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Ruling on annual leave entitlement during long-term sick leave could make SMEs cautious about hiring

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New rules on long-term sick leave are preventing almost three-quarters of small businesses from employing new staff, new figures suggest.

A European Court of Justice ruling under the Working Time Directive means statutory entitlement to paid annual leave will continue during long-term sick leave. But a poll of more than 1,400 respondents by the Federation of Small Businesses (FSB) shows the ruling will affect the way 71% of businesses employ. 

Of those, 38% will be more cautious about taking on new staff with health problems, 21% will be less likely to take on new staff and 17% will be more likely to dismiss staff on long-term sick leave.

At a time of already high unemployment, the FSB is concerned this ruling is having a detrimental effect on employment in small firms. 

The figures also show that a different ruling - also under the Working Time Directive -allowing allow workers to convert annual leave into sick leave, taking the annual leave at a later date, will have a negative impact on over half (54%) of the respondents' businesses.

As the debate on the Working Time Directive reopens this autumn, the FSB is urging the European Commission to review these Court rulings to ensure the law is rewritten to reverse these decisions. This will encourage small firms to take on more staff and help bring the country further onto the road to recovery. 

Small firms understand the importance of good health in the workplace and the FSB is calling for more publicity of the fit note, which replaces the sick note. The fit note - which aims to focus on what an employee can do at work - will help get employees back to work sooner. This will ease staff on long-term sick leave back into work and will give small business owners more incentive to retain their invaluable staff.

John Walker, national chairman at the FSB, said: "It is well-known that small firms are the country's key employers and have done all they can to retain their employees and take on new staff throughout the recession. However, measures put in place by the European Court of Justice on sick leave are hampering small businesses' ability to do the job at hand and help tackle unemployment - which is at its highest for 17 years.

"Small businesses are like a family, knowing and understanding the needs of their staff. But these FSB-ICM figures show that the changes in the law on sick leave are hampering employment opportunities to get long-term unemployed back into work. The European Commission must look at the measures on sick leave while reviewing the Working Time Directive and ensure these are rewritten so that sick leave is actually classed as sick leave and small firms have the best conditions to take on more staff and help pull the economy back onto the road to recovery."