Regulatory red tape is tripping up SMEs

Podcast Ep 178: A slew of new laws and regulations all at the same time may be too much for struggling SMEs to handle, warns SFA director David Broderick.

While Ireland is home to large global giants like Apple, Google, Microsoft, Pfizer and Facebook, the reality is that around two-thirds of the population (65.6%) work for SMEs. According to CSO stats 1.6m people work for 278,862 enterprises, of which 92% employee less than 10 people.

Many of these organisations have survived Covid-19, an inflation and energy crisis not to mention a cost of living crisis that impacts their most precious assets – their staff – but they are also expected to transition to a low or zero carbon future.

“The business owners themselves are now packing the shelves, they’re packing the van, they’re doing the orders. They’re doing whatever it takes. And that’s impeding growth. And that’s a real concern for the Irish economy”

For most, survival means ensuring wages are paid on time, business is won and they can afford rent. So it’s not surprising that a slew of new bills, acts and regulations would threaten the patience of any MD or financial controller.

Take for example the Work Life Balance and Miscellaneous Provisions Act 2023 which was recently signed into law, with more new legislation for Irish businesses to follow, such as the Automatic Enrolment Retirement Savings Bill and revisions to the EU’s Packaging and Packing Waste Directive.

Navigating muddied waters


For David Broderick, director of the Ibec-based Small Firms Association, it’s only reasonable that we question how prepared SMEs are for these new laws, and if they will be able to keep up with their larger business counterparts.

“The SFA represents businesses with 50 employees or less – just under half of the private workforce and 98% of our businesses.

Broderick doesn’t doubt the necessity of these regulations and laws and doesn’t doubt for a moment that these are well-intentioned, but his concern is it is a lot of regulation – and expense – for SMEs to deal with in a short space of time.

“I speak with these business owners every day and their two most valuable assets are cash and time.

“The majority of the time the MD of these businesses is the person looking after human resources, they’re the head of sales. So that valuable commodity that is time is what is really being eroded here.

“A larger company can take one of these regulations and hand it over to X department quite simply, whereas a small business owner just doesn’t have that luxury and are really struggling to keep their heads above water.”

Broderick said that the timing of these new laws and regulations couldn’t be worse on the heels of a pandemic, a war in Europe, rising energy prices and inflation. “They survived Covid and went directly into an energy crisis.”

Broderick said an added stress and oft unacknowledged reality is the combination of full employment, a skills shortage and a cost-of-living crisis whereby many employees of small firms struggle to find a place to live.

“They are trying to provide a work environment that will attract talent while at the same time trying to keep a margin and keep their business running and operating.”

The personal toll on owner managers from staff shortages is a hidden secret in the Irish economy. “The business owners themselves are now packing the shelves, they’re packing the van, they’re doing the orders. They’re doing whatever it takes. And that’s impeding growth. And that’s a real concern for the Irish economy.”

Broderick pointed out that while the likes of the Work Life Balance and Miscellaneous Provisions Act, the Enrolment Retirement Savings Bill and the EU Packaging and Packaging Waste Directive require adaptability and change from all sizes of businesses, these legislations present major hurdles for smaller businesses who increasingly lack the expertise and resources required to achieve sufficient levels of compliance. Administrative burdens, employee practices, and increased costs on account of these regulations, all will prove another pinch for SMEs.  

He warns that implementing changes required by legislation adds up. “Our research has shown us that for a big company to implement a regulatory change it works out at a cost of €1 per employee. Whereas for a small company that costs €10 per employee and more to implement any regulation. So that’s why this raft of regulations at this time is extremely concerning.”

While it might be easier to stop a runaway train than slow the onset of new regulations, Broderick said that all that is needed in the future is a little more consideration as to how small firms can apply change.

The SFA’s estimates suggest that the rollout of auto-enrolment, the living wage, pensions, statutory sick pay, and other leave proposals already announced will add 9% to average labour costs in Ireland over the coming decade. This is all against the backdrop of market-related cost increases which have manifested most deeply across energy costs, material costs and business administration. These are seeing many SMEs across the country struggle to grow their staff and expand their businesses.  

Broderick cited suggestions that auto-enrolment for pensions be pushed out two more years. “We would certainly hope the Government listens to that recommendation now more than ever. People I’m talking to in business every day are struggling and if something doesn’t change small businesses are going to go under. We need these businesses, we need then in every village in Ireland. We need that community. And unfortunately if something doesn’t change, then that’s not going to happen.”


While the majority of businesses in Ireland are under the 50-employee mark, the imperative is for as many firms as possible to scale and become the major employers of tomorrow on a par with the multinationals.

To bring owner managers on the route to scaling up and building bigger and better businesses, the SFA’s MentorsWork programme offers one-to-one mentoring from an independent professional mentor, experienced in the business area, as well as masterclasses and peer-to-peer workshops. It includes an online diagnostic tool to provide insights and help business owners and managers identify key skills and development needs.

In the past 12 months MentorsWork has helped more than 1,600 businesses all around Ireland in challenging times and more than 2,500 firms since the programme started in 2020. Broderick said that through the programme he has seen a sharp uptake in SMEs seeking guidance and mentorship on how to navigate what he describes as “increasingly muddy waters.”

Citing a local family run hardware store as an example where there’s typically one in every town across Ireland, Broderick said that up until recently, their biggest risk exposure would have been a downturn in consumer demand. Now they must contend with a vast array of regulation and red tape that requires considerable thinking time and administration, not to mention the cost burden that will follow.

In a nutshell, Broderick believes SMEs are drowning in good intentions but starved of pragmatic approaches.

While it’s appreciated that new business regulations come from a good place, with employee welfare at the forefront, he believes there is a need for far greater flexibility and adaptability for SMEs when it comes to implementing new and proposed legislation.  

He said a one size fits all approach will not work when it comes to regulation in a business of 1,000 people versus 50, as smaller businesses do not have the same level of resources and expertise that would be found in a larger business.  

In one case the advice taken on board via a MentorsWork mentor to change packaging rather than a product resulted in a business increasing sales by 42%.

As such, as well as offering a 12-week programme, MentorsWork has evolved into a kind of consultancy for businesses that imparts advice on areas like sustainability and digital transformation.

“I’ve personally mentored businesses,” Broderick said. “You can talk to business owners who have gone into business to follow a passion and there are so many piece of the jigsaw and you realise that leadership is an extremely lonely place.”

“The good thing about MentorsWork is that you can take the time and just sit down and chat and put an extra set of eyes on it. Sometimes the answer is staring them in the face. We can help them identify the priorities. Because in some cases if they don’t deal with these priorities in the next two, three or six months, there won’t be a business further down the line.”

John Kennedy
Award-winning editor John Kennedy is one of Ireland's most experienced business and technology journalists.