After taxes, regulatory red tape is widely seen as the biggest obstacle holding back the forces of enterprise, and small businesses in particular. For a number of years now, the consensus has been that Irish SMEs have been burdened with more than their fair share of compliance requirements, to the detriment of the domestic economy.
But there are signs the message is getting through to the government. In the news recently there were reports that new Minister for Enterprise, Peter Burke, has written to his department’s own agencies demanding cuts to the amount of red tape businesses face, with follow-up meetings with agency CEOs planned.
In a move that will be welcomed by SMEs, Burke is expected to set new targets requiring agencies under his remit to simplify policies and processes to make them more admin-friendly. This follows the introduction last year by the Department of Enterprise, Trade and Employment of the ‘SME Test’, which requires all proposed new policies across the department to be evaluated for impact on small businesses.
All of this is music to the ears of small businesses that have increasingly faced a regulatory maelstrom coming at them from all angles. As much as the amount of red tape faced, what SME’s in particular struggle with is all the overlapping compliance requirements that come from so many different regulatory bodies.
It’s significant that action is being taken by The Department of Enterprise in this regard. Of all government departments, the DETE controls the most agencies. Key business bodies like Enterprise Ireland, IDA Ireland, the Company Registration Office, the Health and Safety Authority, the Workplace Relations Commission, and the Competition and Consumer Protection Commission, all of which have regulatory powers, are all on Minister Burke’s list for reform.
The cost of red tape
Complex regulations and the administrative burden they bring often translate into an additional cost burden for SMEs, many of which do not have specialised internal departments such as HR, legal and accounts to handle compliance obligations.
One report claims that in a small business that employs eight people, the equivalent of 50% of one employees’ time is now spent on paperwork, or 16% of the company’s entire labour resource. According to the Small Firms Association (SFA), implementing regulatory changes costs SMEs approximately €10 per employee, compared to €1 per employee for larger firms, highlighting the disproportionate burden on smaller businesses.
At a time when SMEs have seen costs soar across the board, no least from major government labour initiatives such as the introduction of the living wage and increased employer PRSI, trade organisations argue that mounting regulatory red tape places unjust, unfair and unnecessary additional pressure on sectors that have already seen margins eroded significantly in recent years.
As welcome as any government interventions to reduce the regulatory burden will be, these developments won’t spell an end to red tape. Many areas of business administration are complex and time-consuming, especially around finance and taxation. That’s why Xeinadin Ireland has a dedicated team of small business accountants who specialise in supporting SMEs to achieve stability and long-term success.
Get in touch with us to find out more.
