By Daniel Hunter

With Business Secretary Vince Cable announcing reforms to labour market rules, QualitySolicitors, the UK’s fastest growing legal brand, has said it expects small to medium sized businesses (SMEs) to back the proposals.

Research carried out earlier this year found that almost two thirds (63%) of SMEs seeking legal advice in the UK were concerned about terminating the employment of under-performing employees.

This particular issue topped the scale of most problematic legal challenges currently experienced by small businesses, based on a survey of QS 400 solicitors around the country

The research also found that the second most prolific legal issue for small and medium sized businesses is making redundancies when restructuring their companies, with almost half of solicitors (45%) finding it one of the top three legal challenges business owners face. Selling their business is also an issue SME owners are concerned about, with 32% of solicitors citing it as an area they have advised on.

The main reason for SMEs finding these issues challenging, according to the research, is that in 85% of cases they do not know or understand what their legal requirements and obligations are and 45% lack awareness of changes in legislation. In addition, 65% of SMEs often leave it too late to seek legal advice on compliance issues and 45% of them leave insufficient time to resolve legal matters due to other business pressures.

“As an entrepreneur myself I completely understand why the finer points of employment law may not be front of mind for people when they are starting a business, but failure to comply with legislation or taking cuts in the short term can prove costly to a company, and ultimately the profits, in the long term," Chief Executive of QualitySolicitors Craig Holt said.

Craig Holt agrees that taking pre-emptive legal advice is a smart move: “In this challenging economic environment when SMEs need to run efficient and effective businesses in order to survive and grow, it is more important than ever to make sure they have a clean bill of legal health. This means keeping on top of employment law and preparing in advance for difficult situations.”

As a starting point, SME owners who want to avoid costly legal problems should follow these basic rules:

1. Consistency. Have consistent policies in place especially in disciplinary, grievance, equal opportunities and sickness. Follow those policies and ensure all key staff are trained on them.

2. Recruitment. It pays to find the right person so make sure you recruit staff correctly and look after them by having a proper induction process and giving regular feedback on performance.

3. Procedure. Ensure that the correct procedures are in place. E.g. it is a legal requirement that a new member of staff should have their employment contract within two months of starting.

4. Training. Good training is essential. A lot of tribunal and personal injury claims relate to inadequate or lack of training so make sure it is provided, recorded and kept up to date.

5. Communicate. Talk to your staff, keep them informed and ensure that your company stays abreast of changes to employment legislation to avoid claims being made against you.

6. Advice. If in doubt seek proper legal advice. The right information on how to implement employment legislation could help your business before it gets into trouble and save you money.

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