The new business laws affecting small businesses in 2016

Whether you’re just starting up or currently running a small business, you may be feeling overwhelmed by the issues that you face on a daily basis.

With so much to do, one area that is often neglected by many is the law. A report last year found that 25% of SME’s have no idea they’re breaking the law, with many stating that the ever changing legislation and jargon filled manuscripts make it a confusing task.

But ignorance of the law could see you facing crippling fines or even a jail sentence, putting a painful dent into you finances and damaging your company’s reputation.

So with several good reasons for you to get to grips with business laws, this guide gives you practical advice on the major new legislation set to affect small businesses in 2016, and what you need to do to stay on the right side of the law.

Auto-Enrolment Pensions (AE)

The message has been made very clear by the government on the importance of auto-enrolment, investing a staggering 3.5 million on their “I’m In” ad campaign featuring entrepreneurs Karen Brady and Theo Paphitis.

Thousands of small businesses in the UK, will take on this daunting task as part of the Governments workplace pensions scheme, and if you’re not already aware of what is required of you, now would be the time to educate yourself on what you need to do.

As scary as it may sound, it’s still not too late and doesn’t have to be too painful if you get organised now.

If you have fewer than 30 employees, you will need to start auto-enrolment of all eligible staff. This includes staff who;

  • Earn more than £10,000 for the tax year 2015/2016
  • Aged between 22 and the state pension age

As a business you are now legally responsible to help staff save for their retirement for the very first time.

The law has already been implemented for large corporations that have hundreds of staff, but for small businesses with less than 30 staff, auto-enrolment will need to be implemented in 2016.

The exact date each small business needs to have an Automatic Enrolment Pension Scheme in place is determined by their ‘Staging Date’. You can find out the Staging Date for your business here.

In order to ensure a smooth transition and less upheaval the following process should be followed;

  • Set up a workplace pension scheme.
  • Communicate these new pension rules in a written letter to your employees. You can find templates on The Pensions Regulators website.
  • Automatically enrol all of your eligible staff.
  • Register your business with The Pensions Regulator and ensure to keep a record of this.
  • Complete your declaration of compliance with The Pensions Regulator.

Once you’ve begun this process you will then need to facilitate any opt-out requests and arrange refunds. From then on you will need to maintain accurate records, which will need to be constantly reviewed with your employees including any new staff that you take on.

This can seem like an overwhelming amount of paper work and admin, so if you do not have the confidence to do it yourself, it may be cost and time effective to hire the help of an accountant or book-keeper.

You can find out more on AE Pensions in this Guide to Auto Enrolment – 12 key facts small businesses need to know and from the Pensions Regulator.

The National Living Wage

Despite being announced last year, the National Living Wage for employees aged 25 and over will be set at £7.20 per hour and will come into force in April.

National Living Wage is the legal minimum an employer can pay per hour so you may want to start looking at how you manage your payroll in response to this rise.

Chancellor George Osborne has confirmed that there will be help for small businesses, meaning a company will be able to employ four people full time on the new National Living Wage and pay no national insurance.

There has been much confusion between the difference of National Minimum Wage and the National Living Wage. However it can, essentially, be broken down like this;

  • National Minimum Wage – This is the per hour rate for those under the age of 25
  • National Living Wage – This is the per hour rate for those 25 and over

Luckily for this new law there is no lengthy paper work involved, so all you simply have to do is notify your employees and amend their contract of employment accordingly.

You can find the full details of the NLW regulations in ByteStart’s Guide to the National Living Wage for small businesses.

Digital Regulations

As the world of online now expands into our working lives, it’s no surprise that new legislation brought in this January has made it legal for employers to read private messages sent via Facebook, WhatsApp and iMessenger.

Applying to every country that has ratified the European Convention on Human Rights, this is a significant step in more digital business laws that you will need to look out for.

As an employer you will only be legally entitled to check these messages via a company device, and will not be allowed to snoop on personal phones, so it’s important that you make these new changes clear to your employees.

If you are looking to implement this policy you need to communicate this to staff through their contract of employment, setting clear guidelines on the use of personal devices in the workplace environment, as well as guidelines on the use of company devices.

There are now many tools and systems that you can purchase to enable you to check on the activity of computers should you feel that productivity is being affected by social media use.

Equal Pay Reporting

You may have seen that the news has been filled with industries calling out the inequalities in pay between and men and women. Despite many being in the same position or roles, Women’s pay can often be dramatically lower than their male counterparts.

This year the government are looking to rectify this by introducing regulations requiring companies with 250 or more employees to carry out an equal pay review.

Whilst this is not currently a piece of legislation that will impact small businesses, experts predict that once this law is rolled out to corporations and large businesses, start-ups and SME’s will soon have to follow.

The Equality Act 2010 contains the power for the government to make regulations mandatory surrounding pay gaps, proposing penalties for those who do not comply. Therefore, it is advised that small businesses begin to implement equal pay procedures and pay auditing.

This may seem like a confusing task, and one in which you may not feel confident within so enlist the help of an accountant or financial advisor to guide you.


To ensure that you don’t incur any legal fines or reputational damage, it’s best not to ignore these business laws, and seek guidance where possible.

Constant changes to the law can be a headache to implement, but for the success of your business it’s essential you try to understand the basics.

About the author

This guide has been written for ByteStart by Luke Hutchings – Head of Employment at Taylor Rose TTKW.

More help on business law from ByteStart

For more on dealing with the laws affecting startups and small businesses, try some of our other guides;

And these, which help you with employment law and managing staff;

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