Employment law costs are a burden for SMEs

Sep 22 2009 by Karen Dent, The Journal

COMPLYING with employment law is costing small businesses a total of almost £2.4bn annually, although the North East had the lowest regional bill at £71m.

The figures come from the Forum of Private Business’ (FPB) Cost of Compliance survey, which found employment legislation was the costliest administrative burden for small firms which have been forced to make redundancies because of the recession or dismiss staff over disciplinary problems.

The organisation said more than one in three calls to its members’ legal helpline last month related to employment queries.

That figure could well rise when legal changes comes into force on October 1, including increases in the National Minimum Wage and a rise in the cost of redundancy.

FPB spokesman Matt Goodman said: “Looking ahead to October’s one-off increase in the weekly wage limit used to calculate redundancy payments, they are also concerned that it is becoming a more expensive process.

“There is a knock-on effect. The increase will also affect other statutory compensation payments, including unfair dismissal awards, compensation for non-compliance with flexible working procedures and compensation should a statement of employment particulars not be provided to an employee.”

The North East is spending the least on employment law compliance – the region’s annual bill of £71m is a fraction of the £361m paid out by businesses in the South East and the £332m spent by London firms.

The FPB has put together free video advice on employment law, along with other issues affecting SMEs. Visit www.smallbusinesschannel.co.uk.