Dealing with employment issues is costing the UK’s small businesses £2.4 billion a year in administrative costs.
Figures released by the Forum of Private Business (FPB) from its members’ helpline service show that more than one in three of all calls in August 2009 related to employment matters – more than any other issue.
Redundancy queries amounted to 14% of the total number of calls while disciplinary matters accounted for 12%, dismissal 7%, and short-time working (when contracted hours are cut) 2%.
FPB members are also worried about the raft of regulatory changes coming into force on October 1, which includes an increase in the National Minimum Wage to £5.80 an hour for workers aged 22 and above, £4.83 an hour for workers aged 18-21, and £3.57 an hour for those under 18 but above compulsory school age.
The minimum weekly redundancy payment, which is also used to calculate tribunal awards, will also increase from £350 to £380 per week.
FPB policy representative Matt Goodman said: “There is a knock-on effect. The increase will also affect other statutory compensation payments, including unfair dismissal awards, compensation for non-compliance with flexible working procedures and compensation should a statement of employment particulars not be provided to an employee.”
According to FPB research, smaller-business employers spend £259 million per year on work associated with dismissals and redundancy; £391 million on absence control and management; £237 million on maternity; £333 million on disciplinary issues and £1,175 million on holidays and other aspects of employment legislation.
The average time per month spent on employment law issues was around 10 hours for each small business.
Companies in the southeast were found to spend the most on employment law out of 12 regions surveyed, at £361 million per year.
London firms faced the second-highest bill at £332 million, followed by £272 million for those in the northwest. Smaller businesses in the northeast had the smallest annual bill at £71 million.
According to the Tribunals Service, the number of employment tribunals in the UK soared from just over 115,000 in 2005 to almost 190,000 in 2008.
To help small businesses avoid the pitfalls of employment law, the FPB has published its Employment Guide 2010.