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Britain's smaller firms spend £2.39bn every year simply complying with the miles and miles of employment-based bureaucratic red tape, proving that every small business must have a water-tight financial plan throughout the year.

According to the Forum of Private Business' research, the amount spent by smaller businesses on employment law was the highest out of all other different types of legislation, surpassing the £2.1bn per year spent on health and safety administration and £1.8bn on tax.

The survey found that smaller business employers spend £259m on work associated with dismissals and redundancy. They spend a further £391m on absence control and management, £237m on maternity, £333m on disciplinary issues, and £1.18bn on holidays and any other remaining areas of employment legislation. The average time per month spent on all these different areas of employment law was found to be around 10 hours for each small business.

FPB member Rachel Andrews, financial director of Hertfordshire-based Andrews Computer Services, says she believes small businesses spend a lot of time and money dealing with employment red tape because the law is "skewed" in favour of employees.

She said: "With all the legislation, you often feel as though business owners are being treated like morons. There has got to be some realism – I wonder if the policy-makers have ever done any cost-benefit analysis on these things. Most of us simply haven't got the time to go through and understand what these rules are trying to do."

To make a business work isn't cheap. This is why every business, no matter what its size, needs to be able to know about every penn that is going in and out. Talk to a financial adviser about cleaning up your books and minimising your outgoings.

SOURCE: FPB, 03/07/09

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