Why Britain’s sole traders and SMEs aren’t recruiting

A report by Intuit, released last week, found that 91 per cent of sole traders would not consider hiring an employee in the next 12 months.

Interestingly, their reluctance wasn’t down to economic conditions. Of the 500 sole traders and small businesses polled, 71 per cent said that their recruitment decisions were unaffected by current news of anaemic growth and austerity.

The problem boils down to processes and procedures rather than economic pain: more than a quarter of respondents placed the blame on the administrative burden of bureaucracy and paperwork.

Take Priya Lakhani, CEO and founder of Indian sauce brand Masala Masala. She says her company, founded in 2008, isn’t hiring right now because “we need flexibility and we haven’t really got the time or the funding to go through employment and accounting regulations”.

According to the report, even small business with existing staff are unwilling to take on any new full-timers, with more than half saying they’re not recruiting.

“Current employment legislation makes it very scary for small businesses to hire people when otherwise they would love to,” comments Sean Morgan, recruitment expert and managing director of Quest Professional. “Employment law is far too complicated and too intimidating. And the liabilities are too great.

“At present there are a number of major hurdles small businesses or sole traders face, including unfair dismissal, maternity leave and discrimination laws,” he continues. “The government claims to be addressing unfair dismissal – but it could be up to a year before we see an effect on employment rates.”

So, what will it take to change business owners’ minds?

Top of the list, according to nearly 50 per cent of the pollsters, would be lower employment-related taxes such as National Insurance Contributions.

Help with administrative tasks, such as creating employment documents, health and safety compliance and setting up payroll infrastructure, also rated highly. Hardly surprising when you consider that many SMEs still use a basic spreadsheet or, worse, pen-and-paper, to run their staff payroll.

One of the deepest economic and social problems facing the UK has been surging youth unemployment – more than a million 16- to 24-year-olds are without a job, more than at any time since records began in 1992. But just think: if even a quarter of the UK’s 4.1 million sole traders and small businesses took on just one other employee, youth unemployment could, in theory, be stamped out.

Do you have plans to hire staff in the next 12 months? If not, why not? What’s holding you back? Share your comments below.

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