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Small firms to get support on regulation compliance

The government has announced that it is to set up a pilot scheme aimed at helping smaller businesses comply with health and safety and employment rules.

The scheme is to be implemented in response to the findings of the independent Anderson review which recommended a range of proposals to improve the quality of regulation guidance that government gives to business.

The review found that businesses experienced the most difficulty understanding health and safety and employment legislation.

Announcing the scheme, the government said that the measures will help firms comply with the law and will save them time and money. The advice businesses receive will be backed by insurance, so they can be confident in following it.

Specifically, the measures include piloting a telephone advice service, which provides tailored and ‘insured advice’ to help businesses comply with employment and health and safety law; removing disclaimers that bring the accuracy of the guidance into question and confuse firms; encouraging inspectors not to prosecute ‘reasonable’ businesses; and setting out when the government will update the most frequently used guidance to comply with the Code of Practice on Guidance.

Other proposals put forward by the review, and accepted by the government, will see the introduction of a ‘quick start’ summary for each piece of guidance, setting out essential actions firms must follow to comply with the law; a central contact point for reporting inconsistent or inaccurate guidance; and actions to broaden the skills of inspectors so that they can provide better advice based on the needs of businesses.

Stephen Carter, the business minister, said: “In the current economic climate it is more important than ever that we help to reduce the time and money businesses spend on compliance with regulation.

“Getting guidance right for small businesses frees up precious resources which people need to run their businesses. These new plans will give a much needed boost for small firms, giving them clarity and confidence in government advice.”

Research among SMEs, carried out for the review, revealed that three-quarters of businesses struggled to understand all of the content of the regulations and did not know where to find relevant information to help them comply with the law. A half of firms did not use any advice at all on regulation compliance.

From the study, it was clear that small businesses face a greater burden, in terms of costs and time spent per employee, complying with regulation.

It is estimated that almost half of all businesses use external advice about how to follow regulation, spending at least £1.4 billion per year on such services.

Some 75 per cent of medium-sized enterprises said that they paid for advice on employment or health and safety regulation.

Employment tribunals were also identified as a real problem for smaller businesses. Figures showed that SMEs are disproportionately represented in employment tribunal applications. Businesses with 50-249 employees, for instance, generate 21 per cent of tribunal applications but account for only 4 per cent of total employment.

While welcoming the response to the Anderson review, the Institute of Chartered Accountants in England and Wales (ICAEW), however, urged to the government to go further in implementing its recommendations.

Clive Lewis, head of SME issues at the ICAEW, said: “The Anderson Review suggested improved guidance and increasing compliance could reduce businesses costs by up to £841 million a year and save £40 million in reduced employment costs.

“We welcome the government’s acceptance of the need to improve its guidance, particularly the intent to ensure it contains a positive statement of what users can expect from it, its scope and limitations.”

But Mr Lewis added: “However, much of the government’s response to Anderson is simply pushing forward actions to the next revision of the Code of Practice on Guidance, which is due for review before July 2009.

“The current Code of Practice has a let-out - ‘Government departments and their agencies should follow the Code, unless there are very good reasons to depart from it’, so this is not re-assuring.”