Small businesses in danger of legislative overload

Small businesses have reached saturation point in regard to the amount of employment law they can take on board, the Federation of Small Businesses (FSB) will warn MPs tomorrow.

The FSB will give oral evidence to the Trade and Industry Committee inquiry into employment regulations on Tuesday.

It will argue that a light legislative touch is vital to the UK economy, and especially to small firms that rely on a flexible labour market to weather significant economic changes and maintain their profitability.

But at the moment, there is a very real danger of a legislative overload:

– Employment legislation is too complex to administer, particularly for small firms where the regulatory burden falls squarely on the shoulders of the owner managers

– Employment legislation is geared towards large, frequently international businesses and public sector bodies. Inadequate consideration is given to its effect on small businesses and their employees

– Employment legislation changes too often. There is hardly a pause without a new or amended regulation, causing unproductive time, avoidable costs in implementation, and mountains of paperwork.

In earlier written evidence submitted to the inquiry, the FSB pointed to the massive use by its members of its employment law helpline. In just one month, the helpline was asked a total of 5,186 questions on employment.

It also recommends a major review to examine how legislation can be simplified and the use of small business exemptions where the legislation is inappropriate either to the mischief at which it is aimed, or the needs of employers and employees alike.

FSB employment affairs chairman, Alan Tyrrell, said: “Small businesses employ more than 50 per cent of the private sector’s employees – that is some 12 million workers. But the typical UK small business owner is a one-person HR department, and heavy increases in the administrative burden can have a direct influence on their productivity and ability to create jobs.

“Entrepreneurs have large expansion plans, positive forecasts and big ambitions, but the cumulative impact of employment regulations can deter them from hiring more staff,” he said.

“Small businesses heavily depend on regulatory stability and a flexible workforce, both of which are put at risk with new pieces of legislation.”

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