particular period.
Policy: this is a legal written document from the
insurer to the insured detailing the terms of the
insurance contract.
Excess: this is a stated amount on each insurance
policy which the insured is responsible for paying in
the event of a claim being made. This reduces the
number of small claims being made.
21
Key Definitions
Exclusion Clause: conditions to the insurance
contract where compensation will not be paid.
Cover Note: If there is a delay in receiving the
policy, the insurer will issue a cover note stating
that insurance is in place and that the insured is
awaiting the policy.
Certificate of Insurance: this is a summary of
the policy with information regarding the
insured and the risks insured against.
Renewal Notice: This is a letter sent by the
insurer stating that the policy time is coming to
its end and requesting a premium for continuity.
22
Key Definitions
Claim Form: Form filled in when
seeking compensation describing what
happened and the amount of money
claimed.
Proximate Cause: this refers to the
reason the event / accident occurred.
23
Principles of Insurance
1. Insurable Interest: person must have a
financial interest in the item they wish to insure,
the asset must be of financial value and they must
benefit from having the item and suffer financially
from its loss, e.g. a persons house / car.
2. Utmost Good Faith: person must be honest
and truthful when filing out the proposal form and
disclose all material facts (about the asset and
themselves) which may affect the level of risk,
decision of the insurance company to cover the
risk or the premium charged, e.g. previous health
problems would increase the cost of a health
insurance premium.
24
3. Indemnity: person cannot make a profit
from insurance, i.e. will not benefit from over
or under insurance. Risks are insured
against the cost of replacing the asset if a
loss is suffered.
4. Subrogation: once full compensation has
been paid, the insurer can claim ownership of
what remains and sell it for its scrap value.
If the loss is at the fault of a 3rd party, the
insurer can also sue the third party to recover
the loss. (linked to indemnity)
25
5. Contribution: if a person has an item
insured with more than one insurance
company, e.g. over-insurance and a loss
occurs, the person will only be paid once
as each company will only pay part of the
compensation due to the fact that the
insured cant claim in full from both and
thus make a profit. (Linked to Indemnity)
26
Calculating a Premium
TOTAL PREMIUM
=
BASIC PREMIUM
+
LOADINGS (Extra Risks)
REDUCTIONS (No Claims Bonus)
27
Calculating Compensation:
Problems arise when the item hasnt been insured for its
correct value and the indemnity rule will be used to determine
the amount of compensation.
In the event of Over-Insurance (asset insured for more than
its worth), the maximum amount of compensation is the
current value of the item which has been lost or damaged.
In the event of Under-Insurance (item insured for less than
its worth) the insurance company will use the average
clause principle to calculate the amount of compensation:
Average Clause = Amount insured for * Loss Suffered
Current Market Value
The insured will get compensation for the same fraction for
which the good is insured.
28
Average Clause Example

