Small firms turn blind eye to legal risks of managing staff

Small businesses are taking more legal risks with workers than their larger competitors, according to research from the Institute of Directors (IoD) and consultancy Adecco.
Data from the Small Business Recruitment and Retention Survey shows that small businesses are less concerned about the risks associated with managing employees, despite the fact that legal disputes are commonplace for small firms.

Only 29% of small businesses see minimising legal risk as a priority. More than 80% of companies with more than 100 employees said they had updated their employment policies within the last six months in response to various legislations changes, whereas only 56% of smaller companies said the same.
“There are some significant differences between small companies and their larger rivals in their attitudes to legal issues,” said Richard Macmillan, managing director of Adecco UK and Ireland.

“Often because they don’t have dedicated HR managers to track legislation and develop policy, small businesses are oblivious to the financial and cultural risks that legal action can cause.”

A key factor in this seems to be the media and their coverage of high-profile industrial dispute cases. Almost half of smaller companies admit to forming opinions on workplace legal matters from the media rather than legal specialists.
“The media coverage of industrial disputes is clearly very informative for business owners but it does need to be supported with detailed case theory and practice,” added Macmillan.  “Large businesses do not have the monopoly on legal risk and SMEs need to be more sensitive to the complex nature of employment legislation and compliance.”
There is also discontent among the small business community regarding employment legislation. Nearly 80% of companies think there should be a fairer balance between employee and employer rights and 73% believe the law unfairly treats employers.
Richard Wilson, head of business policy at the IoD, said: “HR issues take a significant portion of directors’ time but it’s typically done on a reactive basis.

“Small businesses also struggle to keep up with the increasing amount of legislative red tape which, if not properly administered, can end up costing businesses a lot of money.”

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