FPB: Regulation should occur just once every term

Tuesday 8 April 2014

Red tape is a burden for limited companies, contractors and sole traders, costing time and money.

Consequently, many are likely to welcome a call from the Forum of Private Business (FPB) to limit the government to regulating for employment law just once in every parliamentary term.

According to the body, this radical step will support small business growth by lowering the cost of compliance.

In 2013, the FPB estimated that the total cost of small and medium-sized business compliance with red tape at £18.2 billion. Broken down, this amounts to £14,800 per small business.

Despite the efforts of the current government to lower the amount of regulation companies have to comply with, this sum is a large increase on 2011. Indeed, employment law makes up £4.7 billion of all compliance costs.

It isn't just expenditure that has proven to be a burden either, and the constant change of duties makes compliance confusing for the self-employed.

Phil Orford, chief executive of the FPB, said: "The coalition government intended to be the first government in history to reduce – not increase – the overall burden of regulation. There have been some very positive changes to the way regulations are made, tested and implemented, but to date businesses are not feeling the benefits.

"This suggests there is a clear mismatch between the positive deregulatory work of the government and the increasing cost of compliance for businesses. This is undoubtedly down to the continuous flux of regulatory change."

In particular, the constantly evolving rules around parental leave have proven to be a challenge. According to the FPB, these laws have changed - on average - every 18 months since 2002.

This means that each time the government amends the law, staff need to be trained up and the administrative burden needs to be outsourced.

The FPB claims it is possible that an SME employer could be managing staff absences under several pieces of legislation simultaneously.

By lowering the number of times the government is able to change regulation, businesses will be given greater certainty.

It is hoped the next government will clearly define its position on any area of employment law and regulate the area just once per parliamentary term.

"This is not a business group being anti-parental leave or anti-flexible working, it is a business group that is against the constant change in the law and is standing up for the needs of small businesses," Mr Orford said.

He added that currently a lot of the government's attempts to lower red tape are centred on Whitehall processes, opposed to the impact these have on the front line.

With SMEs generally lacking the HR departments needed to ensure compliance, an approach to employment law is needed that is fair.

This will support small businesses in their current quest for growth. Research from PwC has recently shown that 52 per cent of SMEs believe the positive economic news coming out of the UK reflects their own experiences.

What's more, three in ten consider themselves to be in better financial health now than before the economic crisis.

By Victoria McDonnell

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