Current UK Employment Inhibiting Small Business Growth

Complex legislation preventing small businesses from hiring new staff, Citrus HR research finds

Current UK Employment Inhibiting Small Business Growth

Employment law could be negatively affecting small business, according to research by Citrus HR.

Simplifying employment law would encourage 39% of businesses to hire more staff and was a factor in making such decisions, the survey found.

A lack of understanding is leaving companies at risk of making serious errors that could result in financial penalties, with just 25% of respondents saying employment law is acceptable in its current state.

It was also discovered that up to 30% of those surveyed don’t know what the National Minimum Wage levels are, putting them at risk of fines as high as £20,000.

Close to a fifth of owners questioned said they are not aware of countries make up the EU. This could mean that appropriate checks have not been carried out to confirm new workers’ eligibility to work in the UK.

Working out how much holiday leave part-time staff are entitled to was identified as a particularly cumbersome task, with employers having to calculate the exact hours each employee has worked over a 12 or 13 week period. Unlike many larger employers small businesses don’t have systems and qualified staff to manage the process.

Employment laws change frequently, and despite risking unwittingly breaking the law if they don’t, 75% of respondents said that keeping up with legislation has a significant effect on their time.

Another example of a recent change that has made small businesses’ compliance burden even harder is employees’ entitlement to ask for Flexible Working. The Lock vs British Gas case saw the sales consultant bring a claim for outstanding holiday pay which did not reflect the sums he would have been able to earn on commission. As a result, the precedent could lead to employers having to pay out on historical claims.

This represents a serious threat to small businesses’ ability to invest in future growth, with many lacking the necessary resources to spend money on activity from some years ago.

Laws employers most wanted to change included not being allowed to pay people for unused holiday unless they leave (37%), the removal of the compulsory retirement age (29%), the ability for people who fall ill on holiday to claim it as sick leave (21%) and women on maternity leave continuing to accrue paid holiday whilst not actually in work (14%).

Close to half of respondents felt their businesses were too small to use HR support, with 40% not employing any support at all.

Put off by HR services that require small firms to sign contracts and charge hundreds of pound a month for several years, the survey found that over a third (36%) of respondents see such support as expensive and cumbersome.

However, following the government’s recent pledge to cut red tape by £10bn over the next five years, the legislative landscape for small businesses in the UK could be improving.

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