Sage on the Web

I was recently asked for my thoughts on the impact of recent changes in employment law on the small business – has it gone too far? 

There has been a great deal of discussion in the media and there is no doubt we, and all of our clients, are under increasing pressure from changing workplace legislation and the associated costs of compliance.  Of course, I am in favour of measures which protect employees, but I am really worried the UK will end up developing the kind of employment laws which have strangled many businesses in the EU.  The UK must build a climate which enables SMEs to compete and grow in the current difficult trading environment.

I personally have mixed feelings about the latest changes.  The fewer barriers put in front of employing individuals, whether permanent or contract the better. Every piece of new employment legislation put in place is another question to answer in deciding whether a business really needs to employ this individual.

Some of our clients are venture backed technology companies, early stage or ‘bleeding edge’ dealing in immature markets.  Some require heavy investment and are some way off break even.  The changes which will come into effect during the next 2 years will bring even more cost pressures that may at best stifle their growth but I fear it could well see the demise of some, already struggling in the recession.  I am concerned that the financial burden of giving agency workers the same rights in certain areas as permanent staff, for example, and the eventual enrolment of staff into a pension scheme, could be a financial burden too big to bear.

Sadly we, together with many other small firms have had to withdraw the provision of childcare vouchers (which was a very nice perk for employees) because legislators started to hint that instead of a simple salary sacrifice this should form part of an employee’s contractual terms and conditions, thus giving employers ongoing liabilities during periods of maternity and paternity leave.

But there is much to be positive about, we have to remember that much of the motivation behind recent changes to employment law has been to promote family friendly policies and this is a good thing.

The best promoter for family friendly policy is that it simply becomes part of what good companies do, companies gain competitive advantage through it, they retain and recruit the best staff.  As an employer you need to have these types of policies if you want to be considered amongst the best.   This has the added benefit of sorting out what legislators believe are family friendly policies from those that employees vote for with their feet.

Mike O’connell, CEO, Isosceles Finance