If
a persons house is valued at
200,000 and the person decides to
insure the house for 150,000 and due
to a fire 32,000 worth of damage
occurs. How much compensation will
they get?
The house is insured for s of its value
Therefore a person will get s of the
compensation. s of 32,000 =
24,000
They may also have to pay an excess
29
Types of Household
Insurance:
1. Life Assurance: provides financial
protection for the family if main earner dies and is
also a form of saving.
Pure (whole) Life Assurance pays an agreed
sum if insured dies, yearly premium paid until
person dies. Covers funeral expenses and finances
for deceaseds family.
Endowment Assurance life insurance with a
savings plan with a view to providing finance postretirement. Paid when insured reaches a certain
age or in event of the death of the insured.
Temporary (Term ) Life Assurance life
assurance policy for an agreed term.
30
Types of Household
Insurance:
2. Property Insurance: covers buildings and
contents in event of fire, theft or accidental damage.
3. Motor Insurance:
Third Party: covers the household against damage or
injury to a third party due to fault of householder.
Compulsory by law
Third Party, Fire and Theft: covers against damage
or injury to a third party due to fault of householder and
also covers against risk of fire or theft of a household
car.
Fully Comprehensive: covers against damage or
injury to both the Third party and the householder due
to fault of householder and also covers against risk of
fire or theft of a household car.
31
Types of Household
4.Insurance:
Personal Insurance:
Medical Health Insurance: covers medical and hospital
expenses, companies offering this include, Aviva, Laya
Healthcare, VHI, Glow Health.
Salary Protection Insurance: provides monthly income (up to
75% of original salary) in the event of having to give up work
due to illness or injury.
Personal Accident Insurance: compensation for injury
suffered from an accident, i.e. loss of sight.
Travel Insurance: Lasts for the duration of the trip where
compensation is paid for accidents/ illness suffered while away,
e.g. lost baggage, emergency return home.
Pay Related Social Insurance: statutory requirement
calculated as a percentage of a persons wage and provides
payment in event of unemployment, disability, pregnancy, and
also old age pension.
32
Importance/Benefit of Household
Insurance
Covers hospital and medical bills as a result of
illness or accidents. E.g. Medical health Insurance
Reduces the financial burden on a family in event
of death of the policy holder and also in the event
of theft, fire or an accident. E.g. Pure life assurance
Provides a source of income if out of work due to
illness/injury or unemployment. E.g. Salary
Protection Insurance
Future Savings, i.e. endowment life assurance.
Legal requirements, e.g. PRSI, motor insurance and
when getting a loan, e.g. mortgage protection
insurance.
33
Types of Business
Insurance:
1. Fire Insurance:
Buildings & Contents Insurance:
covers loss or damage to property and
contents due to fire, lightening,
explosions, burst pipes, flooding, and
storms.
Consequential Loss Insurance: covers
loss of profits resulting from having to
stop trading while damage is being
repaired and also covers payment of
certain expenses, i.e. rent, wages.
34
Types of Business
Insurance:
2. Accident Insurance:
Burglary/Theft Insurance: covers against loss or
damage due to theft of stock, cash or other
valuable goods.
Transit Insurance: covers against loss or damage
due to theft of stock, cash or other valuable goods
while being transported.
Plate Glass Insurance: covers against damage to
glass on premises, i.e. large windows, mirrors,
fittings, e.g. Car Showrooms
Public Liability Insurance: necessary if members
of the public access the premises, i.e. shops,
cinemas, banks and covers against claims from the
public due to injury
or death while
on the premises.
35
Types of Business
Insurance:
2. Accident Insurance:
Employers Liability Insurance: covers
against claims from employees due to
injury or death during work.
Product Liability Insurance: covers
against claims from the public due to injury
or death as a result of a faulty product/
service made & supplied by the company.
Fidelity Guarantee Insurance: necessary
where employees may be in a position of
trust and covers against loss of income due
to fraud or dishonesty
of an employee.
36
Types of Business
Insurance:
3. Motor Insurance: required by law,
fleet policies cover all vehicles and
named drivers of the company. Note:
Third party, Third party fire & theft and
comprehensive, see explanation above.
4. Personal Insurance:
Key Person Insurance: covers against
death of an important employee.
PRSI: see above. Employers also pay
PRSI towards each employees fund.
Compulsory
37
Importance/ Benefit of Insurance

for a Business
Financial Safeguard for survival of the
business, i.e. protection against financial loss
in event of an accident e.g. fire, and enables
the business to focus on its main objectives.
Improves safety and security due to risk
minimisation.
Provides cover for employees and the
public in event of injury or death. (public
liability)
Legal requirement, e.g. PRSI, motor
insurance
38
Enable insurance
companies to invest in large
Risk Management
(IAMM)
Risk management is a process

