Employment potential of SMEs stymied by red tape, taxes and entitlement

We’ve become accustomed to hearing about small business being the engine room of the economy, but the reality is the engine is spluttering, especially when it comes to employment.

Despite the best intentions of the federal government’s most recent budget, the SME sector still faces significant barriers to reaching its potential as a driver of productivity and employer of people in this country.

These barriers come mainly in the form of industrial relations red tape, unnecessary taxes and levies such as payroll tax, and the increased tendency of some employees to treat roles with SMEs as a way station to their ‘dream’ job.

The issue of red tape, which covers a wide scope of bureaucracy, is one that successive governments have tried to address but have made limited headway.

In the arena of industrial relations, small businesses are often having to deal with the Fair Work Commission (FWC). In the words of one of the presiding members of the FWC, vice president Graham Watson, the Fair Work Act “is intended to provide a simple, flexible and fair framework for agreement making and the facilitation of enterprise agreements”.

Instead, as Watson noted in a recent enterprise bargaining agreement case involving blinds maker Uniline, the law is open to being interpreted in an overly technical manner, which penalises employers acting in good faith. Watson said the Uniline case “cries out for a common sense approach”, which was not forthcoming in the majority decision reached by the FWC bench.

The claims against Uniline was that it did not notify its employees of their employer representation rights within 14 days of the start of bargaining, which the Australian Industry Group’s Innes Willox observed was a technical oversight:

“The Uniline case was not one where there was a contest between an employer and a union. The overly technical manner in which the bargaining laws are currently being applied is causing problems for all parties involved in enterprise agreement making, often at great cost.”

This is just one of the many cases SMEs have to fight in the industrial relations system. It’s these types of technical and bureaucratic muddles that end up costing SME owners their time, money and, potentially, business.

Of course before a business owner can even think about hiring someone, just so they can go to the greater expense and heartache of ending up before the FWC, they will probably have to fork over payroll tax for the privilege.

While some states are moving towards lowering their payroll tax barrier by lifting the threshold at which it’s paid, Australia’s two biggest states continue to lag behind. If you’re an employer in NSW, you’re slugged with payroll tax once your wage bill hits $750,000, and in Victoria it’s $550,000.

Again, this is hardly an incentive to grow your business and take people on.

In addition to industrial relations headaches and taxation tyranny, there is the fact that almost as soon as some employees have signed a work contract they’re seemingly out the door on the eternal search for greener grass elsewhere.

As this article in The Age puts it, some younger employees just aren’t interested in sticking it out and getting runs on the board unless they have their sometimes inflated egos stroked or can dictate terms and conditions which suit them.

Without wanting to resort to the ‘back in my day’ line of argument, when I was coming up through the ranks it was a matter of biding your time and learning from those around you. You treated your employer, colleagues and people in the industry with respect because they usually knew more than you and you wanted to learn.

Young people bring great ideas and energy to the table, but sadly an attitude has developed among some that if you’re in a job for a year you are then suddenly qualified or entitled to move into management ranks.

This deterioration in employee loyalty makes it very hard for employers to commit to the growth and education of staff. Again, it’s small businesses that disproportionately wear the brunt of this problem.

This might be why so many small businesses are shifting away from hiring staff to simply contracting freelance specialists and consultants on a job-by-job basis. In many cases, it’s proving to be a simpler solution for SME owners than grappling with the trifecta of red tape, tax and entitlement.

Fi Bendall is chief executive of The Bendalls Group, a business that leads STRATEGY : ADVOCACY : MOBILE delivering the business acumen to drive effective positive results in a disruptive economy for the C-suite. Fi has recently won a Westpac/AFR 2015 100 Women of Influence award.