One in five firms has been threatened with a tribunal claim in the last three years, according to the British Chamber of Commerce. Increasing legislation surrounding rules of dismissal and health and safety were seen as the most burdensome issues they faced. Over 80% use external expertise to help them comply with employment regulation.

These are the results of a piece of research carried out among over 2,000 SMEs based in the UK.
 
"SMEs are central to the future growth of the UK economy,” says Callum Taylor, head of management liability at AXA Commercial Lines. “They have the ambition to grow but as this research highlights they are being severely hampered by the increasing legislative hurdles they are facing. 

"Dismissal rules are too complex, tribunal cases are endemic, and the vast majority of small firms are buying in extra external resource to ensure they are compliant with employment regulation. The more staff they take on, the more likely they are to face claims – the risk is that one bad recruitment decision could wipe out a whole year’s profit, or worse.”

According to the Ministry of Justice, 80% of applications made to an employment tribunal in 2010-11 did not result in a full hearing - almost 40% of applicants withdrew their cases, but employers still had to pay legal fees in preparing a defence.

"Further legislation coming down the line is likely and the risks that SMEs face can only increase,” Taylor warns.

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