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Employment laws could be damaging UK SMEs and jobs

New market research by consultants Citrus HR suggests UK employment laws could be damaging small business and preventing them from taking on more staff.

Three-quarters of respondents said keeping abreast of legislation was a "significant drain on their time". When asked whether current employment law affected their decision to hire, 39% of small business respondents said they would take on more people if employment law was less complex. Only a quarter thought employment law was acceptable as is.


The research also suggests a marked lack of understanding of UK employment law among respondents. Less than a third knew the current National Minimum Wage (NMW) rates – despite the risk of a fine of up to £20,000 for employers who do not pay at least NMW rates.


Respondents said calculating holiday for part-time staff and those working "casual hours contracts" was particularly difficult. Changes to flexible working rules was a common answer when respondents were asked for examples of a recent legislative change that had made small business employment law compliance more difficult.


Almost a fifth (18%) of respondents didn't know which countries are in the EU, which, according to Citrus, means there is a risk of sanction for not carrying out checks to find out if workers are allowed to work in the UK legally.


Among the employment laws respondents most wanted to change included not being able to pay employees for unused holiday unless they leave (37%), followed by removing the compulsory retirement age (29%), employees being able to claim sick leave when unwell while on holiday (21%) and women on maternity leave continuing to accrue paid holiday (14%).


More than half (60%) of respondents used HR support, although much of the support aimed at small businesses was viewed as "expensive and cumbersome", which is a key reason why 36% of respondents did not use HR support.


In July, the government unveiled plans to launch "ambitious reviews into burdensome red tape" in key sectors (energy, waste, agriculture, care homes and mineral extraction) – its first step to working with British businesses to "axe unnecessary regulation and its poor implementation" by a further £10bn over the course of this parliament.


Business Secretary Sajid Javid commented: 

"I'm determined to take the brakes off British businesses and set them free from heavy-handed regulators. The government's pledge to cut £10bn in red tape over the course of this parliament will help create more jobs for working people, boost productivity and keep our economy growing. For the first time, these reviews will look not only at the rules themselves, but [how] they're enforced. We want firms to tell us where red tape is holding them back."

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