If you are passing by or coming in to meet with us, you will notice that building works have begun at Holman Hodge! Our new office space is under way, and we are excited to share what’s Next for us in 2024.

What’s Next?

Plenty of people have been asking us what’s Next? Next is our new curated community that will be launching on Level 15 at 45 Pirie Street next year. We are re-defining co-working, in a supported, luxury space designed with comfort, collaboration and community in mind. There are four offices and 39 desks available, each set up with ergonomic furniture and a host of support services, so that you can walk in and start operating from day one. If you are considering an office move, a city-based branch, or individual workspaces, we’ll be welcoming new community members to join us in 2024. Find out more on the Next website or contact one of our Directors.

45 Pirie Street

If you visit us in our new building, you will notice that there is quite a lot going on at 45 Pirie Street. It is shaping up to become an inspiring place to work in the heart of Adelaide’s business district.

The building owner has commenced works on the new foyer and entry. It will be extended out to the Pirie Street footpath, offering exceptional amenity. While the front of the building has been boarded up for safety purposes, there is pedestrian access in place to direct visitors to the current building access point. This is via one of the existing front doors but is likely to change to a side entry as development progresses. The building design is exceptional, with end of trip facilities and 360 degree views. Take a look here.

Our new office

We are also pleased to report that while we patiently work and wait on Level 7, our fit-out on Level 15 is progressing well and is currently on track for completion in early March 2024. We can’t wait and we appreciate everyone’s patience as we continue to work towards getting into our new home on Level 15.

Car parking

Finally, to assist when you visit our office, we have included a link here to maps identifying the paid parking stations and the available street parking within walking distance to our office.

If you have any questions or feedback, please don’t hesitate to contact us.

As we address the potential impact of 60 day dispensing and a tight retail environment on pharmacy profitability, in our last blog, we looked at workforce planning. We partnered with boutique human resources (HR) consultancy firm, Bespoke HR, who shared insights into what workforce planning is, key areas to consider and requirements under the Pharmacy Modern Award 2020.

As with any element of organisational change, leadership is key. In this blog, our Holman Hodge pharmacy accounting team sought insights from Paulette Kolarz, Managing Director of Bespoke HR. She discusses the evolution of the new leadership landscape and driving performance, as well as workforce opportunities to consider in workforce planning.

The new leadership landscape and driving performance

We know that a leader’s role always requires pivoting and that restructure or even downsizing will have a direct impact on leaders. Some key areas for leaders to focus on during a downsizing include:

• Open and honest communication

Maintain clear, open, and transparent communication with employees throughout any organisational changes. Provide regular updates, address concerns, and offer clarity on the reasons behind the organisational decisions.

• Empathy and emotional intelligence

During challenging times, leaders should demonstrate empathy and emotional intelligence. Understand and address the emotional impact of organisational changes on employees, and provide support as needed.

• Focus on core activities

Concentrate on core business activities that are essential for the organisation’s survival and long-term success. Trim non-essential functions and projects.

• Performance management

Take the opportunity to review KPI’s and adjust performance metrics and expectations to align with the organisation’s new goals and priorities. Set realistic targets and recognise employees who excel during challenging times. During periods of change, it can be beneficial to review goals and KPIs every 90 days to ensure they are aligning to the changing landscape and needs of the business. This also helps all staff remain clear on their own role objectives and focus.

Workforce opportunities

In previous years, the Pharmacy industry has faced staff shortages and difficulties around finding suitably experienced staff to fill critical roles. In instances where your organisation is needing to downsize your workforce, there are some opportunities that you may want to consider including:

• Reduce leave liabilities

Consider providing employees opportunity to take their annual or long service leave. As long as you are following the requirements under the Pharmacy Modern Award 2020, this could be a great time to give your employees a well-deserved break.

• Talent mapping

Take the opportunity to identify high performers as well as identify gaps in critical skills and competencies within the organisation. This information helps in succession planning and prioritising reskilling and upskilling initiatives to address these gaps.

• Promote flexibility

Encourage flexibility in work arrangements, such as part-time or flexible schedules, to accommodate employee needs and reduce overstaffing during specific hours or days. Noting that you must following the requirements under the Pharmacy Modern Award 2020.

• Talent pipeline

Building an effective talent pipeline as part of your recruitment strategy is critical when there is qualified staff looking for work in the market. Consider attracting, engaging, and nurturing potential candidates who could fill key roles in your organisation in the future.

Workforce planning is a critical aspect to setting your organisation up for success to manage the impact to your business with the potential revenue decline resulting from the introduction of 60 day dispensing. While there may be some difficult decisions you need to make as a business leader, there are also many opportunities available to you to refocus your workforce and review your approach to human resources.

