HR

Micro businesses shouldnt need arduous regulations but it’s up to owners to show it

Hannah Wilkinson | 8 July 2016 | 8 years ago

employment legislation
The minimum wage, unlike a lot of more burdensome legislation, requires little compliance work
As comments made in 2012 by Andrea Leadsom about scrapping employment legislation for micro firms resurfaced this week, they were met with a sense of outrage by vast swathes of the media.

But there are plenty of reasons why the UK’s smallest firms shouldnt need such regulation the minimum wage is just one such example.

Some pretty sturdy economic theory suggests that if someone is paid less than 7.20, it’s either because the work they are doing creates less value than this, or because an employer has enough market power that they can pay someone less than they’re worth.

In the case of micro businesses, this latter possibility is quite easy to dismiss those employing a handful of staff simply don’t wield that sort of influence on the labour market.

The alternative possibility that employees in micro businesses are simply not productive enough to warrant earning a decent market wage, is trickier to assess. But research carried out by the Organisation for Economic Co-operation and Development (OECD) in 2013 showed that in rich, service-driven economies like Britain’s, small firms are often more productive than large ones with the implication that any employees they have are producing valuable output.

Thus, the concerns raised by Steve Turner, the the assistant general secretary of Unite, who claimed that removing employment legislation for small firms would plunge already vulnerable people in miserable, precarious employment, seem unwarranted.

it’s not just about economics psychology is also important. When you have one or two staff who you see at work every day and sometimes socially, too, decisions about their rights and benefits are about real people, not figures on a spreadsheet, making callous behaviour towards staff more unlikely.

The minimum wage, unlike a lot of more burdensome legislation, requires little compliance-related work beyond doing a quick calculation to check an annual salary is in keeping with it. This probably explains why the majority of Federation of Small Businesses (FSB) members did not object to its recent rise when questioned about it in October 2015.

But the fact that 38 per cent of these small employers did resent this increase highlights that, for a variety of reasons, not all small employers are great ones to work for. Whether this is because leaders havent yet mastered the best way to market their employees? output, or because training that would allow workers to be worth more isnt being provided, the risk of removing legislation for micro firms is that staff have to shoulder the cost while their bosses learn from mistakes.

Leadson is right that small business owners shouldnt be strangled by red tape. As the Brexit process gets underway, legislation which previously seemed set in stone will be up for review but those owners making the case for it to be removed should bear in mind the increased responsibility to employees that this would entail.

Topic

HR

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