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Employment and Pay

The Issue

Small firms have played a huge role in achieving the record-high employment rate we see today. We need to see more support for small firms in managing the costs that come with making high employment a reality. Employment laws regulate the relationship between an employer and a worker. Employment laws are enforced by Employment Tribunals (ET) in England, Wales and Scotland. The Working Time Directive (WTD) is a European Union (EU) law that gives workers in EU countries, rights to a minimum number of rest breaks, rest hours and holidays.

We want equality in the workplace and a fair system for employers and workers alike. We lobby policy makers and politicians here and in Brussels to understand the impact of employment laws on small firms and reduce unnecessary regulations.

Small businesses recognise the benefits of paying their staff a good wage and offering a range of workplace benefits. These include:

  • Greater productivity
  • Increased staff loyalty and morale
  • Attraction and retention of talent
  • Boost to local economy, if higher wages are spent locally

We’ve welcomed the gradual increases in the National Minimum Wage, reflecting the upturn in the economy. However, the Government’s decision to introduce a target of 60 per cent of median earnings by 2020 will be a significant challenge for many small businesses. Those in the hospitality, care and retail sectors are likely to be most affected, as their profit margins tend to be tighter.

Action FSB has taken

  • Lobbying Government to recognise the challenges employment regulation can cause small firms, design new laws with small firms in mind and reduce burdens wherever possible.
  • Calling on Government to reform ETs to make them more efficient and a last resort in employment disputes.
  • Lobbying Government to improve awareness of rights and responsibilities and prevent abuses. e.g. the introduction of a Code of Conduct for Zero Hours Contracts.
  • Lobbying Government to recognise the impact of the National Living Wage on small firms and to extend the Employment Allowance to counterbalance the financial impact.
  • Calling for annual changes to each of the minimum wage rates to continue to be based on the recommendations by the independent Low Pay Commission.
  • Lobbying Government to make public organisations factor in the cost of paying the National Living Wage when procuring services.
  • Helping small businesses to recruit and retain staff by providing a wide range of benefits for staff, through the creation of voluntary collective insurance schemes.

Our Ask

Since the recession the UK workforce has performed exceptionally well. Any future reforms of employment laws need to reduce red tape, while maintaining a fair balance of employment rights. Further reforms of Employment Tribunals will help regain confidence in the system for both small businesses and claimants alike.

We’ve always supported the National Minimum Wage. It has traditionally been set at a level that eliminates low pay without harming employment. Future wage rises must be sustainable and based on the advice of the independent Low Pay Commission. To help small businesses increase wages, the Government needs to ease financial pressures including rent and utility costs. Good first steps have been achieved with the cut in Employers’ National Insurance.

FSB research shows 18 per cent of small businesses have used the Employment Allowance to increase wages

Achievements in...



  • Reforming Employment Tribunals to improve dispute resolution and discourage ill-founded claims.
  • Simplifying the rules for Shared Parental Leave and the Right To Request Flexible Working to make them more small business friendly.
  • We’ve taken part in the Government’s Task Force looking at EU rulings on holiday pay, as part of the WTD.
  • Lobbying Government to recognise the impact of the National Living Wage on small firms.
  • We’ve persuaded the Government to cut Employers’ National Insurance by introducing then extending Employment Allowance.
  • We’ve called on the Government to ask the Low Pay Commission to publish indicative minimum wage rates for future years to help small firms plan ahead.
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