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How changes to employment law could impact on a small business

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Changes to regulations can cause a great deal of upheaval for small businesses, especially when they refer to employment law.

Changes made in 2015 included the banning of exclusivity clauses for zero-hour contracts, the introduction of shared parental leave, and Fit for Work. A number of changes to employment law are being introduced in 2016, with some already in place. Planning and preparation is crucial to minimise the impact on a small company.

Changes made this year include:

National Living Wage

The National Living Wage came into force in April 2016, meaning that employees who are 25 years old and above are entitled to earn a minimum of £7.20 per hour. By 2020, the amount will have reached £9 per hour.

This may impact on employers who have a small workforce, especially if they are aged above 25. Some small businesses may consider reducing the number of employees they have, or increasing prices to cover the cost of implementing the changes. Investments may be affected, as a business owner will likely exercise greater caution in the financial department. Outsourcing to a management accountants may help, as they will use their experience to implement the changes with minimal upheaval.

National Insurance

The employer’s National Insurance Contributions for apprentices aged below 25 years old do not have to be paid as of April 2016. This is relevant for the amount up to the Upper Earnings Limit, up to £827 from April 2016. This could save some money for employers who have a number of apprentices within their organisation.

However, small businesses that provided a contracted out pension scheme will find that they have to pay slightly more in National Insurance Contributions, as a single-tier pension will come into force from April 2016. Employers will no longer receive a rebate.

How might these changes impact on small businesses?

A small business owner facing a number of changes to employment law may decide to try and recoup the costs by reducing the number of staff, or cutting production expensive. There are many ways to reduce costs in a company and a professional may be able to help a business owner to absorb costs with minimal impact on the company.

Will there be more employment law changes?

It is possible that further changes may be introduced in the next year or so, especially following the Brexit vote. If you would like to discuss ways to keep their impact on your business as low as possible, please contact us to arrange a meeting.