Small firms' red tape exemption - what it means for you

The government apparently can’t resist the temptation to leak its own announcements. Ministers have now given away details of so many of the measures that were, presumably, intended for the Budget, that it seems there may well be little new information in Wednesday’s announcement.

At the end of last week, business and enterprise minister Mark Prisk explained a range of new measures intended to ease the regulatory burden on small businesses. In a speech to the Federation of Small Businesses he announced several new initiatives that the government hopes will make it easier for small firms to start and grow.

So what has changed, and how does it affect you?

What has the government announced?

The government has said that the smallest firms will receive a three year exemption from all new domestic regulations. So, these firms will not have to comply with a range of new regulations that the government might choose to enact over that period.

The exemption applies to all businesses with fewer than 10 employees. It will also be offered to what Mr Prisk described as “genuine new start ups”.

The government hopes that the exemption will allow businesses to concentrate on starting and growing their business in the most efficient way possible. As Mr Prisk said, “unless it is about public safety or national security, you should be minding your business, not ours.”

The business and enterprise minister also used his speech to announce several other changes, including on flexible working. It had been thought that the right to request flexible working would be extended to parents of children up to 17 years old. Mr Prisk said on Friday that this extension would now be scrapped – although he indicated that it may be revisited in a later, larger rethink of flexible working rules.

He also said that firms with fewer than 250 employees will no longer have to abide by the ‘Right to Request Time to Train’ rules. The minister said that the majority of training “already takes place, willingly, within the private sector,” and that smaller companies “deserve the benefit of the doubt here.”

What does ‘domestic regulation’ mean?

The extension applies to all regulations made directly by the government. So, if the Prime Minister decides that he wants to introduce a new rule for businesses, firms with fewer than 10 employees will not have to comply for at least three years.

But sometimes, the government is required to implement directives from Europe. The government has no opt out on the majority of these, so the exemption enjoyed by small businesses will not be extended to regulation that comes from Europe.

What’s happening with parental leave?

Towards the end of last week, a document was leaked that appeared to suggest that the government was also considering giving small businesses an exemption from existing rules on parental leave.

The document said that businesses with fewer than 10 employees would have the right to negotiate their own deals with workers, on things like how much parental leave they get and how they will be paid.

But the idea was quickly rubbished by lawyers and unions. It was pointed out that this amounts to a scrapping of the right to parental leave, and that this would not be legal.

Consequently, business secretary Vince Cable was forced to say that the proposals were not, in fact, being considered by the government.

What’s this about crowdsourcing?

In his speech Mr Prisk also indicated that businesses would have a bigger say in which regulations stay, and which are scrapped. He said that he wants to ‘crowdsource’ opinion from businesses, which would be able to tell government which rules they wanted to see abolished. “The onus of proof will then fall on Whitehall to prove why the regulation needs to stay,” Mr Prisk said.

In many ways, this is likely to be a nice sound-bite with little real impact. It is unclear how this system would work on a practical level. But perhaps just as importantly, it is unclear how the government would square the inevitable desire of the business community to divest itself of as much of the regulatory burden as possible, with the necessity to protect the public and employees.

George Osborne will deliver his Budget announcement to Parliament on Wednesday. There will be full coverage on Simply Business, including a live blog identifying the elements that apply to you and your business. You can sign up for free here.