involving risk identification,
assessment, minimisation and
monitoring.
Insurance is costly therefore it is
only sought to protect against the
risks which threaten the profitability
and existence of the business
39
Methods of Risk
Reduction
Security window alarms, alarm system, CCTV, instore safe, security staff, inspections, stock control
and monitoring.
Fire both fire drills, inspections can be carried out,
no smoking policy, fire doors, sprinkler system.
Finance outsource cash collection via security
firms e.g. Securicor, reduce stock held within the
business to optimal level.
Training and Information health and safety
courses, fire protection course, first aid, rules of the
road etc.
Motorists seat belts, car servicing, alarm systems.
Lifestyle reduce risk of ill health by living a
healthier lifestyle, regular exercise.
40
Part 3:
Taxation
Taxation = the way of raising money for the
revenue commissioners, from businesses and
households to finance government provision of
goods and services e.g. education, health, army,
public services.
41
Types of Taxation
Direct Taxation taken from
income / profits directly. E.g. PAYE,
Corporation tax
Indirect Taxation added to the
purchase of goods or services. E.g.
VAT
Tax is needed to distribute wealth so
every person has a decent standard of
living. The more money you earn the
more tax you should pay.
42
Tax Forms
Form 12: given by employee to tax office to set up
tax credits (tax credit cert) and is required by
employers to calculate rate of tax. If not supplied then
emergency tax applies, i.e. higher rate. This can be
reclaimed.
Form P60: given to employee by employer and shows
Gross Income received. Tax and PRSI deducted over
the course of the year and the net income received.
Evidence of Income earned and tax paid.
Form P45: Cessation Certificate, given by employer
to employee on termination of employment. Shows
total earned to that date and amount of tax and PRSI
taken. Given to new employer on commencement.
43
Tax Forms
Form P21: Balancing Statement, given by
Revenue Commissioners to employee and
shows calculation of employees total PAYE
tax deductions for the previous year. If tax
has been over paid then tax refund is
received by employee, if under paid then
employee will make up the amount due the
following year.
Form P35: yearly notification from each
registered employer in Ireland of the gross
pay received and PAYE/PRSI deducted from
their employees.
44
Household Taxation
PAYE (income tax): 20% standard rate and
41% higher rate & PRSI taken from source.
SAIT Self Assessment Income Tax: where
self-employed. Preliminary tax (estimate of
income tax and PRSI paid at end of first 10
months of the year and the balance at the end)
VAT: Standard rate @ 21% on all goods and
services (some at 13.5%)
Motor Tax: legally required
Excise Duty: tax on certain products e.g.
cigarettes, oil and alcohol paid at time of
purchase.
45
Household Taxation
DIRT: @30%, tax on interest earned in a deposit
(savings) account.
Capital Gains Tax (CGT): @22%, tax on profit made
from sale of an asset, i.e. property (other than main
residence), sale of shares
Capital Acquisitions Tax: paid on gifts or inheritance,
some exemptions apply (e.g. if from spouse, if charitable
donation, lotto win, first 3000 worth of a gift) and
different rates apply e.g. the higher the amount, the
higher the tax, the closer the blood relationship the
better.
Universal Social Charge: Introduced in Budget 2010,
tax paid by all members of the labour force on top of
PAYE and PRSI. Different rates apply depending on the
amount earned. (2%, 4%, 7%)
46
Business Taxation
Corporation Tax: paid on company profits
@12.5%. Helps attract foreign investment,
e.g. American Companies such as Pfizer.
Lowest in Eurozone (questionable at present)
VAT: where turnover over a certain amount
(51,000 goods, 25,500 services) they must
register for VAT. @ End of 2 month period, VAT
paid on sales less VAT paid on purchases
submitted, however where VAT on purchases
exceeds VAT on sales, Business gets a refund.
PRSI: must be paid by Business for each
employee.
47
Business Taxation
Commercial Rates Tax: paid on value
of land/ property used / owned by the
Business collected by local authority
and goes to provision of local services.
Customs Duty/ Import duty: paid on
imports from outside the EU.
Capital Gains Tax: paid on profits
earned from investments.
Motor Tax: legally required
48
Implications of Taxation on a
Business
Collecting, recording and payment of taxes

adds to workload of admin staff, who ensure all
tax deducted is sent in when due, otherwise it
may affect employees entitlements from State.
Business must register for PRSI if employing
staff. Where the rate of PRSI is high, this can
increase wage cost on Business. Similarly
where VAT is high, production and selling costs
are increased as products / services become
more expensive, profitability is decreased and
competitive edge may be lost if passed onto
customer.
49
Implications of Taxation on a
Business
Tax receipts and payments must be

factored into cash flow forecast.
Tax Incentives may entice Business to
locate in a particular area, e.g.
commercial rates tax.
Potential tax implications must be
considered when making Business
decisions, i.e. low tax stimulates
investment while high taxes discourage
investment / expansion.
50
Operation of PAYE
System
Tax year commences in January

