Clause 36 - Removal of exemption for small employers
Employment Bill
5:30 pm
Mr Charles Hendry (Wealden, Conservative)
I beg to move amendment No. 68, in page 39, line 31, leave out from 'procedures,' to end of line 32 and insert
'subsection (3) shall have effect so that the note need not comply with the specified provisions where the relevant number of employees was less than six'.
The amendment is straightforward. It is designed to take account of the pressures facing small businesses and reduce the impact of these measures on companies employing five people or fewer. At present, the position is that 20 people are enough to allow a company to be exempted. We have not pressed for that because our main concern is with the smallest companies, the micro-firms, which are most vulnerable to the bureaucracy entailed by the provisions.
The sort of companies that we are talking about, with five employees or fewer, find it most difficult to survive, even in good times. They face a welter of rules and regulations. We need to go back to how people start a business. They do so not because they want to be tax collectors for the Government or to fill in forms all day, but because they have an idea that they want to pursue. They may not have run a business before and it is quite a brave step. They are not ready for the volume of paperwork that comes their way.
The most difficult time for that new business, as I know from experience, is taking on the first employee. It represents a significant act of faith. That person's salary will probably not yet be covered and so one assumes that one can bring in enough new business to cover it, other costs and make a profit. A range of other factors also come into play. One may be paying national insurance contributions for the first time and filling in pay-as-you-earn returns. It may push the business above a value added tax threshold. There may be additional insurance implications and one is taking on responsibility for that person and possibly his family.
Perhaps all that is best illustrated by a couple of brief examples. A plumber who has worked on his own and takes on a mate will often not just have to go through the elements that I have described, but may have to buy a new van. He has his mind on a whole range of different things. He may have to train that person and will be distracted from the job in hand while he does so. He then must work that much harder to find new business to ensure that the business survives and prospers. He may have left school at 16 and not be
particularly well educated. The minefield of forms and requirements to fill in bits of paper will be alien to him. He is certainly not a lawyer and probably not even a great wordsmith. He is simply someone who wants to run his business as well as he can. Micro-businesses like that do not need an additional level of bureaucracy.
The second example is a small corner shop. The guy gets up at 4 am when the papers arrive and is still there late into the evening filling in his books. He will find that his whole life is taken over. When he takes on his first employee, he takes on those additional responsibilities and he does not want further legal requirements. There may also be language problems. While he may know how to run a business hugely successfully, English may not be his first language and he will be dealing with legislation. Although some small firms, particularly lawyers and accountants, may specialise in dealing with details, the overwhelming majority of companies that employ five people or fewer are not in that category. They are small businesses that are often struggling to survive. We should bear such people in mind and try to make their lives that much easier.