"Employment legislation is strangling small businesses"

The new research, commissioned by career management consultancy Right Management, surveyed 250 business owners on issues pertaining to employment law. The results showed that over three quarters of MDs find the legislation far too complex. In addition, 67 percent believe that pay and benefits legislation will cause problems over the next few years and 72 percent think they spend too much time on HR issues.

Jayne Carrington, MD of Right Management, is using this body of evidence to petition government to reduce the legislative burden on SMEs. Carrington says: "We have spent considerable time talking to companies about managing the talent they have. SMEs need more time to focus on those fundamental issues. If the Government is looking to the private sector to grow and generate jobs, it needs to make life easier for those running SMEs and simplifying legislation would mean companies can focus on growing and strengthening their businesses for job and wealth creation for the economy."

Jamie Waller, CEO of ethical debt management and enforcement company, JBW Group, believes that the Coalition is drowning small businesses in employment law red tape. "How can small businesses become the fuel to drive the recovery if they have to deal with government decisions such as abolishing default retirement age and the creation of new flexible working rights?" he asks.

"Pension legislation will come into play in 2011 and this will require management.  HR and finance departments of small businesses will be held accountable and will need to ensure the business compliance. Who is going to pay for this? This is a typically ill-thought issue that the government believes will benefit people. The truth is small business will probably get rid of a member of staff to finance the additional management time."

"HR Headmistress" Kate Russell is one of the UK's foremost employment experts and author of 101 Tips for Employers. She believes that the raft of legislation will actively discourage small business owners from employing more staff. "There's been a steady stream of legislation giving rights to employees," she says. "Three recent examples, namely the Agency Workers Regulations, additional paternity rights and the EU's proposed 20-week maternity at full pay, are threatening SMEs willingness to employ staff.

"At a time when there's particular pressure placed on the private sector to fill the unemployment gap, it's never been this costly to employ people.  SMEs are likely to find the proposed new rights absolutely prohibitive.  There is already a marked trend to outsource labour, cutting out the cost of employment.  If the Government want the private sector to offer employment, business owners must be allowed to work cost-effectively."

Another bugbear for UK businesses is the introduction of a compulsory pension scheme for qualifying employees from 2012. This will increase pensions contributions from small businesses by 3-4%.

Ruel Taylor, director at Mobilefun.co.uk, says: "Controlling variable costs is a key concern for most small business, with salary being one of the largest cost areas.  Such legislation may have a negative impact on a small businesses' recruitment strategy as new employees become eligible from day one of employment, and an employer is responsible for a 3% contribution of the employees' salary to the scheme."

Taylor continues, ""While in a slow - if recovering - economy we are being encouraged to create job opportunities for the unemployed  masses generated by the downsized public sector, yet the cost of the existing workforce has increased adding no direct benefit to the employer."

The consensus from the small business community is this: If you want us to save the UK economy, and employ the scores of people left jobless by the public sector cuts, stop making employment financially unviable and time-consuming.

Have you been affected by the new employment legislation? Have your say below.

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