New figures from the Federation of Small Businesses (FSB) show that sickness absence costs small businesses on average £1,500 per year.
Long term sickness absence does not affect the smallest of businesses frequently, but when it does it has a big impact and the costs can be high. The FSB’s ‘Voice of Small Business’ survey panel shows that on average small businesses only experience 2.4 days sickness absence per employee each year – much lower than the national average 7.7 days per employee – 25 per cent said that they experienced no sickness absence at all and 81 per cent said that they were not at all affected by long-term sickness absence.
However, in the last 12 months sickness absence cost firms on average £1,500, but for nine per cent it cost more than £5,000. So it is important that the Government does more to help with the costs of sickness absence in the smallest firms.
Currently, some small businesses can feel confused by the Percentage Threshold Scheme – the current system used to calculate how much SSP an employer can claim back. This means that many small businesses either have to spend time doing difficult calculations or they have to spend money on buying in help.
With 40 per cent of small business employers claiming that dealing with holiday entitlement and sickness absence was one of the most difficult aspects of employment law, the FSB believes that recovery needs to be simplified so micro firms can reclaim all SSP costs more easily to stop them from being hampered at such a difficult time.
The FSB is calling on the Government to introduce a small employer’s relief for all firms with an annual National Insurance Contributions bill of less than £45,000 to recover SSP. This relief would be like that used for reclaiming statutory maternity pay and would use the same calculations. As a result, it would ease the administrative burden, as well as helping businesses manage sickness absence better.
Small firms care about their staff and want to invest in their health where they can. However, Government must understand the pressures small firms are under, and that this is one pressure among many. This needs to be recognised within the soon to be published independent review into sickness absence.
It will also need to recognise that small firms are not able to cope with an increase in the burden of responsibility or an increase in regulation, but that by better supporting small businesses, they could be able to improve the way that they manage sickness absence.
The Government should look at improving the way the Fit Note is used by making it electronic and increasing the training that GPs are given on how to use it.
Small businesses also need better access to free occupational health advice either through GPs or via the national occupational health phone line to make this issue easier to manage.
John Walker, national chairman, Federation of Small Businesses, said:
“Small firms act like a tight knit family and value the contribution their staff bring to the business. And research shows that staff in smaller firms are more often committed and loyal. But sickness absence is one of the most complex pieces of employment law they have to deal with. It can also be costly with small businesses paying around £1,500 over the past 12months. The Government must provide a small employers relief for statutory sick pay in the same way they do for statutory maternity pay so those small businesses that experience a member of staff on long-term sickness absence, are not hampered and are given the support they need.”
A targeted VAT cut and a National Insurance Contributions (NICs) holiday must be introduced for small firms as small business confidence fell to -9.3 due to the pressure of weak demand and rising costs, according to the Federation of Small Businesses (FSB) ‘Voice of Small Business’ Index.
The Index – which has been a good predictor of the path GDP will take – fell by 9.6 points from +0.3 to -9.3 in the third quarter as more businesses lost confidence in the economy. This news comes just weeks after GDP was revised downwards to 0.1 per cent in the second quarter and ahead of third quarter figures due next week.
And, in more gloomy news, figures last week showed unemployment reached 2.57 million and youth unemployment almost reach the one million barrier. A balance of six per cent more businesses surveyed by the FSB think that they will lay people off in the coming three months, pointing to a further increase in unemployment by the end of the year.
The FSB has long called for the current NICs holiday to be extended to existing businesses across the UK that have fewer than four employees and that employ up to the three more staff.
One in 10 businesses (11 per cent) said that extending the NICs holiday would be an incentive to take on staff, according to recent FSB research. The current NICs holiday is only open to new start ups and has not had the take-up that the Government expected it to, with only 7,000 businesses using it. By extending it, the Government has the opportunity to put more people in a job which in turn would boost the tax base and money to the treasury.
Consumer demand is also a large barrier to economic growth and so the FSB has called for a targeted and time specific VAT cut to encourage people to spend in these areas. The FSB is urging the Government to follow the lead of other EU countries and cut VAT in the construction and tourism sectors to five per cent for a year to help give the economy a real boost.
In addition, a NICs holiday would also offset increasing cost pressures on firms. More than three quarters of the firms surveyed said that their costs had increased in the quarter, mainly due to rising commodity prices as more than half of respondents (57 per cent) cite rising energy costs, and 49 per cent increase in the cost of raw materials as the reason.
John Walker, national chairman, Federation of Small Businesses, said:
“As businesses come to terms with the double whammy of falling revenues and rising costs, it is no wonder that they’re losing confidence, and unfortunately, as their overheads increase one way to control it is to lay off staff.
“It is the first time since we started the Index that we have seen more people believe that they’re going to lay off staff than take them on. This has to show the Government that a more robust plan for growth is needed.
“Moreover, this is the first time that we have seen confidence in all regions of the UK in negative territory. We urge the Chancellor to look closely at our NICs holiday proposals and bring this forward in his Autumn Statement. We fear that without it, the recovery will falter once more.”
Proposals to charge small firms for ‘material’ faults found during inspections by the Health and Safety Executive (HSE) could damage relationships and may be seen as a way to raise revenue rather than improving compliance, according to the Federation of Small Businesses (FSB).
The HSE has proposed to extend its current systems of cost recovery to include a fee for intervention where an inspector will charge for the inspection and any subsequent actions when a material fault has been found. The HSE estimates that for an inspection that results in a letter, the cost to business could be at least £750.
