Small businesses failing to understand employment regulations

A study has uncovered a worrying lack of understanding around employment regulations amongst small businesses in the UK.

A lack of HR resources and expertise is leading to risky hiring practices and a misunderstanding of employment regulations, finds research from Jobandtalent.

The report follows the release of official data from The Pensions Regulator, which revealed that the number of employers being fined up to £10,000 a day for not complying with the new regulations on workplace pensions, has shot up by 300 per cent in three months.

The survey of 500 small and medium-sized enterprise (SME) owners finds that such businesses are most at risk due to a lack of dedicated HR expertise or resource.

According to the study, only 37 per cent of SME owners have a good understanding on all matters to do with employee rights and employer regulations and keep updated on regulatory changes continuously.

A quarter also admit that while they understand current regulation, they struggle to keep up with changes.

Some 12 per cent feel they have limited to no understanding of present employment regulations, let alone changes in the future.

When questioned about the hiring process and time to hire new talent, two thirds (67 per cent) of the respondents revealed that they do not have anyone dedicated to finding talent and hiring or HR. Of those businesses, the vast majority (77 per cent) feel that the responsibility for hiring falls to the business owner.

More than one in five SME owners surveyed (22 per cent) take between two and five days to hire and ‘onboard’ a candidate, including registration, tax and insurance setup, reference checks, payroll registration, pension enrolment; all complex processes which take business owners away from their core responsibilities.

Outdating recruiting techniques

Other findings from the survey shed light on the antiquated methods SMEs continue to use in search of talent, despite advances in technology. Despite the decline in print media, 30 per cent of SME business owners polled still post an advert in a newspaper when searching to fill a role, and more than half (55 per cent) of SMEs questioned still rely on word of mouth.

James Peck, UK managing director of Jobandtalent says that small business owners need to hire great talent to grow, but this research shows that a number of UK small businesses are still taking enormous risks when hiring and managing their staff.

‘Noone starts a business because they like doing paperwork, but complying with regulations on auto-enrolment and the apprenticeship levy, for example, requires an almost constant stream of admin around hiring, payroll and benefits.

‘That’s very time consuming and keeps business owners away from their core tasks. Cutting time to hire and reducing risk are both critical success factors for small and growing businesses, so the ability to hire quality talent quickly with less administration provides businesses with the best possible opportunity to grow.’

Further reading on hiring staff

Hiring your first employee as a small business

Ben Lobel

Ben Lobel

Ben Lobel was the editor of from 2010 to 2018. He specialises in writing for start-up and scale-up companies in the areas of finance, marketing and HR.

Related Topics

Employment Law

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