Government must help small businesses retain staff as well as recruit

Says Business Lobby Group

Subsidies for companies recruiting and training extra staff will not go far enough to protect employees and small businesses hit by the recession, the Forum of Private Business (FPB) is warning.

In addition to a new 2,500 subsidy for taking on and training workers unemployed for at least six months, the FPB believes the Government should provide help to businesses struggling to retain their existing staff. Modifying the Working Tax Credit scheme to support shorter working hours and freezing planned increases in employment costs would allow businesses to limit the redundancies they are forced to make.

While the FPBís Chief Executive, Phil Orford, welcomed the measures to get the long-term unemployed back into work, and boost their skills to help businesses and the economy to grow, he called for a more sustained programme in the forthcoming Budget, to be announced on 22 April 2009, to better protect employment.

ìIt is important to remember that recruitment is still taking place, and for these employers this scheme is very welcome, but many small businesses are concentrating on trying to keep hold of their skilled employees. This should also form a central pillar of the Governmentís support strategy,î said Mr Orford.

ìThe administrative structures are already in place to modify Working Tax Credits to allow for the retention of key and skilled staff on shorter working hours,î he continued. ìThis process should be based upon the actual hours worked, with income validated by the employer, rather than the current schemeís method of basing calculations on the previous yearís earnings.î

He added: ìFurther, in protecting jobs and boosting recruitment, the Government must ensure that its initiatives, including those designed to benefit employees, do not in themselves become new barriers to employment.î

The FPB is against the proposed Statutory Redundancy Pay (Amendment) Bill, which would increase maximum redundancy payments from 350 to 500 per week. The additional costs would force many more businesses to close rather than attempt to reverse their fortunes, adding to unemployment and leaving the taxpayer to foot the bill.

In addition, last week (1 April 2009) was the 10th anniversary of the introduction of the National Minimum Wage (NMW). Although it has benefitted workers, the NMW has increased by 60% over the past decade, becoming a significant cost burden for smaller business employers. In its submission to the 2009 Budget, the FPB called for it to be frozen to reflect the reality of wage stagnation and to protect jobs.

The FPB is also concerned about the impact of future increases in the cost of employment. In November 2008ís Pre-Budget Report, for example, the Government announced that employersí National Insurance (NI) Contributions will increase by 0.5% from 2011. The FPB believes this will amount to a tax on both new and existing jobs at a time of fragile economic recovery, and is calling for the increase to be scrapped.

FPB member Noel Hope is the Managing Director of Dorset Aluminium Products Ltd in Dorchester. He has been forced to make redundancies as a result of the economic downturn.

ìThe Government is providing incentives to take on the long-term unemployed, but what business owners really need is help protecting people who are already employed,î said Mr Hope. ìWe are a small manufacturing company and times are tough, but, as far as Iëm aware, there are no incentives to retaining staff at all. A Working Tax Credit scheme for employers makes absolute sense. It would mitigate the need to make redundancies by enabling people to work shorter hours, and allow businesses to retain the skills they need. It would buy us time to adjust to the circumstances we find ourselves in.î