About the Author

Paulette Kolarz is the Managing Director of BespokeHR and is recognised as one of Australia’s leading authorities in Human Resource Management and Leadership Development. Paulette helps organisations attract, retain and grow their leaders and build high achieving, engaged teams.

With more than 20 years working in HR, she has significant experience in providing end to end people solutions in the areas of HR Consulting, Recruitment and Training and Development.

If you would like to get an in-depth evaluation of your people priorities, Bespoke HR’s 15 minute survey provides you with a detailed personal report (and it’s free). Click on this link to undertake Your People Success Score and People Priorities audit.

We have looked at a range of issues around 60 day dispensing. Check out our previous blogs:

• Navigating workforce planning with the 60 day dispensing challenges: What pharmacy owners should consider
• Navigating pharmacy valuation, negative equity and partnerships
• Our top tips to prepare for 60 day dispensing challenges / Holman Hodge / Giving you a hand in business.

As we are all aware, the introduction of 60 day dispensing and a tight retail environment presents a series of challenges for pharmacies, one of which is finding innovative ways to offset any negative consequences to profitability. As pharmacy accounting specialists and business advisors, we have been working with our pharmacy clients on ways to address revenues and profitability. It is important to consider what role workforce planning can play to ensure pharmacies are flexible and can adapt to possible shifts in potential operating models. This may include considering whether there is a need to change your structure, change work hours, and, in some regrettable cases, possibly consider redundancies.

We have partnered with boutique human resources (HR) consultancy firm, Bespoke HR, to highlight key considerations in navigating workforce planning in this new environment, as 60 day dispensing and environmental factors change the pharmacy landscape. In our first of two blogs on this topic, we will explore:

• What workforce planning is and discuss some key areas for pharmacy organisations to consider when reviewing their workforce
• Discuss the key requirements under the Pharmacy Modern Award 2020 when undertaking workforce planning activities such as redundancies and changing work hours.

What is workforce planning?

Workforce planning is a systematic approach to identifying current and future staffing needs to achieve business goals. In the current pharmacy landscape, this involves addressing factors such as script reduction, changes in consumer behaviour, and shifts in healthcare delivery.

When reviewing your workforce needs, consider the following:

• Staffing levels

Begin by assessing your current staffing levels in relation to your forecasted workload and demand. The goal is to ensure that you have the right number of employees and employee types (casual, full-time and part-time) with the right skills to meet customer needs effectively and review whether you have the ability to flex up and down as required.

• Skill sets and training

Identify the skills and competencies your organisation requires to adapt to changing roles. Determine if additional training or upskilling is necessary. Additionally encourage and facilitate opportunities for cross-skilling among different roles to ensure flexibility within your workforce. This is critical where you may be looking to downsize your workforce.

• Technology integration

Explore how technology can enhance efficiency. Digital tools for tasks such as prescription processing, inventory management, and appointment scheduling can free up staff for more critical tasks.

Key requirements for restructures and changes to employment conditions

After reviewing your workforce, you may find that you need to restructure and / or make some changes which could involve changes to job roles, responsibilities, and changes in work hours or employment role status, such as full-time to part time employment.

Changes of this nature can have several implications for employees covered under the Pharmacy Modern Award 2020 (or other underpinning Industrial Awards / Agreements).

It is important for employers to understand their obligations under the Pharmacy Industry Award 2020 and to consult with affected employees and their representatives when making significant changes. Here are some key things to consider:

• Unfair dismissals

Employees who believe that they were unfairly dismissed as a result of restructuring or redundancies may file unfair dismissal claims with the Fair Work Commission. As such, ensure that any redundancies comply with the relevant Industrial Agreement and the Fair Work Act 2009. A redundancy must be genuine which means the employee’s job does not need to be done by anyone else.

• Redundancy entitlements

Be aware of the redundancy entitlements outlined in the Pharmacy Modern Award 2020 or other underpinning agreement such as a contract of employment. Affected employees are entitled to redundancy pay based on their years of service. There are some cases where redundancy entitlement does not apply such as under probationary period, length of service under 12 months or where the Small Business Code applies.

• Consultation requirements

Under the Pharmacy Industry Award 2020, employers are required to consult with affected employees and their representatives before implementing significant workplace changes, such as restructuring, redundances or changes to opening hours, rosters and hours of work. Consultation should involve discussing the proposed changes, the reasons behind them, any potential impacts on employees, any potential redeployment opportunities.

• Changes to hours of work

Where an employer wishes to change an employee’s hours of work or change their role from full-time to part time, it is important to understand that this process can be quite nuanced. On some occasions a redundancy may be triggered as part of this process and seeking professional advice is always recommended.

• Notice periods

Employees affected by redundancies are generally entitled to receive notice as per the award provisions. The notice period may vary depending on the length of an employee’s service, their age or any special provisions in their contract of employment.