Tax credits are deducted by the Government
on income tax payable
Notification of determination of tax credits
received by employee
Income tax Payable = Gross Tax (SR + HR)
Tax Credits
Take home Pay = Gross Salary (Income Tax
Payable + PRSI)
The Standard Rate Cut off Point (SRCOP) is
taxed at 20% (36,400) while the higher rate is
41%
51
Sample Answer on
Calculating Take Home
Pay
From the following information, calculate the net

annual take-home pay of Ms. Joan McCormack.
Joan McCormack is an employee of Lynch Printers Ltd
and earns a gross annual salary of 84,000.
She is allowed the following tax credits: Single Person
credit of 1,760 and PAYE credit of 1,760. The income
tax rates are: 20% on the first 34,000 (standard rate
cut-off point) and 41% on the balance. The employee
PRSI rate (including the health levy) is: 6% on the first
48,800 and 2% on the balance. (Reference http://
examinations.ie/archive/exampapers/2007/LC033ALP0
00EV.pdf
)
52
Sample Answer on
Pay
Remainder =
1. Start with the Salary
84,000
34,000
2. Add up your Tax Credits
53
Sample Answer on
Pay
3. Subtract Tax Credits from Gross Tax
Gross Tax = 27,300 3,520

(Combined Tax Credits) = 23,780
(Tax to be paid)
4. Calculate PRSI
54
Sample Answer on
Pay
5. Find Your Total Deductions
23,780 (Total Tax to be paid) + 3632 (PRSI) = 27,412
6. Find your NET TAKE HOME PAY by

Subtracting your Total Deductions from
your Gross Salary.
84,000 (Gross Salary) - 27,412 (PRSI) = 56,588
55
Part 4:
HR MANAGEMENT
HR Management: the effective use of the
people in the business in order to enhance
organisational performance.
56
What is HR all about?

It is the process by which the
business attracts, develops and
rewards employees in an effort to
achieve business goals in an efficient
way.
57
Functions of HR
58
1. Manpower Planning:
Identifying the employee and skill
requirements for the business.
Aim to get the right no. of people
with the right skills at all times.
59
How to plan your

Manpower
Forecast requirements
based on estimated sales and
anticipated changes in the Business.
Assess current manpower (list of employees and their
skills)
Compare current with forecasted requirements and
increase or decrease the manpower through
o People leaving / retiring *Redundancies (voluntary or
compulsory) lump sum given based on years
service & salary)
o Training to increase skill base of current employees
o Promotion of employees or switching between roles
(Deployment)
o Recruiting new employees
Ensure national wage levels, employee legislation and
trends are monitored.
60
2. Recruitment and
Selection
Attracting, interviewing and selecting
the right candidate with the right
attributes and skill base for the
vacancy. Done Internally (within) or
Externally (outside)
Business needs to look, is it
necessary, the contract type (temp
or perm) wage, skill, attributes
required.
61
External Recruitment
(advantages & disadvantages)
Wider base to choose the best person but
increased cost due to advertising &
interviewing.
Brings new skills/ expertise/ ideas/ views to
the Business but potential employees dont
know how the Business operates.
Tensions between existing employees
avoided though employees may react
negatively as no opportunity for promotion.
62
Internal Recruitment
(advantages & disadvantages)
Strengths & Weaknesses already
known, Quicker, Cheaper
Know the operation of the Business
but no fresh ideas coming in from
outside.
Promotion encourages employees to
work harder although may instil
jealousy or lead to conflict.
63
7 Step Recruitment Process

1.
2.
.
.
3.
4.
5.
6.
7.
Preparation (Person Specification & Job Description written

