DERBYSHIRE and Nottinghamshire Chamber of Commerce has called on Government to exempt new businesses from forthcoming pension reforms and other employment regulations placed on sole traders to encourage them to take on their first employee.
The Chamber has released the findings of a new survey of local business owners, who identified new pension requirements, dismissal rules and sickness absence as the top three barriers to creating jobs.
More than one in three sole traders (37 per cent) identified forthcoming pension requirements as their number one recruitment obstacle.
The changes outlined in the Pensions Act 2008, which come into effect in 2012, appear to be discouraging significant numbers of sole traders from considering taking on employees. Firms will have to pay a three per cent minimum pension contribution towards the retirement savings of staff. For many owner-managers, this will bring with it indirect costs in setting up pension schemes, and changes to payroll systems.
In addition, 31 per cent of sole traders identified the dismissal process as a barrier to taking on staff. This suggests that even before hiring their first employee, sole traders are concerned about the inability to sack employees if they aren’t right for the job, or if there is a fall in demand for their goods or services.
Implicitly linked to this, more than a third (35%) of sole traders found sickness absence as an obstacle to growing their business, whilst 30% were concerned about the health and safety implications of taking on a new employee.
When asked what ambitions local sole traders have to increase their workforce by 2015, 36% said they planned to take on their first employee(s), 52% said they had no plans to employ someone and 12% weren’t sure.
When quizzed about what would encourage a sole trader to employ their first member of staff, 48% said increased demand for their goods or services, 31% said finding a person with the right skills and qualifications and 18% said reduced rates of employers’ National Insurance contributions or exemptions from employment law.
And when asked about the skills base in the UK compared to other countries, 53% of sole traders believe the UK workforce is less skilled than that of other EU countries, whilst 63% thought the UK’s labour market was less flexible than the rest of the EU, although 53% said it was more flexible than that of the US.
George Cowcher, chief executive of the chamber of commerce, said: “Sole traders – and start-up enterprises in particular – play a key role in driving the economy forward. Whilst some do not want or have the potential to expand, many of them will go on to become the job creators of the future.
“Businesses consistently state that over-burdensome employment regulation prevents them from taking on more staff. In an environment of high unemployment, and weak economic growth, Government has to look at how it can free up these business owners and allow them to grow their enterprises.
“Whilst Government has created initiatives to reduce the burden of red tape, some of these measures don’t go far enough. Exempting new businesses from 2012 pension reforms in their first three years or until they have more than ten employees would remove the one of the biggest barriers to job creation. In addition, a reduced rate of employer National Insurance Contribution would encourage people starting in business on their own to take on their first member of staff.”