• Outplacement support

Consider offering outplacement support to affected employees, such as career counselling or assistance with job searches. It is also important to note ‘Job Search Entitlements’ for impacted employees under the Pharmacy Industry Modern Award 2020.

• Transition plans

Develop transition plans for the remaining team members to ensure they can manage the workload effectively after redundancies. In the current workplace health and safety landscape it is imperative that all employees’ workload is achievable and that they are able to take the necessary breaks. Not considering these factors can bring unnecessary psychosocial risk your organisation.

• Transfer of business

If the restructuring involves the transfer of a pharmacy business, employees may be entitled to have their employment transferred to the new employer with their existing entitlements and terms and conditions intact. Employers should be aware of their obligations regarding the transfer of business, including employee rights.

• Part-time and casual employees

Part-time and casual employees under the award may have specific entitlements and notice periods depending on their employment status and terms of engagement. Employers should adhere to these provisions when making changes affecting these employees.

• Penalty rates and overtime

Changes to opening hours may impact employees’ entitlements to penalty rates and overtime under the Pharmacy Award. Employers should review and adjust employees’ rosters and pay rates accordingly after meeting the requirements under the Award to effectively consult with employees.

• Consultation with relevant authorities

In some cases, especially if substantial redundancies are involved, employers may need to consult with the relevant union or relevant government authorities, such as the Fair Work Commission, as required by the Fair Work Act 2009.

• Record keeping

Employers should maintain accurate records of consultations, notices provided, and any agreements reached with affected employees or their representatives during the restructuring process.

• Legal and professional advice

Given the complexity of employment law in Australia, it is advisable for employers to seek legal or engage professional HR services when making significant workplace changes, to ensure compliance with the Pharmacy Award and applicable legislation.

Workforce planning can result in considerable change. In our next blog, we will discuss other opportunities to consider in workforce planning and the role of leadership.

About the Author

Paulette Kolarz is the Managing Director of BespokeHR and is recognised as one of Australia’s leading authorities in Human Resource Management and Leadership Development. Paulette helps organisations attract, retain and grow their leaders and build high achieving, engaged teams.

With more than 20 years working in HR, she has significant experience in providing end to end people solutions in the areas of HR Consulting, Recruitment and Training and Development.

We have looked at a range of issues around 60 day dispensing. Check out our previous blogs:

• Navigating pharmacy valuation, negative equity and partnerships
• Our top tips to prepare for 60 day dispensing challenges / Holman Hodge / Giving you a hand in business.

As part of the Federal Budget 2022 – 23, the government announced support for small business, in the form of two bonus tax deductions:

1. The Technology Investment Boost
2. The Skills and Training Boost.

The legislation enacting both announcements has now passed Parliament and impacts the preparation of 2023 income tax returns.

Who is eligible?

Small businesses with an annual aggregated turnover of less than $50 million.

What can I claim?

The Small Business Technology Investment Boost provides an additional 20% deduction of expenditure incurred for the purposes of a business’ digital operations or digitising its operations – covering both business expenses and depreciating assets.

The details:

• This includes portable payment devices, cyber security systems, and subscriptions to cloud based services
• Depreciating assets must have been used or installed by 30 June 2023
• Annual cap on expenditure of $100,000 applies for each qualifying income year (so maximum additional deduction is $20,000 per year)
• Deductions that are above the cap are dealt with under the existing law
• Applies to expenses incurred between 7:30 pm AEDT on the 29th of March 2022 and the 30th of June 2023.

The Small Business Skills and Training Boost provides an additional 20% deduction for expenditure that is incurred for the provision of eligible external training courses to their employees. We suspect that the eligible claims will be limited.

The details:

• Training from registered providers in Australia only, registered with one of the following authorities:
  • Australian Skills Quality Authority
  • Tertiary Education Quality & Standards Agency
  • Victorian Registration & Qualifications Authority
  • Training Accreditation Council of WA
• The registered provider can’t be an associate or the small business making the claim
• The expenditure must already be deductible under existing tax laws
• No annual cap
• Expenses incurred between 7:30 pm AEDT on the 29th of March 2022 and the 30th of June 2024.

What action do I take?

Extracting this information requires intimate knowledge of your subscriptions, purchases, and technology suppliers, beyond your General Ledger. We recommend that you collate this internally. We have a spreadsheet available which may assist with the collation of these documents. Please contact your Holman Hodge adviser for a copy.

Please return the populated spreadsheet to us with your annual financial information.

Any questions, contact your Holman Hodge adviser.

You can find the ATO’s update relating to these boosts here.

The potential impact of 60 day dispensing

It is common for pharmacies to be owned in partnership between the ’Founder / long term owner’ (Founder) of the business and younger partners. This is often part of a succession plan for the Founder. Alternatively, it may be a result of a key employee retention model.