statement listing the elements of a particular job including. title,
purpose, duties, qualification, training, experience required, salary)
Advertise (Job Centres, FS, Newspapers, Colleges, Online
(monster), Recruitment Agencies)
Adverts must meet Employment Equality Act 1998 no gender
discrimination etc.
Adverts include job desc, person spec, pay & conditions, application
process, contact details
Screening (Filter Applications, CVs and Cover Letters and create a
shortlist of suitable people)
Selection (Interview complying with the Employment Equality Act
1998, IQ Tests/Aptitude Tests / Personality Test, Portfolio,
Experience, Qualification, Employment Record)
References (Check with people who know the candidate
previous employer / manager)
Contract (Legal Requirements commencement date, title, hours,
location, wages, holiday entitlements, notice, code of practice,
pension scheme etc.)
64
Inform unsuccessful
Candidate (Good Business Practice)
3. Training &
Development:
Training = to aid the acquisition of skills &
knowledge required for the job for new employees or
to broaden the skill base/qualifications of existing
employees.
Types:
Induction begin a new job, trained in policies,
technology, work colleagues, code of practice,
health & safety, dress code (familiarisation)
On-the-Job skills via supervision & modelling
behaviour
Off-the-Job relevant courses / seminars /
conferences
65
Benefits of Training
Updates skill base and improved
morale due to investment in
employees, helps them focus on
values, customer satisfaction and
increases productivity.
Facilitates response to change in a
calm equipped manner.
Enables employees to be multiskilled (increasing flexibility & variety
of work.
66
Training & Development:

Development:
aim is to distribute new

responsibilities, challenges, promotion, more demanding
post via certified course (degree, masters, PhD)
Benefits of Development
Prepared employee for promotion / more demanding
role e.g. Management or increased responsibility.
Broadens understanding of the business environment as
a whole
Improves employee motivation through increased selfesteem.
Improves Capacity of Employees to deal with a wide
range of issues not necessarily in their job description.
67
Drawbacks of Training &

Development
Jealousy between employees

Cost
Benefits may be difficult to assess
Possible departure of employee with
new skill to a higher paid job
elsewhere.
68
4. PERFORMANCE
APPRAISAL
Open, Positive, and Constructive discussion
between Supervisors and Employees with regard
to employee performance during a period of time.
Job priorities and objectives are assessed in
correlation with targets set and new ones set,
The possible need for training is identified,
Problems encountered are highlighted or
corrective action necessary.
Employees may be identified for promotion and
wages / bonus are discussed and negotiated as a
result of work well done.
69
Benefits of Performance Appraisal
For employee:
Motivates employee to take responsibility for
themselves, their career and their job.
Helps Channel employee focus on what they want
to achieve thus making it worthwhile for them as
enables them to evaluate career options.
Increases confidence and self-esteem as talents &
efforts are recognised and rewarded.
Gives them a channel in which to express their
views / opinions / grievances.
Enables them to negotiate and present a case for
more pay / bonus / promotion.
70
Benefits of Performance Appraisal
For employer:
Updates employee information.
Identifies areas in which training is
required.
Identifies those employees who are in
line for promotion.
Increases motivation for employees,
thus productivity for the business.
Identifies areas in need of change for
best practice via employee feedback.
71
5. Rewarding Employees
Essential function of HR mgt.
money is generally a key motivator,
however different people are
motivated by different things, i.e. job
satisfaction / security and the reward
structure should reflect this.
72
Monetary Rewards
(money)
Wage / Salary
- Flat Rate based on set no. of hours worked
- Time rate - / hr.
- Piece rate based on no. of units produced
- Commission given as % of employees sales
- Bonus extra in recognition of hard work
Profit Sharing Schemes: if business profits exceed a
certain level then employees will receive a share thus
motivating employees to increases productivity.
Share Ownership: Employees receive shares as part
of reward system. High performance may lead to higher
dividends and increased value of share. Also gives
employee a say in the business.
73
Monetary Rewards
(money)
Share Options: Employees given the
option to buy shares at a specified price. If
performance is high, market price of shares
increases. Employee could exercise their
option to buy at the specified price and sell
at market price thus making a profit.
Pension: % of pay to pension fund. Lump
sum paid on retirement & remainder
throughout life. Form of deferred payment.
74
Non-Monetary Rewards
Benefit-in-Kind (BIKs): Nonmonetary forms of income. E.g.
Company car, subsidised meals,
subsidised travel, holiday, vouchers.
Job Satisfaction: Nature of work,
Opportunity to travel, Challenge of
work (fireman), Recognition of
Achievement (cert / award /
presentation)
75
Factors in Deciding Rates of Pay /

