Sole traders put off expanding by costly employment laws

Money, News

Sole TradersThe British Chambers of Commerce (BCC) has carried out a news survey that reveals sole traders are being deterred from becoming employers due to the expensive cost of employee pension plans, sick leave and dismissal rules.

Over 1,000 sole traders took part in the survey to find out what they really think about hiring people. Nearly a third of the respondents blamed the upcoming compulsory pension payments to employees as their main barrier.

The compulsory pension plan is due to come into action in 2012 and means that firms will have to start paying 3% of each employee’s monthly salary into a pension pot as well as managing employee contributions and the fund. Businesses with fewer than 250 employees will not have to start contributing until 2014.

The report also revealed that the other reasons for not taking on staff were due to the dismissal process and employees’ sickness absence.

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.”

He 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.”

Could this be another case of the Government giving to small businesses with one hand, and taking away with the other?

Photo by Jared and CorinCC