The British Chamber of Commerce (BCC) in a report published on Tuesday has urged the government to waive burdensome employment laws for sole-traders to encourage them in hiring their first employee. The recommendation was made after a recent survey of 1,000 owners identified the new pension requirement (auto-enrolment), sickness absence and dismissal rules as the three top deterrents for taking on their first employee.
Nearly one in three (32 percent) sole-traders identified the soon-to-be-rolled-out auto-enrolment plan as the biggest hurdle in hiring their first staff. The Pensions Act 2008, which mandates all businesses to complete the auto-enrolment process between 2012 and 2015, seems to be the biggest barrier. Businesses are required to pay a 3 percent minimum pension towards employees’ pension savings. For many self-managed businesses, this will result in additional costs since they would require setting up pension schemes and make changes in payroll systems.
About 27 percent sole-traders found the dismissal process as the biggest barrier for taking on staff. This indicates that businesses are worried about dismissal even before they hire if they are found unfit for a job or there is a drop in demand for their goods and services. Another equal number (27 percent) found sickness absence a barrier in growing their business.
“In the UK, the proportion of enterprises with no employees has increased each year since 2004. There are currently over 3.6 million sole traders, and while not all of these people want or have the potential to expand, some do. Businesses consistently state that employment regulation prevents them from taking on more staff. If the government wishes to achieve its goal of increasing employment, it must respond to sole traders’ concerns, and make changes that encourage them to grow when the time is right”, said Dr. Adam Marshall, Director of Policy at the British Chambers of Commerce.
“Our research shows that new entrepreneurs are more ambitious, and their enthusiasm must be harnessed early on. Exempting new businesses from upcoming pension reforms, either for their first three years in business or until they have more than ten employees, would remove the one of the biggest barriers to job creation. In addition, sole traders tell us that a reduced rate of employer National Insurance Contributions would encourage them to take on their first staff member”, he observed arguing for a reduced rate of pension contribution.
Lobbying for more incentives to help sole-ownerships, he said: “Sole traders could play a big role in boosting both employment and growth across the UK. But our research shows that more needs to be done to give them the confidence to take on staff as their businesses develop”.