News

July 12, 2011

Cost of employment law puts sole traders off expansion, says BCC

A new survey of sole traders reveals that the cost of employee pension plans, sick leave and worker-friendly dismissal rules are deterring some small firms from becoming employers, leading to calls by business organisations to exempt micro-firms from some employment rules.

The British Chambers of Commerce (BCC) polled over 1,000 sole traders to find out what they really think about hiring people. Almost a third of respondents named the forthcoming compulsory pension payments to employees as their main barrier. From 2012 onwards, firms will have to start paying 3 per cent of each employee’s monthly salary into a pension pot – and manage employee contributions and the fund. Under the new law, businesses with fewer than 250 employees start contributing in 2014.

Dr Adam Marshall, policy director of the BCC, said: “One in three businesspeople with an ambition to grow their business by 2015 said that exemptions from [some red tape] would encourage them to take on their first staff member. Over half of the same group said a reduced or special rate of employer National Insurance Contributions would incentivise them to hire.”

The report showed other barriers to job creation also loomed large – over a quarter of one-man bands said that the dismissal process had put them off employing. The same proportion of sole traders (27 per cent) cited concern about employees’ sickness absence as a reason not to take on staff.

Marshall added: “The Government’s move to exempt micro-businesses from new regulation fails to take into account the vast amount of existing legislation, which is seen by sole traders as a major deterrent.

“More needs to be done to give sole traders the confidence to take on staff as their businesses develop.”

• Read our briefing on successful hiring on the Law Donut