Rarely do people go into business because they have a passion for bureaucracy. But complying with rules and regulations is a huge part of running a company, and failure to do so can lead to huge fines, or in extreme cases, the closure of the business. Moreover, once a small company starts to employ other people, a whole new world of bureaucracy opens up, as the employer needs to start thinking about pensions, holiday pay, and taxation, to name a few key concerns.
While this kind of paperwork is an overhead, experts would argue it leads to happier and more productive staff. So SMEs are on top of this, right?
Not necessarily. From our recent research, 51% of SMEs stated that they struggle to keep up with changing employer regulations. But this is not for want of trying: 39% have had a good understanding at some point, but have lost track as regulations were debated and altered. But just 12% admit they have never grasped employer regulation and compliance – many of whom admit they do not know where to go for guidance.
Why is this important? Take pensions. Figures for the last available quarter from the Pensions Regulator tell a story of small businesses failing to keep up with legislation around auto-enrolment and being hit with fines that can reach £10,000 per day.
Alongside this, SMEs have also recently been forced to battle changes to wages and contract legislation, with the introduction of the National Living Wage in April this year and numerous concerns over Zero Hours contracts. Even policy makers have struggled to get their heads around the Zero Hours contracts issue.
Managed correctly and fairly, flexible working options – whether it’s Zero Hours contracts, on-demand business models or general shift work – can empower both employees and small businesses and create a satisfied, efficient workforce. But in the wrong hands they can be exploitative to workers. After much deliberation, new legislation has been put into place, but given the complex nature of the subject, it’s little wonder many SMEs are still left perplexed. 68% of companies we questioned told us that they are unclear on Zero Hours contracts.
Knowing where to go for help
Trying to stay on top of all regs and rules as an SME isn’t easy, especially as two thirds of all small businesses don’t have a human resources team or anyone devoted to this area. In 77% of cases, responsibility for hiring falls to the business owner, our research found.
Services like Jobandtalent are designed to reduce the administrative burden on business owners when it comes to hiring and HR-related regulations. This doesn’t just mean helping to find the right new team member, but also consolidating the process of verifying, onboarding and then managing new staff to further relieve the admin headache. Some of our clients have calculated that this service has reduced their hiring costs by as much as 30%.
Most SMEs understand that they have an obligation as employers to protect their staff and comply with legislation. When they fail to do so, this often comes from confusion over what this entails, or lack of support, rather than actual negligence. However, unfortunately the fines and consequences are the same regardless of the cause. The key is for SMEs to uncover how and where they seek support on matters of staff management, so they are freed up to concentrate on the core aspects of running their business, without leaving themselves vulnerable to regulatory breaches.