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Wasting money
Written by Gary Howes   
Monday, 30 March 2009 10:58
Economic Policy: The government has today said that around £100m is being spent by SMEs on acquiring advice which the government says is freely available.

The money is "unnecessarily" spent, "on external consultants and advisors to help manage their employer obligations," says a press communique released on behalf of the Department of Business.

New research commissioned by the Department for Business, Enterprise and Regulatory Reform (BERR) found that around one in ten small businesses have paid an average of £1,000 each on external advice on their employment obligations within the past year.
 
According to the research the top areas in which respondents from smaller business pay for advice are:
 
  • Calculating staff NI contribution (39%)

  • Writing business contracts; such as a new staff contract for an employee (30%)

  • Managing maternity and paternity leave (22%)  
 
  • Calculate staff holiday entitlement (13%)

The research identifies the reasons behind the huge additional financial burden self-imposed on GB small businesses:
 
Lack of confidence

Business leaders that are spending unnecessarily cite lack of confidence as a key factor.  Over half of those polled, (52 %) said they do so because they do not know enough and just under one in three (30%) worry that they will get it wrong if they do not call upon external advisors.
 
Knowledge gap

Almost a quarter of owners polled (24%) feel they are not eligible to manage their employment obligations themselves.  One in five respondents (21%) think they need a professional qualification to give staff a new contract and a quarter (26%) of all small business employers surveyed believe they need a qualification to dismiss staff or make someone redundant.
 
Distrust of free advice

More than half (53%) do not believe they can comply with employment obligations through free advice – one of the major reasons they are turning to consultants unnecessarily.   
 
Pat McFadden, Minister for Employment Relations said:
 
 “In a downturn every penny counts and we don’t want small businesses spending money on advice and information that the Government provides free of charge. The Government is committed to showing small businesses where savings can be made.
 
“Some small business owners may feel that they need a professional qualification to manage simple tasks and that free advice will not provide them with the answers they need. But, there are a range of sources of information available and I would urge all small business owners to familiarise themselves with the Business Link online resources.
 
“By using Business Link as their first port of call, businesses could save thousands of pounds that could in turn be invested back in to the business. If just half of employers switch to the free online tools we have developed, it could save UK businesses around £50m a year.”
 
More than a quarter of small business owners (26%) said they used paid-for consultants as they didn’t have the time to manage their obligations themselves. However, of those businesses that do handle their employment obligations themselves, many said it was much simpler and less time –consuming than other employers might think – 72% of businesses that don’t pay consultants said they only have to manage their obligations less than once a month.