Complying with regulations stressful for business owners
When politicians blithely announce new commitments to reduce red tape, business owners — particularly small business owners — must be excused for their weary groans. How many such promises have been uttered in the past? Despite widespread agreement that red tape is harmful to the economy and many well-intentioned attempts by government to reduce it, unnecessary regulations continue to proliferate.
The sheer volume of obligations business owners are expected to be aware of is staggering — including GST, PST, workers’ compensation, employment standards, privacy rules, records of employment, payroll taxes, mandatory Statistics Canada surveys, business registration and sign bylaws.
The Canadian Federation of Independent Business (CFIB) recently estimated the “rock-bottom” cost to Canadian businesses to comply with all these regulations is $33 billion annually. While breakdowns of the costs of individual rules are not available, results show payroll regulations feature prominently. A 2005 CFIB survey of 7,391 business owners identified GST as the most burdensome regulation (71 per cent), but payroll taxes (57 per cent), income taxes (57 per cent) and records of employment (39 per cent) all scored high.
The costs of complying with regulations go beyond time and money — there is a human price as well. Almost three-quarters of business owners indicate regulations add significant stress to their lives. Six out of 10 agree that “complying with regulations takes time away from friends and family” and one out of two spends significant time on regulations outside of regular working hours. Any other social problem with these characteristics would likely warrant urgent attention by politicians.
How did we get to this sorry state of affairs? It all boils down to incentives. Most of the cost of red tape is borne by business and consumers so it doesn’t show up in government budgets. For every $1 spent by government to administer a regulation, the private sector spends $20 to comply, according to the CFIB’s 2005 study Rated R: Prosperity Restricted by Red Tape. Until recently, no government even attempted to determine any kind of estimate of the total burden of regulatory compliance.
But there is hope. A new way of thinking is emerging and should be encouraged by those in the business community. It started in British Columbia and has spread to Newfoundland, Nova Scotia, Manitoba and, most recently, the federal government.
In its 2004 budget, the federal government announced the creation of the Advisory Committee on Paper Burden Reduction (ACPBR), made up of representatives from the public and private sectors and tasked with making measurable reductions in the paperwork burden faced by small businesses.
In its first report, the ACPBR recommended something that has never been tried at the federal level: to measure the total paper burden and set overall and department-specific reduction targets. Recently, the federal finance minister announced the government would be acting on these recommendations. Fourteen departments have been asked to establish a baseline measure of paper burden, which will be announced this month. Further, the government said the paper burden will be reduced by 20 per cent by November 2008.
There is currently a huge opportunity for those who want to bring forward examples of onerous paperwork and other issues they would like changed. One such issue for many businesses is the record of employment (ROE).
The CFIB, together with the Canadian Payroll Association, is recommending the ROE be reformed. In many cases, ROE recipients will not be making a claim for EI benefits yet the employer is still required to produce a form. If an employee is leaving one firm to join another, is leaving to return to school or only worked a few days, an ROE still must be produced. Of the eight million ROEs produced every year, five million are never used.
Another challenge of the ROE is the legislated time frames that are difficult to meet. If, in an attempt to meet the deadline, an employer fills out the form incorrectly, an investigation requiring a request for payroll information form may result. This form requires even more detailed information than the ROE. It also requires payroll information based on a Sunday-to-Saturday time frame, even though only 18 per cent of payrolls are produced on a weekly basis and even fewer are Sunday-to-Saturday.
The ROE is just one of thousands of regulatory obligations faced by businesses. It illustrates why a new way of thinking is desperately needed. To put the brakes on regulatory creep and provide real relief to businesses, the burden must be measured, tracked and reported over time and there must be limits put on the total burden.
Recent steps by the federal government in this direction deserve the support of the business community. To achieve a 20-per-cent reduction by the end of next year would be significant. The next step is to convince the government to make these reforms permanent. Regulation is an ongoing headache for business. The solution is ongoing transparency, accountability and restraint, not one-off exercises that smack more of lip service than action.