For a small or micro business, a bill of £750 or more for a material fault could be extremely damaging especially during difficult economic times. The proposal currently states that micro firms will in general receive the same level of fees as large businesses. This will disproportionally affect micro firms as fees of this level will have a greater affect on the ability of the business to function and grow.
The FSB is concerned that small firms may view the proposal as a revenue generating exercise which could damage the HSE’s relationship with business. Worryingly, the proposal fails to clarify whether the money raised would go to the HSE or to the Treasury. The FSB believes that if it goes to the HSE small firms could fear that their inspection has been influenced by the need to raise money – especially as the context for this consultation is a 35 per cent budget cut to the HSE.
It is important that businesses have a good working relationship with the HSE to allow them to ask for help and support to ensure they achieve compliance. With the possibility of a hefty fee over their heads they may be less likely to want to ask for help and compliance may suffer.
Furthermore, those businesses that wish to challenge the result of their inspection may have to cover the whole costs of the dispute if their complaint is not upheld. The FSB is concerned that many businesses will feel pressured to pay the fees and not appeal even if they have just cause due to the potentially large and undefined costs of a dispute process.
John Walker, national chairman, Federation of Small Businesses, said: “The FSB has a real concern about these proposals as they stand. Not only could they add to the fear that many small businesses have about health and safety regulation, but could have a serious impact on their relationship with the inspector, which if positive can help compliance to the benefit of the business and society.
“£750 is a hefty fee for small and micro businesses especially during difficult economic times. Most small businesses do not have the same resources that larger firms have to buy-in expert help and yet they are required to be experts in a wide range of complicated regulations. Instead of penalising them with large bills, the HSE should be there to help and support small firms to be compliant. For many small firms this proposal will be seen as anti-growth.”
The Federation of Small Businesses (FSB) has welcomed the Government’s commitment to overhaul the way that small businesses will be able to compete for public sector contracts, through cutting red tape and being more open and transparent.
Public sector procurement has long been an issue for small businesses, with 70 per cent of SMEs rarely bidding for public sector contracts due to a lack of awareness of the opportunities that are available and the red tape surrounding the application process.
For many small firms, access to public sector contracts comes through local government – with 27 per cent of FSB members supplying this sector. The FSB has long campaigned that local government is more transparent in the contracts that it has available, in the same way central government is, and the commitment to do this is a welcome step.
Recent research into small firms’ access to public procurement markets across the EU places the UK 24th out of 27 member states, with only 24 per cent of contracts going to small firms, compared to 44 per cent in France.
Small and micro businesses do particularly badly in the UK, with only an estimated 11 per cent of the total value of contracts being awarded to businesses of that size. This is despite the fact that small and medium-sized enterprises (SMEs) account for 49 per cent of the UK’s turnover.
The FSB is pleased that the Government has recognised that these barriers exist and has committed to making the process simpler. The initiatives, such as the reform of the pre-qualification questionnaire (PQQ) process and more transparency through a new contracts website, as well as providing a dedicated voice for small firms’ views to be heard, will mean more small businesses having the potential to access work.
John Walker
John Walker, national chairman, Federation of Small Businesses, said:
“The FSB has worked hard to ensure that small firms have the same access to public sector contracts as big businesses. The measures outlined today, which look to remove red tape and open up more transparent channels of communication, are most welcomed.
“These measures will now need to be accompanied by a genuine cultural change within Government procurement in terms of its approach to dealing with small businesses.
“Removing the need to fill in a PQQ for smaller contracts is a bold move but it is vital that something more bureaucratic or confusing does not emerge in its place. We hope the promise of a dedicated voice for small suppliers within Government will help to prevent this.
“The good thing is that the Government is going to publish figures on the amount of contracts going to SME’s so we will be able to measure its success and hold the Government to account if it is not working. That type of measurement and transparency is something we’d like to see adopted more widely across the public sector.”
Small businesses ended 2010 less confident than they were at the beginning of the year, according to the Federation of Small Businesses’ (FSB) latest ‘Voice of Small Business’ Index.
The report, which looks at the general health of the small business sector, has found in the fourth quarter of 2010 that business confidence fell for the third successive quarter to a net score of -13.2, the deepest decline since the survey began in March 2010.
Overall, the figures show that the private sector recovery lost momentum in 2010, and as the constraints on businesses cash-flow increased from utility bills, fuel duty and VAT combined with the public sector cuts, growth in 2011 is also likely to be sluggish at best.
The severe weather at the end of the year and the rise in VAT to 20 per cent at the start of 2011 have both had an impact of small firms’ confidence, especially those businesses operating in service and consumer focussed sectors such as restaurants, hospitality and retail sectors and those in the transport sector.
The report also shows that small businesses expect employment growth to weaken in the coming months, with 77.7 per cent of small firms expecting to keep employment levels the same, but 12.4 per cent expecting to decrease the number of staff they have – up from 10.4 per cent in quarter three.
The FSB is urging the Government to bring forward plans for growth that includes a competitive tax system to help boost employment and to keep to its manifesto pledge to introduce a fuel duty stabiliser. The Bank of England must also keep the base interest rate at 0.5 per cent to help keep the focus on growth.
John Walker
John Walker, National Chairman, Federation of Small Businesses, said: “A number of pressures on small businesses are beginning to come to a head, such as the increase in VAT and fuel duty, placing more strain on cash-flow. This combined with the severe weather at the end of 2010 has meant that small firms are not as confident about their prospects in 2011.
“With inflation above target and the labour market still weak, small firms cannot rely solely on the consumer for growth in 2011. So it is imperative that the Bank of England base rate is kept at 0.5 per cent, as once the impact of the VAT rise is excluded, inflation is relatively low.”
