The Department for Business Innovation and Skills is urging business bosses to take up free advice to help them manage their employer obligations.
Thousands of small business owners in the UK are spending millions of pounds unnecessarily on external consultants and advisers to help manage their employer obligations.
A study by the Department for Business Innovation and Skills (BIS) found around £100m is being spent by small businesses every year on simple advice, such as calculating staff holiday allowances, despite free advice being offered by the government on the Business Link website.
Without dedicated HR teams, small business bosses often have to manage their duties themselves, and the study has revealed for the first time how much money is being spent unnecessarily managing these obligations. The research found that around one in 10 small businesses have paid an average of £1,000 each on external advice on their employment obligations within the past year.
The top areas in which respondents from smaller business pay for advice are: calculating staff NI contributions (39%), writing business contracts, such as a new staff contract for an employee (30%), and managing maternity and paternity leave (22%). Furthermore, almost one in six of those that pay for advice (13%) admit paying consultants to help calculate staff holiday entitlement.
Lack of confidence
Business leaders that are spending unnecessarily cite lack of confidence as a key factor. More than half of those polled (52 %) said they do so because they do not know enough, and just under one in three (30%) worry they will get it wrong if they do not use external advisers.
Almost one-quarter of owners polled (24%) feel they are not eligible to manage their employment obligations themselves. For example, one in five respondents (21%) think they need a professional qualification to give staff a new contract.
More than half (53%) do not believe they can comply with employment obligations through free advice – one of the major reasons they are turning to consultants unnecessarily.
More than one-quarter of small business owners (26%) said they used paid-for consultants as they didn’t have the time to manage their obligations themselves. However, of those businesses that do handle their employment obligations themselves, many said it was much simpler and less time-consuming than other employers might think – 72% of businesses that don’t pay consultants said they only have to manage their obligations less than once a month.
John Charles is the chief executive of Catering2Order, which was awarded the contract to provide catering requirements to the 2012 Olympics site. He says that for small business bosses like him to maintain a competitive business, it is vital that they not only understand their obligations but also know how to manage them efficiently.
“The tools on the Business Link website are very useful and it is much simpler than many businesses would think,” he says. “It’s important to be on top of how to manage your employment obligations if you want to be a successful and competitive business. Using the free tools is not time-consuming or complicated. As a small business, you have to watch every penny and get as much support as possible.”
The vast majority of small business leaders (96%) said the best piece of business advice they had received had been free. However, the research shows there is a misunderstanding of how bosses can comply with their obligations through acting on free advice.
Case study: How free advice can save £100,000
Alex Cheatle, managing director of Ten Lifestyle Management, says: “We all readily welcome free advice from family and friends, but this BIS study shows there is still a reluctance to act on free online advice, and this needs to be addressed.
“If I had ignored all the free advice I was offered, neither myself nor my business would be where we are today. The best piece of free advice I found on the Business Link website was some information on tax credits. I couldn’t believe at the time that we were eligible to claim it, but we did claim it and that was worth £100,000 to us.
“The information from the government on Business Link enables you to browse for the exact advice you need in your own time, without someone trying to sell you something. If professional free advice is available and it provides all you need to comply, you should act on it. I simply say, ignore free advice at your peril.”
For more information on the free tools and advice provided by government to help bosses meet their obligations, visit www.businesslink.gov.uk/employingpeople