Another take on the cost of compliance

By PAULA OLIVER

A new survey has turned up surprising findings on the compliance costs faced by small businesses - and sent another message to the Government.

The survey required small businesses to keep a diary for 13 weeks detailing the actual time and money they spent on compliance issues.

On average the businesses spent just over an hour a week on compliance.

That figure is in stark contrast to a Business New Zealand survey last year which estimated companies spent five times that amount of time on compliance.

The difference is partly explained by the types of businesses that were surveyed and the methodologies used.

One of the new survey's authors, University of Otago senior lecturer in economics Dr Stephen Knowles, said that the Business New Zealand survey included larger companies and manufacturers.

His survey sample was small, with only 25 randomly selected Dunedin companies taking part. The median firm had just four full-time equivalent employees and had a turnover of $350,000 a year.

"The character of the firms are probably different too," Knowles said.

"Ours are not as well connected to networks and associations."

The Business New Zealand survey relied on the recall of participants whereas the other survey required intensive diary-keeping - a reason so few companies were able to take part.

Knowles' survey canvassed motels, cafes, hairdressers, engineering firms, and garages. At the start it asked whether compliance was an issue for each business.

Eight said it was a major issue, 11 said it was minor and four said it was not an issue at all. Two were uncertain.

One company said it had not taken on additional workers because of the compliance costs involved; another said it would think again before buying another business and a third said it had stopped doing particular work because of compliance issues.

The most common compliance costs related to tax regulation, employment relations, health and safety, and checking and filing ACC premiums.

Filling in Statistics New Zealand questionnaires annoyed some, but others such as motels valued the information made available by filling in the forms.

The participants were annoyed most when they had to do what they considered was the "Government's work".

These jobs included making court, WINZ or IRD-ordered deductions from an employee's wages, deducting student loan repayments, or verifying the earnings of employees making ACC claims and filling in questionnaires.

Knowles said that while spending an hour a week on compliance might not seem a lot, it could be seen by some as a significant intrusion into the working week.

At the closing interviews for the survey one business admitted that compliance was something that was "always in the back of your mind".

From a policy perspective, that meant that simply reducing the amount of time spent on each individual compliance task would not seem like an improvement to some firms. What was needed was a reduction in the number of tasks, he said.

Paper work

Average weekly time spent on compliance

Minutes

Motels 74.25

Cafes 56.75

Hairdressers 86

Engineering 80

Garages 35

Average 64.55

Quantifying Compliance Costs of Small Businesses in New Zealand