The real cost of employment
law for small businesses
Managing Human Resources is an issue for all employers, irrespective of size or specialisation. In addition
to controlling a broad range of business critical activities, including recruitment, payroll, benefits and
employee engagement, it also requires an in-depth knowledge of employment law, which is constantly
evolving to meet the changing needs and demands of the workplace.
You may agree that keeping up-to-date with new and existing
employment legislation, while also managing other HR tasks and
running your business, can prove particularly difficult. Your
company may not yet be large enough to warrant its own HR
specialist or have the resources to ensure this obligation is
managed effectively.
You may be one of the 10% of
Britain’s SME leaders, including
CEOs, Managing Directors, directors
and line managers, who spend up to
two days a week looking after HR
issuesa.
In an attempt to minimise the workload, many small businesses
divide these tasks between various senior employees, often with
little or no HR experience. You may be one of the 10% of Britain’s
SME leaders, including CEOs, Managing Directors, directors and
line managers, who spend up to two days a week looking after HR
issuesb . As a result, 40% of small businesses feel that dealing
with red tape and regulations is their most time-consuming
activityc.
Impact on productivity
Attempting to juggle day-to-day activities while also staying on top
of employment law — perceived by many as simply box-ticking —
can have serious implications on productivity, with estimates
putting the bill at £5 billion or more every yeard.
The added workload means those people most crucial to your
business are spending much of their time on tasks that do nothing
to help grow the company. In fact, three quarters of CEOs and
Managing Directors cite new business development and customer
service as the most likely areas to suffer as a resulte— two of the
most important activities for any business. In addition, over one
third of FSB (Federation of Small Businesses) members named
regulatory burden as the biggest barrier to business, only behind
cash flow and the economyf.
The risks
As well as impacting productivity, giving non-specialists
responsibility for employment law can be risky. Often employees
with these responsibilities aren’t familiar with the legislation and
lack an understanding of the complexities involved. In fact, a
quarter of small businesses admit to not keeping up to speed with
legislation changes and more than a third feel employment law
isn’t relevant to their businessg. With limited understanding of
what’s required and why it is important, your business could be
overlooking its obligations, with potentially serious repercussions.
A quarter of small businesses
admit to not keeping up to
speed with legislation
changes and more than a third
feel employment law isn’t
relevant to their businessh.
Employment tribunals have a statutory cap of £76,574 for an unfair
dismissal claimi, in certain circumstances this amount can be
much, much higherj and while the majority would be much less
than this — average claims range from around £8,000 to £16,000 —
this is still a cost most small businesses can’t afford to shoulder.
In such cases, your business also needs to think about legal fees,
even in cases where the ex-employee loses their case and is
clearly bringing a case without merit, it is extremely rare for an
employment tribunal to instruct the individual to pay the business
costs (1,411 cases were instructed to pay costs, out of 236,000 in
Tribunal year 2011/2012)k. This is before any further loss of
productivity for those involved is taken into account, not to mention
any impact on the reputation of your business and the morale of
your employees.
abc
Croner (1 February 2014) SMEs' Attention to HR Means Business Suffers —
Croner Research. http://cronersolutions.co.uk/news/smes-attention-to-hrmeans-business-suffers-croner-research/
d
HR Magazine (22 Feb 2010) Small businesses lack confidence in their
understanding of employment law.
http://www.hrmagazine.co.uk/hro/news/1017493/small-businesses-lackconfidence-understanding-employment-law#sthash.mMSpoO5o.dpuf
Preparing for the future
With 2015 due to bring more employment law challenges for small
businesses, including the Children and Families Act, many
businesses are evaluating whether it makes more sense to have
access to a professional resource, rather than soak up their
leadership time.
Working with an employment law expert will enable your company
to focus on serving customers and growing the business, while
giving you the confidence and peace of mind that you are following
employment law best practice and looking after your employees.
HR Everywhere is a suite of online and telephone advisory services
designed to provide small businesses with flexible and reliable
employment law advice and expertise, enabling them to react to
situations as and when they arise. For more information on how
HR Everywhere can help your business manage its obligations,
visit: www.adp.co.uk/HREverywhere
gh
HR Magazine (22 February 2010) Small businesses lack confidence in their
understanding of employment law.
http://www.hrmagazine.co.uk/hro/news/1017493/small-businesses-lackconfidence-understanding-employment-law#sthash.mMSpoO5o.dpuf
i
http://www.cipd.co.uk/hr-inform/employment-law/legislativechanges/statutory-rates/default.aspx
j
http://www.morton-fraser.com/knowledge-hub/employment-tribunal-awards
e
Croner (1 February 2014) SME’s Attention to HR Means Business Suffers —
Croner Research. http://cronersolutions.co.uk/news/smes-attention-to-hrmeans-business-suffers-croner-research/
k
http://www.shoosmiths.co.uk/client-resources/legal-updates/Employmenttribunal-costs-difficulties-of-recovery-6164.aspx
f
Federation of Small Businesses (May 2011) The Burden of Regulation.
http://www.fsb.org.uk/policy/images/the%20burden%20of%20regulation%20%20may%202011.pdf
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