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UK employment laws ‘deter sole traders from hiring’

UK employment regulations deter many sole traders from recruiting their first employee, a new survey has found.

In a study by the British Chambers of Commerce (BCC), dismissal and sickness rules were identified as major obstacles to job creation amongst sole traders.

Yet the BCC claims the ‘biggest barrier’ to job creation is the upcoming pension reforms, which require all employers to pay a minimum 3% contribution into an employee’s workplace pension by 2017.

Of the 1,127 survey respondents, 32% said the new pension requirements were the main obstacle when taking on staff, while 27% identified the dismissal process as another barrier to job creation.

One in three survey respondents who wanted to grow their business said that exemptions from employment law would encourage them to take on their first staff member.

The research has prompted calls for sole traders to be exempt from certain employment regulations.

‘Exempting new businesses from upcoming pension reforms, either for their first three years in business or until they have more than 10 employees, would remove one of the biggest barriers to job creation,’ commented Dr Adam Marshall, director of policy at the BCC.

‘Existing government initiatives do not go far enough to give today's sole traders the confidence to become tomorrow's employers. The national insurance holiday created for start-ups is being used by fewer than 3,000 firms, suggesting it needs to be more flexible to allow businesses to benefit.’

However Sarah Veale, head of equalities and employment rights at the TUC, said:

‘Exempting staff from employment legislation would be the start of a slippery slope towards a casualised labour market, where bad employers know they can mistreat staff as they have no protection or legal right to seek justice’.