By Claire West

The CBI recently called on the Government to “think small first” and tackle regulation that prevents private and family-owned businesses from creating jobs and growing their businesses.

In a new report, Think Small First, the CBI highlighted the potential for small and medium-sized firms (SMEs) to pick up the employment slack from the public sector. Research shows that they create two-thirds of all new jobs and are well represented in regions where the public sector predominates.

But with 60% of private and family-owned firms citing employment regulation as a barrier to job creation, the Government must recognise the disproportionate impact some regulation has on smaller firms, given their limited human resources capacity, and the informal nature of employment relations.

The CBI’s proposals include: speeding up the tribunals system; providing clear guidance in the absence of a default retirement age; introducing the right to an annual review of flexible working and to agree a return date with an employee going on maternity leave.

John Cridland, CBI Director-General, said:

“Smaller firms are job-creation dynamos. The Government must think small first by tackling regulation which distracts them from growing the business and creating jobs.

“Much employment law fails to recognise that private and family-run firms don’t have dedicated human resource teams and tend to manage staff in an informal way.

“The size and nature of these firms makes them strong advocates of flexible and family-friendly working, and the Government should build on this success. An annual review on flexible working would ensure that competing requests could be managed fairly, while agreeing a return date with employees going on maternity leave in advance would help firms plan for the future.

“If the Government gets the law right for small firms, it gets it right for all firms. Thinking small first would better harness the potential of SMEs, rather than simply exempting some of the smallest from aspects of the law that undermine growth.”

The CBI has set out proposals which illustrate how a “think small first” approach would benefit companies of all sizes, but particularly SMEs. These include:

Extending the unfair dismissal qualifying period to two years. This would reflect the limited HR capacity of SMEs and give them more confidence to hire

Requiring tribunals to make practical use of current legal defences based on the size of firms

Reforming the ACAS code to give greater support to smaller firms

Introducing a package of measures to allow firms to manage retirement with confidence in the absence of a default retirement age.

Improving the speed of resolution of employment tribunal claims. This should include requiring pre-hearing reviews with the power to strike out weak claims, a refundable fee per claim to discourage opportunistic multiple claims and greater efforts to encourage settlement between employee and employer.

Giving firms the right to have an annual review of flexible working arrangements, and to redistribute flexible working as employee needs change. For instance, asking parents of older children to increase their hours to allow a returning mother some access to a limited pool of flexible hours
Allowing smaller firms to ask someone going on maternity leave to specify when they plan to return, with the expectation that this date will be kept to unless employer and employee both agree to change it.

Issuing better guidance on managing competing flexible working claims.

Research shows that SMEs grow at a faster rate than larger firms. The sector employs 13.6 million people and since SMEs are widely-dispersed across all major sectors, they are well placed to contribute to the rebalancing of the economy. CBI analysis shows that in regions where the public sector accounts for a larger share of the regional economy, SMEs employ a larger-than-average proportion of the private sector workforce. In Wales and Northern Ireland, for example, public sector employment accounts for 26% and 30% of all employment respectively, well above the UK average of 20.5%. In these places SMEs provide 76% and 78.5% of private sector jobs, well ahead of the UK average of 60%.