Red tape stops small firms hiring workers

Additional employment laws are deterring businesses from taking on staff.

The weight and complexity of employment legislation is stopping small businesses from creating new jobs, according to new research.

Almost 80 per cent of advisers to sole traders, and 62 per cent of advisers to micro businesses, believed that their clients saw new laws as a barrier to recruitment, according to an Institute of Chartered Accountants survey.

As enterprises grow, the reluctance to take on staff reduces, but it is replaced by concern over the threat of legal action from past or present employees. Some 55 per cent of advisers to small businesses, and 46 per cent of advisers to micro businesses, believed that regulation had raised the chances of legal action by current or former employees.

“Small firms are a major source of employment in the UK and significantly contribute to the development of a more flexible labour market,” said Clive Lewis, secretary to the ICA’s Enterprise Group. “We are in real danger of damaging this vital provider of jobs if we do not sit up and take note of the burden increasing employment legislation is placing on smaller businesses.”

Around 45 per cent of private-sector jobs in the UK are at small and medium-sized businesses.


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