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Irish SFA tells Minister for Jobs how to boost employment
An Irish Small Firms Association delegation met Minister Richard Bruton, TD, yesterday, to discuss its jobs and small business proposals. It was an important meeting as the small business sector currently employs half the private sector workforce, some 700,000 people.
SFA Chairman, Ian Martin, leading the delegation of small business owner-managers, has said that "Government job promises can only be delivered through successful small businesses.
"Jobless growth emerging from this recession is a very real risk. A national entrepreneurship strategy that supports risk-takers to set up in business and helps existing small businesses to expand must be implemented immediately. In practice, small business owners can take decisions to hire quickly and if they see trade pick up even for a month, then they will recruit. Support for these businesses is essential if the Government wants to keep its promises."
Mr Martin welcomed the existing commitments in the Programme for Government to support SMEs, including the introduction of a Government loan guarantee scheme, reform of the bankruptcy legislation, reform of public procurement, measures to reduce regulatory burden, and the reduction in employers' PRSI. However, he said that "A more comprehensive enterprise stimulus package would be needed if the jobs commitment was to be delivered."
The SFA delegation specifically highlighted the lack of capacity for small businesses to expand due to ongoing difficulties in accessing bank finance and proposed an extension of the corporation tax break for start-up companies introduced in Budget 2009 to other small firms to allow them to use their own cash to reinvest in the business.
The SFA Chairman stated: "In Budget 2009 a tax exemption was introduced for start-up companies which provides for a three year remission from taxation on profits and capital gains for companies with a tax liability of less than €40,000 per annum. The aim was to provide a stimulus for entrepreneurs in a challenging commercial environment.
"The SFA is proposing that this tax break be extended to all small firms to allow them reinvest some profits back into the business on an annual basis. The proposal would allow for a tax exemption from profits and capital gains for the first €40,000 profits generated by a small business. This capital must then be retained and reinvested back into the business to assist with job creation. Where an employer can show an increase in employees through their P35 over a 12 month period, the company could then be allowed to avail of the tax break for each employment created."
Mr Martin outlined to the Minister the practical barriers that currently exist to small businesses creating jobs, including the burden of employment law, an excessively high national minimum wage and the disincentive to work that is the social welfare system. He outlined specific case examples from SFA member companies that had been deterred from hiring people in the recent past.
The SFA is calling for the urgent codification of employment law into a single act, and exemptions for small businesses from complying with overly burdensome regulations.
"As an employer, there are over 40 pieces of primary legislation relating to employment matters, that must be dealt with, irrespective of whether the Company employs 1 or 1,000 staff. Significant compliance costs on firms weakens the ability of businesses to adapt to changing economic conditions. The extent, scope and impact of employment legislation hits small firms hardest as they are least able to absorb the loss of flexibility and increased costs which occur as a result."
On the issue of the national minimum wage, the SFA strongly advocated that the Minister retain the rate at €7.65 per hour. "As well as being a clear commitment under the EU/IMF Bailout, the lower NMW is essential in regaining lost competitiveness of Irish small businesses vis-à-vis their international competitors and to boost job prospects amongst younger people", commented Mr Martin.
He emphasised that current employees are protected on the old rate of €8.65 under contract law so no existing employee would experience a 'cut' in pay.
"The new lower rate will only affect new employees, who can decide themselves whether they want to work for this rate, rather than have the State block them from working in order to retain an absurd notion of what a job is worth," he said. "Employers are deciding that they cannot recruit raw candidates into jobs and pay them such a high starting salary, as they will not reap the benefits in productive terms. It is either this rate or have a large cohort of particularly young people locked out of the labour market for the foreseeable future!
"The small business sector has consistently demonstrated that given the right economic conditions, small business owner-managers will, with confidence, continue to invest, create and grow new businesses, thus increasing employment levels and overall revenues to the Government in both business and personal taxation.
"The sector encompasses some 230,000 businesses and provides employment to half the private sector workforce, over 700,000 people. The Minister for Jobs, Enterprise & Innovation, and the Government, must remember that this model of creating a supportive environment for indigenous small business has been and will continue to be the corner stone of our economic success."
15th April 2011