Small businesses spend £100 Million a year on ‘free advice’

A new study published today reveals that thousands of small business owners in the UK are spending millions of pounds unnecessarily on external consultants and advisors to help manage their employer obligations.
 
Around £100m is being spent by small businesses every year on simple advice such as calculating staff holiday allowances despite free advice being offered on the Government’s Business Link website – www.businesslink.gov.uk/employingpeople.
 
New research commissioned by the Department for Business, Enterprise and Regulatory Reform (BERR) found that around one in ten small businesses have paid an average of £1,000 each on external advice on their employment obligations within the past year*.
 
The top areas in which respondents from smaller business pay for advice are:
Calculating staff NI contribution (39%)
Writing business contracts; such as a new staff contract for an employee (30%)
Managing maternity and paternity leave (22%)
Furthermore, almost one in six of those that pay for advice, 13 %, admit paying consultants to help calculate staff holiday entitlement.  The research identifies the reasons behind the huge additional financial burden self-imposed on GB small businesses.
 
Lack of confidence
Business leaders that are spending unnecessarily cite lack of confidence as a key factor.  Over half of those polled, (52 %) said they do so because they do not know enough and just under one in three (30%) worry that they will get it wrong if they do not call upon external advisors.
 
Knowledge gap
Almost a quarter of owners polled (24%) feel they are not eligible to manage their employment obligations themselves.  One in five respondents (21%) think they need a professional qualification to give staff a new contract and a quarter (26%) of all small business employers surveyed believe they need a qualification to dismiss staff or make someone redundant.
 
Distrust of free advice
More than half (53%) do not believe they can comply with employment obligations through free advice – one of the major reasons they are turning to consultants unnecessarily.
BERR’s campaign is keen to dispel the myths surrounding employment obligations and explain to bosses that they can manage these themselves and that the vast majority of their employment obligations can be managed with the help of simple and free online tools supplied on the Business Link website.
 
Pat McFadden, Minister for Employment Relations:
 “In a downturn every penny counts and we don’t want small businesses spending money on advice and information that the Government provides free of charge. The Government is committed to showing small businesses where savings can be made.
 
“Some small business owners may feel that they need a professional qualification to manage simple tasks and that free advice will not provide them with the answers they need. But, there are a range of sources of information available and I would urge all small business owners to familiarise themselves with the Business Link online resources.
“By using Business Link as their first port of call, businesses could save thousands of pounds that could in turn be invested back in to the business. If just half of employers switch to the free online tools we have developed, it could save UK businesses around £50m a year.”
 
More than a quarter of small business owners (26%) said they used paid-for consultants as they didn’t have the time to manage their obligations themselves. However, of those businesses that do handle their employment obligations themselves, many said it was much simpler and less time –consuming than other employers might think – 72% of businesses that don’t pay consultants said they only have to manage their obligations less than once a month.
 
John Charles, CEO, Catering2Order
“The tools on the Business Link website are very useful and it is much simpler than many businesses would think. It is important to be on top of how to manage your employment obligations if you want to be a successful and competitive business. Using the free tools is not time consuming or complicated. As a small business, you have to watch every penny and get as much support as possible.”
 
The value of free advice
The vast majority (96%) of small business leaders surveyed said the best piece of business advice they had received had been free. More than a quarter (23%) said their best piece of business advice was from friends, a third (35%) said it had come from colleagues and one in six (15%) said it had come form their family.

Alex Cheatle Ten Lifestyle Management Ltd
“I built my concierge business on free advice from family, friends and mentors.  If professional free advice is available and it provides all you need to comply, you should act on it.
 
“We all readily welcome free advice from family and friends but this BERR study shows there is still a reluctance to act on free online advice and this needs to be addressed.
 
“If I had ignored all the free advice I was offered, neither myself or my business would be where we are today. Ignore free advice at your peril.”

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