Government must not exclude small firms from job creation plans

Small firms, which are the UK’s biggest employers, should be central to discussions on job growth, warns small business group following Prime Minister’s ‘jobs summit’ with big companies.

The Forum of Private Business is urging the Government to ensure small and medium sized businesses, which already employ almost 60% of the private sector working population, are central to its job creation plans.

The call follows today’s Downing Street summit hosted by the Prime Minister, David Cameron. It was attended by 19 of the UK’s largest companies but no organisation representing the country’s 4.8 million small businesses.

“Individually, many small businesses feel that they are unable to present their concerns to government and rely on us to speak out as their co-ordinated voice,” said the Forum’s chief executive, Phil Orford.

“In this light, it is important that, in the future, we are given a prominent seat at the table when it comes to discussing such crucial issues as job growth and barriers to it, particularly employment red tape. Failure to listen to small business owners about employment will only further alienate them and fuel their concerns that they are, in reality, an afterthought at best.”

There have been reports that the Prime Minister is set to unveil an employers’ charter’ aimed at boosting SME job creation, widely seen as central to creating a private sector led economic recovery based on a resurgent small business sector.

In order to reduce instances of workers’ ‘vexatious claims’ against employers, the charter is set to include measures such as doubling the period in which a staff member has to have worked to be eligible to make an unfair dismissal claim to two years and a charge for employees seeking to take firms to industrial tribunals.

Orford added: “Any measures that make it easier to recruit employees and make key staffing decisions so small businesses can truly take advantage of emerging opportunities are to be welcomed.

“However, a lot more must be done to stimulate employment, including addressing the tax burden and freeing-up business owners from the £2.4 billion annual cost of compliance with employment law. Reducing this should be a central pillar of the Government’s review of red tape.”

According to the FPB’s ‘cost of compliance’ research, at almost £2.4 billion per year employment is the costliest bureaucratic burden of all areas of legislation, surpassing the £2.1 billion per year spent on health and safety and £1.8 billion on tax administration.

The survey found that smaller business employers spend £259 million on work associated with dismissals and redundancy. They spend a further £391 million on absence control and management, £237 million on maternity, £333 million on disciplinary issues, and £1,175 million on holidays and any other remaining areas of employment legislation.

The average time per month spent on all these different areas of employment law was found to be around 10 hours for each small business, part of the 37 hours each month it takes to negotiate all areas of red tape.

Companies in the South East were found to spend the most on employment law out of 12 regions surveyed, at £361 million per year. London firms faced the second highest bill at £332m, followed by £272 million for those in the North West. Smaller businesses in the North East were found to face the smallest annual bill for complying with employment law, at £71 million.

The Forum is also concerned that the Government’s decision to force companies into providing pensions for employees and the removal of the Default Retirement Age (DRA) will deal a double blow to smaller employers.

The Forum believes making businesses of all sizes provide pension provisions from 2012, even if they only employ a single person, will add cost and create extra administrative burdens when small businesses can least afford it.

Additionally, the Forum is arguing that the Government’s intention to remove an employers’ ability to retire workers as part of its abolition of the DRA will act as an extra disincentive for small employers to recruit.

In response to a recent consultation on the issue, the Forum warned that the removal of important retirement options, which could be effective from as early as April 2011, could leave business owners open to accusations of age discrimination, lead to an increase in employment tribunal cases, and hamper small firms’ ability to plan for the future.