How will the government's promised policy changes affect the 99% of UK businesses classed as 'micro' or 'small'?
"Let's make work pay", is the slogan for Wednesday's Budget.
The families running small businesses, which employ 61% of the workforce, work as hard as anyone and deserve to be rewarded.
And the brave people starting businesses, half of which fail within three years, are the hardest-working group of people in the whole country.
But these two groups of people are likely to be the biggest losers from the forthcoming budget. They are the individuals who will have to pay the cost of making the workplace 'fairer'.
Small employers do not get sick pay, or paid holidays, nor do they benefit from the Working Time Directive and a long list of other workplace protections. They work whatever hours are needed to get the job done. And their monthly pay is whatever cash is left after paying all the costs - costs that include paying employees for days of work absence in which no work is done.
Society wants more protections for employees, so another layer of employee rights is coming into force, but society is not the one footing the bill.
Think about it. Does anyone in the public sector lose money when their colleagues are off sick? No. Ditto big businesses, ditto charities. The cost is borne by the taxpayer, or the company's shareholders, or the funds of the charity. A colleague can be off sick for weeks, or months, or even years, and no one loses a penny.
If the government wants to incentivise people to start businesses and to employ others, it needs to do just that. Provide incentives, not disincentives.
In the UK, we rightly pay people for being unemployed, because they have no income. The taxpayer foots the bill.
It makes complete sense to pay people who are off sick, too. But why is the taxpayer not picking up this cost, to share the burden fairly?
Another huge imbalance is the pension situation. Most employees are able to save into pensions if they choose to, and to reap the huge tax advantages of doing so. But all the research confirms that most owner-managers of SMEs are unable to spare the money to invest in a pension.
Does the government try to balance things out a bit, by allowing owner-managers to keep the proceeds if they are lucky enough to sell their business to fund their retirement? No. Having taxed the business throughout its existence (via business rates, employer's NI, corporation tax, and income tax), the government then takes another chunk of money away at the end, through capital gains tax.
The Labour government looks set to increase the tax burden on small businesses even more.
Meanwhile, it also looks set to continue with the usual crazy mix of 128 business support schemes around the country, which provide a living for the people running them but have precious little impact on the 5.5 million SMEs in the UK.
We need to incentivise people to grow their businesses. Now, more than ever, we are doing the exact opposite.
The current set up gives a clear message to would-be owner-managers. Don't start a business. Be an employee. Enjoy the security of an employee's salary and the regular pension contributions, enjoy the sick pay and holiday pay from day one, and put some savings aside. Being a small employer in 2024 is a mug's game.
Has anyone in the cabinet or Treasury ever tried running a small business, I wonder?
Copyright 2024. Featured post written by Rory MccGwire, founder of