Rewards:
Skills more skills, more valuable
Qualifications higher the qualification, higher the pay
Scarcity where skilled employees are scarce, pay high
to retain.
Responsibility higher the responsibility, higher the
pay
Experience the more the experience, the more the
pay; incremental salary.
Trade Union Activity negotiate for better pay &
conditions
Profitability profitable business enables rewarding of
staff.
76
6. INDUSTRIAL RELATIONS
MANAGING EMPLOYER / EMPLOYEE
RELATIONS:
Good Industrial Relations lead to:

Positive attitudes, better working
environment, better morale thus high
levels of productivity.
Co-operation & flexibility in dynamic
environments
Efficient and timely problem solving
and seeking of solutions
77
INDUSTRIAL RELATIONS MANAGING

EMPLOYER / EMPLOYEE RELATIONS:
Poor Industrial Relations lead to:

Negative attitudes, bad working
environment, poor motivation, poor
morale & low productivity
Lack of flexibility and adaptability to
change
Conversion of problems into disputes
Lack of co-operation, high
absenteeism & high staff turnover
78
How to improve Industrial Relations?
i. Clear, open channels of bidirectional communication

facilitating the creation of an environment of trust.
ii. Fair dealings and adherence to prior agreements.
iii. Dignity, respect and empathy towards employees
iv. Flexitime (come in early, finish early)
v. Job sharing (splitting your hours with someone else)
vi. Tele-working / e-working (working from home)
vii.Compassionate Leave (Funerals, Sick Relatives etc.)
viii.Establishment of conflict resolution procedures in
advance. (Negotiation etc.)
ix. Management training on motivation and problem
solving
x. Creation of a clean, safe, healthy working
environment (Safety Officers, Work Doctor, Health
Programs i.e. Stress, Alcohol Abuse, Fitness
79
How to improve Industrial

Relations?
Establishment of a good social program (nights out,
activity days)
Co-operation with union and employee reps.
Democracy via:
o Work Directors (employees elected to B of D)
o Works Council (EU requirement if >1000
employees, a work council should be in place
consisting of employees and management planning
for the future.
o Worker Co-op: members are employees who elect a
B of D, hire a manager and have a say in the running
of the business.
80
Benefits of Good Human Resource

Management: NB
Right No. of Staff with the correct skills / qualification
to match criteria employed.
Good working environment, high morale, high degree
of co-operation, motivated employees and high
productivity.
Low Staff absenteeism and turnover.
Efficient and timely problem solving and seeking of
solutions
Decreased labour costs per item / unit produced
better quality and increased customer satisfaction.
High Business Performance, profits and company
development.
81

Unit 4 - Management 2

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Unit 4 - Management 2

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Unit 4 Management 2

Finance = The money a

Uses of Cash flow Forecast / Budget

Why Prepare a Cash Flow

Possible Cash flow Problems

Possible Solutions to Cash flow

Factors to be considered when choosing Sources

Short term sources of Finance:

Permission from a Bank

Business may lose

Firm gets certain

Medium term sources of

A loan with fixed interest

Never own the

USES (Purchase of Land,

(part ownership) in the

A loan over 5 years

Why is it important to match the

Purpose, amount, timescale

Info required to open a Current Account:

What is Venture Capital?

the possibility of an event

REDUCTIONS (No Claims Bonus)

Average Clause Example

Importance/ Benefit of Insurance

Risk management is a process

Collecting, recording and payment of taxes

Tax receipts and payments must be

Tax year commences in January

From the following information, calculate the net

1. Start with the Salary

2. Add up your Tax Credits

3. Subtract Tax Credits from Gross Tax

Gross Tax = 27,300 3,520

5. Find Your Total Deductions

23,780 (Total Tax to be paid) + 3632 (PRSI) = 27,412

6. Find your NET TAKE HOME PAY by

What is HR all about?

How to plan your

7 Step Recruitment Process

Preparation (Person Specification & Job Description written

Training & Development:

aim is to distribute new

Drawbacks of Training &

Jealousy between employees

Benefits of Performance Appraisal

Benefits of Performance Appraisal

Factors in Deciding Rates of Pay /

Good Industrial Relations lead to:

INDUSTRIAL RELATIONS MANAGING

Poor Industrial Relations lead to:

How to improve Industrial Relations?

i. Clear, open channels of bidirectional communication

How to improve Industrial

Benefits of Good Human Resource

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