In both scenarios, the equity held by the Founder in the business is ’used’ to provide the incoming partner with the capacity to borrow funds to acquire their partnership interest.

Without this assistance, most aspiring pharmacy owners would not have capacity to acquire equity in a pharmacy business.

In this model, the incoming partner gets the opportunity to acquire their equity interest while the Founder is provided with a pathway to handing over ’operational responsibility’ while retaining an equity interest. It can prolong their access to profits of the business without maintaining the level of work intensity required to build and maintain a pharmacy business.

Banks will generally lend between 70-80% of the business value (loan to value ratio – LVR) and, because the Founder generally has plenty of equity, is provided with the capacity for the younger partner to borrow with the business as security (effectively utilising the equity of the Founder). The risk to both partners is not that extreme, provided the valuation doesn’t deteriorate, and profitability is maintained.

Typically, during the years after initial acquisition, the incoming partner is required to devote their full profit entitlement to meet loan and tax payment requirements. It usually takes a number of years to reduce the debt to a level which enables the incoming partner to obtain a lifestyle benefit from ownership.

This model works well for both parties in a financially stable environment.

However, it may result in challenges when the value of the business reduces significantly due to changes in trading conditions. The proposed 60 Day Dispensing policy is likely to result in some of these issues surfacing.

It is widely recognised that pharmacies provided the Australian community with a critical service during Covid. It also resulted in a significant improvement in trading outcomes for most pharmacies and this was reflected in the significant value increases of most businesses.

The shortage of prospective partners and the ‘burn-out impact’ of Covid brought forward the introduction of a number of new partners to the pharmacy sector.

We know that with 60 day dispensing, pharmacy revenues and profitability will be significantly impacted. In a pessimistic scenario, we may see pharmacy earnings and values reducing by 40% (or more). Even with significant reduction in labour costs, these figures are still likely to reduce by more than 20%.

This will likely result in the following:

• The bank LVR will increase. In some cases, it will increase beyond the banking covenants which are typically 70% to 80%.
• The net equity of the incoming partner will be eroded. Indeed, it may become negative.
• The profit share of the incoming partner may not be sufficient to enable that partner to service his/her bank debt on current terms.

Although the debt is the responsibility of the young partner, it has implications for the Founder too. If the younger partner has trouble servicing their debt, the bank (in a worst-case scenario) may be tempted to take action to protect its position.

This would force the other partner to underwrite the position of the younger partner to avoid the forced sale of the business.

What can be done?

In our last article, ‘Our top tips to prepare for 60 day dispensing challenges’, we looked at ways to address both costs and revenues to mitigate the impending decrease in profitability. We continue to encourage clients to commence that process.

In addition, it is important to identify and address the partnership challenges that may arise from this situation. This will require some planning as to how they are going to approach the situation in a commercial sense and best manage the partnership.

In essence, the new partner needs to be able to service their debt in the new environment. While this situation would be very concerning for the new partner, there is likely to be a workable solution.

The preferable method would be to reduce the debt amount by some means. In some circumstances, they may have means outside of the business and can manage their debt independently. Unfortunately, most won’t have that ability.

It is likely, they (with the support of the Founder) will be able to negotiate with the bank to extend the term of the loan and slow down loan repayments. This will allow them to manage debt within the limits of their profit distribution.

Alternatively, the Founder may allow the new partner to take profit distribution payments in advance, effectively borrowing from them to service the bank debt. This may require changes to the partnership agreement to reflect new arrangements.

In times of stress, it’s important to ensure that your partnership remains strong. A discussion, agreement and plan is required between the partners to reduce risk, manage debt and support business continuity. There are a lot of considerations to be tabled. These include personal circumstances, workload, retirement plans, business operations and more.

An independent facilitator may prove beneficial. That role is to talk through the options, model a range of financial scenarios and support you to make the best decisions for yourself, the partnership, the business and your wealth management.

This is one of the things we do at Holman Hodge. We look to model a range of scenarios for our clients, providing similar (deidentified) information for lobbying by the Pharmacy Guild and anticipating early insights on 60 day dispensing from our Pharmacy Benchmarking service.

We continue to have discussions with banks, who are confirming their support for the industry.  As a result, pharmacy owners having discussions with banks as early as possible could be beneficial too.

While the full impact won’t be felt until late 2024, it is important that you plan now for this challenging transition. It will be here sooner than you think – now is the time to prepare, particularly if your LVR is approaching 60%.

For a confidential discussion about your pharmacy investment or to arrange a partnership meeting, please contact us.

About the author: Frank Morgante leads the pharmacy practice at Holman Hodge. His team of specialist pharmacy accountants and advisors support pharmacy owners and businesses across Australia with accounting and compliance, tax and regulatory services, transaction, forecasting, benchmarking, planning and strategic advice.