Current UK employment law is bad for small business

Small firms’ lack of knowledge leaving them open to significant financial penalties, research from Citrus HR finds

Britain’s employment laws could be damaging small business, according to new market research by Citrus HR

When asked whether current employment law affected their decision to hire more staff, 39% of small businesses said they would if employment law was made simpler.

Just 25% of respondents claimed it was acceptable in its present state, with a lack of understanding leaving them at risk of making serious errors, which could result in financial penalties.

The report also found that up to 30% of employers don’t know the current National Minimum Wage, which can incur fines as high as £20,000 – while 18% don’t know which countries are in the EU, meaning they may not have checked whether new workers are eligible to work in the UK.

Calculating holiday for staff on part-time contracts was highlighted as a particularly difficult process, with small businesses forced to work out the exact hours each employee has worked over the last 12 or 13 weeks.

Many businesses said they found it hard to keep track of the hours worked by flexible workers to track their holiday entitlement, compared to larger companies that have dedicated staff to manage the task.

With employment laws changing constantly, 75% of respondents said that keeping up with legislation was a significant drain on their time, though they risk unwittingly breaking the law if they don’t.

Employees entitlement to ask for Flexible Working was cited as an example of a recent change that had made small businesses’ compliance burden ever harder –as well as the decision taken in the recent lock case, which could result in employers paying additional sums to staff for years gone by.

Without the necessary resources, spending money on activity from some years ago represents a serious threat to small businesses’ ability to invest in future growth.

The fact that you aren’t allowed to pay people for unused holiday unless they leave was listed as the law employers most want to change (37%), followed by 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%).

Despite the risks, 40% of those surveyed said they did not use HR support, with 45% of that number mistakenly believing they are too small to need it. Of those not using HR support, 50% claimed they didn’t because they have never had to. Again, this could incur substantial fines and penalties.

Much of the support aimed at small businesses is seen as expensive and cumbersome, with 36% of respondents not using HR support for this reason. Some services require small companies to sign up to pay hundreds of pounds per month for several years, with no way out of the contract.

The legislative landscape for small businesses could be improving in the UK, after the government recently pledged to cut red tape by £10bn over the next five years.

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