According to the FPB’s recent Referendum survey on the ‘Cost of Compliance’, complying with employment legislation is the costliest administrative burden faced by small businesses in the UK, totalling almost £2.4bn each year.
On 1 October 2009, business owners will be expected to cope with a raft of legal changes, including those related to employment such as increases in the National Minimum Wage (NMW) and an increase in the cost of redundancy.
“Many firms are worried that they are not following the correct redundancy procedures when they have to lay off staff,” said the FPB’s policy representative, Matt Goodman. “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.”
He added: “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.”
Mr Goodman urged entrepreneurs to put in place watertight procedures via the FPB’s Employment Guide, which is updated annually and contains guidance on every aspect of employment, including practical help on complying with the law.
The latest available data from the Tribunals Service shows that the number of employment tribunals in the UK soared from more than 115 000 in 2005 to almost 190 000 in 2008.
The survey found that smaller-business employers spend £259m each year on work associated with dismissals and redundancy. They spend a further £391m on absence control and management, £237m on maternity, £333m on disciplinary issues, and £1175m on holidays and any other remaining aspects of employment legislation.
Companies in the South East were found to spend the most on employment law out of 12 regions surveyed, at £361million annually. London firms faced the second-highest bill at £332m, followed by £272m 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 £71m.
FPB member Mark Ashton, of Ashton Marketing Services Ltd in Leicestershire, believes the FPB’s Employment Guide can help other business owners to negotiate the minefield of employment red tape.