More than a third of calls to employment helpline concern redundancy and staff disputes

18 November 2010

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Redundancy and workforce disputes remain the biggest staffing headaches for small business owners but, with fewer entrepreneurs seeking help as the economy recovers, new figures suggest employment issues are becoming less pressing concerns.

In total, 38% of calls made by members to the Forum of Private Business's member employment helpline in the third quarter of 2010 concerned redundancy, disciplinary matters, grievances, dismissals or employee conduct.

The figure is consistent with the previous two quarters, although at 41% it was slightly higher in quarter one. However, overall call numbers have fallen. In quarter one the not-for-profit organisation's employment helpline received 1,665 calls, in quarter there were 1,221 calls and in quarter three 817.

This suggests that, as the economy continues to stabilise, fewer business owners are having to deal with the legal implications of staff performance and making redundancies.

However, following the new ‘enterprise czar' Lord Young's recent suggestion of a shake-up of employment law, the Forum is warning that much of the existing legislation is a costly barrier to recruitment and small business growth.

"When the economy was in turmoil and businesses were forced to cut costs severely and work more efficiently, the legal implications of redundancy and performance management issues were more of a concern for small business owners – clearly they are less so at present," said the Forum's Research Manager Tom Parry.

"However, when we are talking about small business growth and job creation driving a private sector-led recovery, employers must be given greater freedoms to make staffing decisions based on aptitude, attitude and performance without the fear of huge bureaucratic costs and being taken to a tribunal."

He added: "At present much of the employment law that is supposed to protect workers is a significant barrier to job creation for many small firms. For too long the balance of legislation has unfairly favoured individual employees at the expense of smaller business employers – and often the rest of the workforce. This imbalance must be redressed."

The latest monthly unemployment figures from the Office for National Statistics (ONS) suggest that the UK's labour market is indeed picking up. In October, unemployment fell in by 3,700 to 1.47 million. This was the first positive change since July and came despite earlier predictions by some economists of a 6,000 increase in job losses.

Signs that businesses are also seeking to create more jobs were revealed in earlier research carried out by the Forum.

In October, the 358 small business members on the organisation's Economy Watch panel made a total of 30 redundancies - double the number recorded in July, when the previous panel survey took place - but during the same period there were 125 vacancies, which was up significantly from the 71 job opportunities reported in July.

In September, 110 small business owners on the Forum's Employment Law member panel were asked to rank their main concerns when struggling to comply with different aspects of employment law. The issues were:

1) Applying the law correctly, 2) Consistency of enforcement, 3) Simplicity of complying, 4) Proportionality of the law for SMEs, 5) Cost of compliance, 6) Time taken away from running their business, 7) Ability to plan for the future, 8) none of these concerns.

Forum members' main concerns in each area of eight areas of employment law were identified as:

Dismissal/redundancy: 1) 45%, 2) 24%, 3) 37%, 4) 24% 5) 49%, 6) 20% 7) 3% 8) 16%

Grievance/discipline: 1) 39%, 2) 16% 3) 24% 4) 24% 5) 27% 6) 20% 7) 3% 8) 16%

Maternity/paternity leave: 1) 29 %, 2) 2%, 3) 20%, 4) 29% 5) 65%, 6) 37% 7) 33% 8) 8%

Working time directive: 1) 38%, 2) 25%, 3) 25%, 4) 21% 5) 33%, 6) 25% 7) 8% 8) 25%

Recruitment: 1) 33%, 2) 8% 3) 20% 4) 16% 5) 37% 6) 20% 7)12% 8) 37%

Statutory holiday pay: 1) 29 %, 2) 12%, 3) 12%, 4) 12% 5) 33%, 6) 16% 7) 4% 8) 37%

National Minimum Wage: 1) 25%, 2) 11% 3) 23%, 4) 15%, 5) 23%, 6) 11% 7) 13% 8) 34%

Retirement: 1) 35%, 2) 9% 3) 22% 4) 22% 5) 26% 6) 22% 7)13% 8) 43%

In 2009 the Forum's ‘Referendum' survey revealed that red tape costs small business employers almost £12 billion per year, spending an average of 37 hours each month on paperwork. Employment law is the costliest bureaucratic burden, costing £2.4 billion per year. Health and safety administration costs small firms £2.1 billion and tax £1.8 billion per year.

The Forum helps its members negotiate legal pitfalls via its business guides, dedicated legal helpline and insurance packages, which are part of its Health and Safety and HR Director business support solutions. For more information call 0845 612 6266 or visit www.fpb.org.

The Forum's Chief Executive, Phil Orford, discusses the burden of employment law in his latest blog.

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