Member Article

North East SMEs suffer rising compliance costs

Small employers in the North East face rising consultants’ fees as annual compliance costs have increased by 4.7%.

Compliance with new regulations, including the flexible working practices, will cost the 36, 000 small and medium sized employers in the region £25 million, or around £715 per company.

This means that the estimated cost of compliance for North East employers is up to a collective £0.6 billion, equivalent to £16, 000 per firm.

Small employers in the region are advised to rethink their own procedures and shop around for more affordable business services.

Over the last 12 months, retailers were least affected by the changes with an increase of £440 on the cost of compliance whereas manufacturers saw an increase of almost £1040 and health, social and care providers saw an increase of £925.

The amount spent on external providers was, however, even more pronounced with retailers spending £145 more on external support, far lower than manufacturers (£640) and those in health, social and care sectors (£625).

Overall 55% of the cost of compliance was down to an increase in money spent externally, a direct cost to the business.

In terms of the other industry sectors, construction firms have seen the cost of compliance rise by £830, other distributive trades have seen an increase of around £470 and the service sector saw a general increase of around £720.

As most of the additional costs of compliance are payroll costs, namely flexible working, real time information and preparation for auto enrolment, a large proportion of the compliance costs incurred by businesses are likely to continue for the foreseeable future.

In total 77% of the additional cost in compliance over the last 12 months will reoccur over the next 12.

The Forum’s chief executive, Phil Orford MBE, said: “SMEs in the North East continue to struggle to control costs and remain frustrated by the amount of red tape they have to negotiate every day.

“Understanding what is required to be compliant is a big issue for this sector and companies need to be kept up to date with major legislative changes.

“The increasing cost of fines for non-compliance on everything from health and safety to unfair dismissal has made the ongoing support we provide to our members through our helpline and guides all the more important.”