Too much regulation can lock people out of the workforce, especially when it comes to small and medium-sized enterprises (SMEs).
That is the message that the Federation of Small Businesses is set to deliver at Labour's party conference today (October 1st).
It argues that that a different approach is needed for small and large firms.
While smaller businesses recognise that employment legislation benefits those already in jobs, the federation is concerned that by introducing new regulations, disadvantaged groups will be locked out of the workforce.
This is because regulation increases the risks of taking on new staff and can even affect employers' willingness to hire.
It is an especially crucial issue for small businesses, as it is these that often create jobs and take on people who are shut out from the labour market.
Research from the FSB shows that approximately eight in ten unemployed people find work with a small business, underlying just how crucial SMEs are to stimulating economic growth and boosting the job market.
However, the increasing scale of regulation will mean that growth prospects are slowed as confidence to take on staff is reduced.
That is because creating policies that undermine the inherent flexibility of small firms to recruit staff means that they will be less likely to take on people from disadvantaged groups.
For example, a recent FSB study showed that one in five SMEs say that the risk of litigation or employment tribunals is a significant factor limiting their recruitment.
As John Walker, national chairman of the FSB, noted: "We know that employment legislation is designed to protect those that are already in employment, but it doesn't help those people who are not working and it can make it more difficult for them to get a job in the first place."
"Too many policymakers don't think about the consequences of policy for small firms or for the people that are on the outside of the jobs market trying to get in.
"Those people are more likely to be taken on by a small business due to their flexibility and so constant tinkering with the system will undermine this flexibility and result in fewer jobs being created," he added.
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