Regulation has reached saturation point

2004

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) has warned.

The day before the FSB gives evidence to the Trade and Industry Committee inquiry into employment regulations, it has reiterated that a light legislative touch is vital to the UK economy.

Small firms rely on a flexible labour market to weather significant economic changes and maintain their profitability, it says, but at the moment, there is a very real danger of a legislative overload.

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

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

Compounding this complexity, 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", the FSB says.

Such concerns are widely shared. Last week, the government's own small business advisors said that that initiatives to reduce the burden of regulation on small businesses “are not worth the paper they are written on”.

The Small Business Council said in its annual report that excessive regulation was stifling small businesses and discouraging the creation of hundreds of thousands of jobs

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.

A recent FSB survey found that six out of 10 members were dissatisfied with the complexity and volume of legislation, more than half (55 per cent) with compliance costs and the interpretation of legislation (54 per cent), and more than four out of 10 (46 per cent) with the rate of change.

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."