Small Business Blues
The depth and length of the recession will be decided by what we can do to put small business back on its feet. By James Mathias.
As the COVID-19 recession deepens, it is becoming abundantly clear that small business is suffering the worst of the pain.
That is extremely bad news for a country like Australia where small and medium enterprises (SMEs) make up 99 per cent of the economy and employ two in three workers.
The depth and length of the recession will be decided in a large part by what we can do to put small business back on its feet.
An NAB report released this week highlights the urgency of tackling the red tape and complex policy settings that bedevil small businesses in particular.
The complexity of the industrial relations system as evidenced by the report is chief amongst these hurdles. The report found a small business looking to hire its first employee, while navigating through the 214,000 words of the Fair Work Act, can spend up to 18 hours understanding the many awards.
If an employer is spending more than two full working days just working out how to hire another employee, that in itself acts as a major disincentive to employment.
For example, Terry Slaughter, the owner of IGA Springfield Lakes has to deal with 14 levels of pay and 9 separate loadings that puts him in a situation where every employee could be on any one of the 126 different separate rates of pay the act sets out.
Slaughter details that one of his employees, a school-aged worker is paid 5 separate rates over the 14 hours she works a week ‘margins shrink, wages go up, sales shrink, and regulation has become a part of day-today life’ he says.
Disturbingly, the cost of excessive red tape to small business every year is put at $9.3 billion, 67 per cent of which is made up by tax compliance. According to the report, a large enterprise with more than 200 employees pays 40 cents in tax compliance costs for every $1,000 or turnover, whilst a small employer with up to 4 employees pays $90 for that same thousand dollars.
The jurisdiction with some of the biggest impediments for businesses is the ACT. It ranks in the bottom three of all the states and territory for both starting and growing a small business and despite being the hub of bureaucrats, has the highest waiting period for non-property registration and permits like liquor licenses which could extend to and estimated average of 2.9 months.
Of anywhere in Australia to have 50 workers on the books, payroll tax in the ACT is the most expensive, beating the second highest, the Northern Territory by a not insignificant 28 per cent.
The result of all of these unfriendly business policies has been detrimental to employment as the ACT takes top prize for having the highest job vacancies per thousand workers as compared to other states and territories.
Small businesses right across Australia already face many more challenges beyond what is contained within the NAB report despite being the engine room of the economy and now we learn even more so in the ACT. All the additional hurdles and taxes imposed on them by the nearly two-decade long Labor administration means when Canberrans go to the polls in less than two months, a vote for the same old leaves little doubt that SMEs will be dealt out of being part of any economic recovery.