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State of the Nation

SMEs: Be Aware of Vast New Regulation Changes From April 6

By April 7, 2014 No Comments
SMEs: Be Aware of Vast New Regulation Changes From April 6

red tape for UK SMEsEvery year it’s the same thing. A new raft of business-related regulation is introduced, and small business owners must comply – or suffer the consequences. It’s not surprising that many companies admit that they struggle to keep up with these constant red tape changes. Just one in four SME employers hires somebody to deal specifically with regulation, according to research from the Department for Business, Innovation and Skills, and seemingly endless shifts in employment law, in particular, cause many small businesses a real headache.

Many SME bosses will be feeling the pain particularly this month. Sunday didn’t only mark the beginning of the new financial year, but it was also the day when a series of new regulations came into force in the UK. And many of the law changes that took effect on April 6 potentially affect small enterprises, with new rules about business rates, maternity pay, and National Insurance (NI) among those introduced.

New rules that appeared on the statute books on April 6 include:

  • Businesses with up to 50 employees are now to be exempted from any newly devised regulations that are judged to be too burdensome under an extension of the Government’s red tape freeze. Until April, this exemption applied only to SMEs with fewer than ten members of staff.
  • The National Insurance Contributions Bill was also enacted this month, giving an estimated 1.25 million firms and charities a £2,000 tax cut on their National Insurance bills. About 450,000 businesses will no longer pay any NI contributions at all for 2014/15, according to Government estimates.
  • The amount that bosses must pay new parents has increased, with Statutory Maternity Pay, Paternity Pay, and Adoption Pay all boosted to £138.18 per week, up from the previous weekly rate of £136.78. The Government’s official website has more information about maternity pay, and employers can use an online calculator from HMRC to determine how much
    staff taking parental leave may cost them.
  • Rates of Statutory Sick Pay have also increased, now at £87.55 a week for up to 28 weeks. Businesses’ right to reclaim the cost of sickness absence has also been removed, an unwelcome development highlighted on this blog before, and one that potentially leaves many small firms very exposed.
  • As of April 6, employers who lose tribunal claims could be liable to pay penalties of between £100 and £5,000. These fines will be imposed if the employing business has been deemed to have breached the staff member’s employment rights. The maximum compensatory award for unfair dismissal has also grown from £74,200 to £76,574 – or 52 weeks’ pay, whichever is the lower amount. These changes have huge ramifications for smaller employers, and make dealing with grievances quickly and appropriately all the more important.
  • SMEs that are tackling employment disputes could be helped by a free pre-tribunal claim conciliation service that was launched on April 6 by Acas, the body devoted to preventing serious disagreements between employers and workers. This new mandatory intervention requires disgruntled employees to lodge details of their grievance with Acas before going to an employment tribunal, in the hopes of reducing the number of disagreements that end in a tribunal claim. Once claims have been submitted to Acas, conciliation is offered to both parties for one month under this new approach. If the counselling is unsuccessful, or one party refuses to participate, the claim proceeds to tribunal, as previously

Added to this mass of changes on April 6, there were yet more rules that came into force a few days earlier. The first day of April was the date by which companies with between 160 and 249 employees had to enrol eligible members of staff in a qualifying workplace pension scheme. Here at Boost Capital, we’ve talked about this pensions auto-enrolment process before, and smaller firms will also find themselves included in the new pension arrangements over the coming months. The very smallest companies, with fewer than 30 employees, have more leeway, and will only be affected by the rules between June 2015 and April 2017.

But not all of the recent measures were bad news for smaller companies. The changes include a business rate cap of two per cent for one year for firms, and a business rate discount of £1,000 for small retail and food and drink premises with a rateable value below £50,000. Also, the implementation of a doubling of the extension of business rate relief until March 31, 2015 should mean that 360,000 SMEs pay no business rates at all, the Government calculates.

All in all, it’s a lot for small business owners to take on board, and these regulatory developments will do little to strengthen SMEs’ belief in the Government’s pledge to cut the red tape burden. But it is important – in fact, essential – for bosses to get up to speed with the regulatory changes. Small firms must make the time to understand the new rules, or hire someone who can. Failing to do so could leave them exposed to staff disruption, in danger of punitive fines – or prevented from benefitting from the few advantages that the politicians have conferred on Britain’s small business community.
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