Research on regulatory burdens and compliance costs indicates that where a large company may spend one euro per employee to comply with a regulatory duty, a medium-sized enterprise might have to spend around four euros and a small business up to ten euros. As 92% of Irish companies are micro-enterprises employing less than 10 people, and a further 6.8% of businesses employ between 10 and 49 people, one-size-fits-all regulatory compliance requirements can place these firms at a disadvantage to large multinational companies.
While regulations are an essential part of modern business life, for example in areas such as public and workplace health and safety, food safety or environmental protection, it is important that small companies do not face any unnecessary or disproportionate regulatory obstacles to start up, establish and grow.
The Department of Enterprise, Trade and Employment has developed an ‘SME Test’ to assist policymakers across government to think about the potential impact of any new legislation or regulation in terms of the regulatory burden it places on SMEs.
The implementation of the SME Test is strongly promoted by government — it is referenced as a commitment under the 2020 Programme for Government, a high priority deliverable of the SME and Entrepreneurship Growth Plan and a reform commitment under the National Recovery and Resilience Plan.
In 2022, a cross-government network was established to ensure the implementation of the SME Test across government departments. Several departments haven since implemented the test when drafting legislation, a list of which is attached below.
The SME Test is designed to invite consideration of less stringent compliance requirements for smaller companies, where appropriate and proportionate, including simplification of regulatory adherence through the use of templates, reduced regulatory thresholds for SMEs, and the use of exemptions where possible.
Ireland’s SME Test is comprised of a four-step process:
- Firstly, it is necessary for policymakers to identify affected businesses, based on size and sector.
- Secondly, policymakers should consider if early consultation with SME representative bodies, sectoral groups or relevant agencies is required.
- Thirdly, it is important to establish the extent to which the proposal affects SMEs’ competitiveness or the business environment in which they operate. These will include consideration of compliance and administrative costs, such as fees, duties, and costs arising from any obligation to adapt a product or service to meet economic, social or environmental standards. It will also include consideration of aspects such as possible impacts on barriers to entry, and impacts on innovation.
- Finally, upon consideration of these factors, an assessment can be made as to whether measures should be introduced that make it easier for SMEs to comply with the legislation.
The Department of Enterprise, Trade and Employment will continue working with government departments to ensure application of the SME Test to legislation where there are potential impacts on SMEs.
Point of contact
Patrick Sinnott, Department of Enterprise, Trade and Employment
Email: patrick.sinnott@enterprise.gov.ie