Help at hand for small firms struggling with employment law

The Forum of Private Business (FPB) has launched its new Employment Guide to help small businesses comply with employment law, which is an increasing headache for companies forced to make redundancies because of the recession or dismiss staff following disciplinary breaches.

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 £2.4 billion per year.

Now, new figures from the FPB’s members’ helpline service show that more than one in three of all calls in August 2009 related to employment matters – more than any other issue. Redundancy queries amounted to 14% of the total, with calls about dismissals accounting for 7%. Significantly, calls about short-time working amounted to just 2% of the total number. Queries about disciplinary matters made up 12% of all calls to the employment and legal helplines.

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.

According to the FPB's research, money spent by smaller businesses on complying with employment law surpasses the £2.1 billion per year spent on health and safety administration and the £1.8 billion on tax.

The survey found that smaller-business employers spend £259 million per year on work associated with dismissals and redundancy. They spend a further £391 million on absence control and management, £237 million on maternity, £333 million on disciplinary issues, and £1,175 million on holidays and any other remaining aspects of employment legislation. The average time per month spent on all of these different aspects of employment law was found to be around 10h for each small business.

Companies in the south-east were found to spend the most on employment law out of 12 regions surveyed, at £361 million per year. London firms faced the second-highest bill at £332 million, followed by £272 million 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 £71 million.

Earlier this year, the FPB launched www.smallbusinesschannel.co.uk to provide entrepreneurs with free, concise, video-based information on business-related issues including employment law. The site's content includes advice on employment legislation from the FPB's employment adviser, Jane Caven, a human resources specialist and non-executive director of the FPB.

For more information about the FPB’s Employment Guide, call 0845 612 6266.