Small firms to cut jobs amid cost woes and new worker rights, finds poll

A third of small businesses are planning to axe jobs amid worries over soaring staff costs, while new employment rights are also set to see firms rein in hiring and trim their workforces, according to new figures.

A poll of nearly 1,400 firms by the Federation of Small Businesses (FSB) in the final quarter of last year revealed that 33% expect to reduce their workforces, up from 17% in the previous three months.

A separate survey of 1,270 small companies also found that over two thirds – 67% – would curb hiring in the face of the incoming Employment Rights Bill, with nearly a third – 32% – planning to reduce the number of employees they have before the new measures come into effect.

It found that three quarters – 75% – of small employers flagged worries over new laws relating to unfair dismissal changes, while 74% raised worries about changes to sick pay.

Tina McKenzie, FSB’s policy chair, said: “The figures speak for themselves – plans to allow employees to sue their employers on their first day on the job will wreak havoc on our already fragile economy, while changes to Statutory Sick Pay will make employers think twice about their hiring plans.”

She added: “If taking on staff becomes a legal minefield, businesses will simply stop.

“That means more people on benefits, a ballooning welfare bill, and a devastating hit to living standards.”

The Employment Rights Bill also comes as firms face pressures from soaring labour costs, with the Government increasing national insurance contributions for employers from April, alongside another minimum wage hike.

The FSB found that more than half – 51% – of small firms surveyed at the end of last year believe that labour costs are one of the biggest barriers to growing their business.

A spokesman for the Government said: “This Government has delivered the biggest upgrade to people’s rights at work in a generation and our measures already have strong support from business, as well as overwhelming public support.

“As we deliver our Plan to Make Work Pay, we will ensure all businesses have their say and are given the time to prepare for any changes as we deliver our pro-business, pro-worker agenda.”