More recruitment red tape for SMEs

Once again, the Government's revision of wages, tax, pensions and employment is causing a headache for employers and recruitment firms

The department for Business, Innovation & Skills

Azmat Mohammed Opinions, Monday 11 January 2016 Jump to Comments(0) 3,086 Views

Once again, the Government’s revision of wages, tax, pensions and employment is causing a headache for employers and recruitment firms.

Higher taxes on dividends are just one of many new legislations facing SMEs in the next 12 months. This flood of regulation impacts heavily on recruitment and will add extra HR costs for firms. Compulsory pension auto enrolment, mandatory national living wage, pre-employment checks and digital regulations are just some of the many issues that businesses will have to comply with.

Pensions are still in the headlines and continue to be confusing for both employee and employer. Auto enrolment is on its way. Fines will be issued to employers who do not comply by 2018.

The increase in the mandatory national living wage to £7.20, for those aged 25, comes into effect in April 2016. Christian Manicer, partner at Gorvins Solicitors, confirms that the salary increase will force affected firms to restructure their pay scales.

Other problems being tackled by the Government are late payment and the recruitment of overseas labour from non-EU countries. The Government recognises the issues facing businesses and late payment is being considered with the appointment of a Small Business Commissioner. According to the Institute of Directors, the problem is the over complex payment process which reduces business growth.

Recruiting illegal workers is now an offence for an employer and a series of measures have been introduced to tighten the employment of staff from non-EU states.

Contractors’ self-employment status is still on the agenda and this time HMRC will impose stricter rules to determine who is employed or self-employed. The tests for employment status means that the burden of responsibility will fall on recruitment firms and businesses who must ensure compliance.

SMEs are being restricted as to how much profit they allot to owners and must factor in other payments such as salaries, pension contributions and dividends.

EU legislation for a digital single market will be applied from July 2016 in order to harmonise transactions world-wide. The safety of data protection will also be an additional responsibility for those SMEs that have not yet complied.

There is no escape for UK businesses. This new wave of legislation will affect most companies in some way and is less carrot and more stick from the Government with the stick being possible fines, extra administration and recruitment costs and resources. The increase in employer national insurance employment allowance from £2k to £3k is one such carrot and the hope is to encourage SMEs to employ additional staff.