By Max Clarke

Sole traders are ready and willing to hire new staff, but are being deterred from doing so by ‘burdensome’ legislation.

Pension requirements emerged in particular, from a report carried out by the British Chambers of Commerce, as the main barrier to boosting headcount, to the detriment of the UK economy.

“In the UK, the proportion of enterprises with no employees has increased each year since 2004,” said Dr. Adam Marshall, Director of Policy at the British Chambers of Commerce.

“There are currently over 3.6 million sole traders, and while not all of these people want or have the potential to expand, some do. Businesses consistently state that employment regulation prevents them from taking on more staff. If the government wishes to achieve its goal of increasing employment, it must respond to sole traders' concerns, and make changes that encourage them to grow when the time is right.”

Nearly one in three businesspeople identified forthcoming pension requirements as the top barrier to taking on staff. The changes outlined in the Pensions Act 2008, which all businesses must begin complying with between 2012 and 2015, appear to be discouraging significant numbers of sole traders from considering taking on employees. Businesses will have to pay a 3% minimum pension contribution towards the retirement savings of staff. For many owner-managers, this will bring with it indirect costs in setting up pension schemes, and changes to payroll systems.

In addition, a quarter of sole traders identified the dismissal process as a significant or total barrier in taking on staff. This suggests that even before hiring their first employee, sole traders are concerned about the inability to sack employees if they aren’t right for a job, or if there is a fall in demand for their goods or services. Implicitly linked to this, more than a quarter (27%) of sole traders found sickness absence an obstacle to growing their business.

“Existing government initiatives do not go far enough to give today's sole traders the confidence to become tomorrow's employers,” continued Dr. Marshall.

“The National Insurance holiday created for start-ups is being used by fewer than 3,000 firms, suggesting it needs to be more flexible to allow businesses to benefit. In addition the government’s move to exempt micro businesses from new regulation fails to take into account the vast amount of existing legislation, which is seen by sole traders as a major deterrent.

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