SMEs are essential employers

Small businesses are important for the job market, according to the Federation of Small Businesses (FSB). Small businesses with less than 250 employees collectively employ about 1.3 million previously unemployed or underprivileged people per year.

On the other hand, large firms with over 250 employees hire an average of under 130,000 new employees altogether. A recent report from the FSB shows that small businesses are of great importance for hiring employees that are passed over by larger employers, thus boosting the economy.

Among other groups, the disabled, chronically ill, and students are more likely to be hired by a small business than a larger one. The FSB report shows that nearly 95% of the workforce that falls into these groups will be employed by, or start, a small business. Nearly nine tenths of the unemployed that are currently searching for jobs will find work with, or begin, a small business.

Unemployment has fallen, but unfortunately, the market for new jobs remains fragile. Small businesses face increasing expenses and lowering demand, causing a decrease in market confidence. Tax administration is another possible reason for the decrease of market confidence.

Over half of FSB members have reported that tax administration is difficult. A real-time tax system, a tax system requiring businesses to report employee and wage information twelve times per year, would be a hassle for small businesses, according to the belief of the FSB. Furthermore, such a system would force small businesses to provide pensions to their employees starting in 2015. This contradicts tax simplification rhetoric from the Government.

Small and medium businesses are paramount for creating jobs. To encourage more job creation from small and medium firms, the Government has been urged by the FSB to extend the National Insurance Contributions holiday. This extension is to include all small and medium forms across the UK.