SMEs put their future at risk by failing to downsize because they fear litigious staff

Richard Candy, director of Abbey Legal Protection, reports an increasing number of business managers are reporting complex employment law is leaving them vulnerable to legal recourse from ex-employees.

He said: "There are undoubtedly difficult decisions to be made by smaller business managers at the moment. Many are being faced, often for the first time, with the need to organise redundancy packages in order to stay afloat. They feel their hands are tied and they are unable to make the necessary cutbacks.

"The law is complex, confusing and worrying for managers - it is widely perceived there are many routes to litigation for former employees, who, rightly or wrongly, feel aggrieved at losing their jobs."

The news comes as the Confederation of British Industry (CBI) announced in January 38% of SMEs had been forced to make redundancies.

Sandy Harris, chairman, member services at the Federation of Small Businesses, told HR: " Current employment law provides many, laudable, guarantees and benefits both for UK employees and employers. However there has to be a balance between the needs of both parties, and it seems SMEs perceive this balance to be unclear.  

"Redundancy processes are always difficult times but it is in no one's interest if a firm feels unable to undertake cutbacks - if a company cannot afford its staff there must be a route of recourse. To hear that SMEs are putting their enterprises at risk by shying away from such programmes through fear of litigation suggests there is something amiss with our system."