Laura Jones is vice-president, Western Canada, for the Canadian Federation of Independent Business in Vancouver and co-chair of the Federal Advisory Committee on Paperwork Burden Reduction. She can be reached at (604) 684-5325 or [email protected].
The sheer volume of obligations business owners are expected to be aware of is staggering — including GST, PST, workers’ compensation, employment standards, privacy rules, records of employment, payroll taxes, mandatory Statistics Canada surveys, business registration and sign bylaws.
The Canadian Federation of Independent Business (CFIB) recently estimated the “rock-bottom” cost to Canadian businesses to comply with all these regulations is $33 billion annually. While breakdowns of the costs of individual rules are not available, results show payroll regulations feature prominently. A 2005 CFIB survey of 7,391 business owners identified GST as the most burdensome regulation (71 per cent), but payroll taxes (57 per cent), income taxes (57 per cent) and records of employment (39 per cent) all scored high.
The costs of complying with regulations go beyond time and money — there is a human price as well. Almost three-quarters of business owners indicate regulations add significant stress to their lives. Six out of 10 agree that “complying with regulations takes time away from friends and family” and one out of two spends significant time on regulations outside of regular working hours. Any other social problem with these characteristics would likely warrant urgent attention by politicians.
How did we get to this sorry state of affairs? It all boils down to incentives. Most of the cost of red tape is borne by business and consumers so it doesn’t show up in government budgets. For every $1 spent by government to administer a regulation, the private sector spends $20 to comply, according to the CFIB’s 2005 study Rated R: Prosperity Restricted by Red Tape. Until recently, no government even attempted to determine any kind of estimate of the total burden of regulatory compliance.
But there is hope. A new way of thinking is emerging and should be encouraged by those in the business community. It started in British Columbia and has spread to Newfoundland, Nova Scotia, Manitoba and, most recently, the federal government.
In its 2004 budget, the federal government announced the creation of the Advisory Committee on Paper Burden Reduction (ACPBR), made up of representatives from the public and private sectors and tasked with making measurable reductions in the paperwork burden faced by small businesses.
In its first report, the ACPBR recommended something that has never been tried at the federal level: to measure the total paper burden and set overall and department-specific reduction targets. Recently, the federal finance minister announced the government would be acting on these recommendations. Fourteen departments have been asked to establish a baseline measure of paper burden, which will be announced this month. Further, the government said the paper burden will be reduced by 20 per cent by November 2008.
There is currently a huge opportunity for those who want to bring forward examples of onerous paperwork and other issues they would like changed. One such issue for many businesses is the record of employment (ROE).
The CFIB, together with the Canadian Payroll Association, is recommending the ROE be reformed. In many cases, ROE recipients will not be making a claim for EI benefits yet the employer is still required to produce a form. If an employee is leaving one firm to join another, is leaving to return to school or only worked a few days, an ROE still must be produced. Of the eight million ROEs produced every year, five million are never used.
Another challenge of the ROE is the legislated time frames that are difficult to meet. If, in an attempt to meet the deadline, an employer fills out the form incorrectly, an investigation requiring a request for payroll information form may result. This form requires even more detailed information than the ROE. It also requires payroll information based on a Sunday-to-Saturday time frame, even though only 18 per cent of payrolls are produced on a weekly basis and even fewer are Sunday-to-Saturday.
The ROE is just one of thousands of regulatory obligations faced by businesses. It illustrates why a new way of thinking is desperately needed. To put the brakes on regulatory creep and provide real relief to businesses, the burden must be measured, tracked and reported over time and there must be limits put on the total burden.
Recent steps by the federal government in this direction deserve the support of the business community. To achieve a 20-per-cent reduction by the end of next year would be significant. The next step is to convince the government to make these reforms permanent. Regulation is an ongoing headache for business. The solution is ongoing transparency, accountability and restraint, not one-off exercises that smack more of lip service than action.
Laura Jones is vice-president, Western Canada, for the Canadian Federation of Independent Business in Vancouver and co-chair of the Federal Advisory Committee on Paperwork Burden Reduction. She can be reached at (604) 684-5325 or [email protected].
