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Regulator Engagement with Small Business

Research report

This research report released on 9 October 2013 makes recommendations to improve the delivery of regulatory outcomes for communities and reduce unnecessary compliance costs on small business.

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  • Key points
  • Media release
  • Contents
  • Small businesses feel the burden of regulation more strongly than other businesses. Almost universally, their lack of staff, time and resources present challenges in understanding and fulfilling compliance obligations.
  • How small businesses 'experience' regulation has as much to do with the engagement approaches of regulators as it does with the regulations. Regulators are generally committed to effective engagement and to minimising unnecessary burdens, but many do not have robust frameworks to ensure high level ideals consistently translate to good practices on the ground.
  • Regulator culture is crucial. Those regulators with effective engagement practices have adjusted their culture by focusing on senior management priorities, training and skills of enforcement staff, performance monitoring, stakeholder feedback, and rewarding behaviour consistent with desired practices.
  • Regulators' communications can be more responsive to small business needs and capacities. In particular:
    • tailoring information requirements around data already collected by businesses
    • greater use of industry associations to disseminate information
    • ensuring regulatory information can be readily found on websites
    • enabling timely access to regulatory staff, would improve small business experiences with regulators.
  • There is scope for increased targeting of those businesses and activities which present a higher risk to communities, and for adoption of lesser compliance cost approaches for lower risk businesses, such as less frequent inspections or less onerous reporting requirements.
    • When done well, such targeting is likely to achieve outcomes at a lower cost than an engagement approach based on strict application of a small business definition.
  • Governments can improve engagement outcomes by ensuring the frameworks within which regulators operate do not inhibit adoption of leading practices. This includes ensuring regulators have access to an appropriate range of compliance and enforcement tools, and resourcing to effectively achieve the policy objectives behind their regulatory responsibilities.
    • Where regulators are inadequately resourced, either some risks to communities go unmitigated or the costs of mitigation are pushed onto those regulated (including small businesses). Governments should provide regulators with explicit guidance on regulatory priorities, given limited resources.
  • Regulator discretion in compliance monitoring and enforcement must be accompanied by appropriate guidance and transparency and accountability measures as well as a separation of education and enforcement roles, where feasible. Governments should ensure low cost mediation services for the resolution of disputes, particularly with local governments.
  • More widespread use could be made of formal cooperation arrangements between regulators, including lead agency models to facilitate joint compliance checks and proactive sharing of compliance information.
  • Continuous improvement in regulator performance requires ongoing monitoring of the effectiveness of delivery approaches and costs imposed on business. Governments should require regulators to report against engagement principles and encourage regulator forums which exchange views on good practice and build professional capacity.

Regulators can do more for small business

Regulators can do more to reduce the compliance and enforcement burdens they impose on small businesses, according to a report released by the Productivity Commission today.

The Commission argues that regulators should ensure they understand how regulation impacts on small business and keep the compliance capacity of small businesses at the forefront of their minds.

'A regulator's culture and attitude towards business can be as important as the content of the regulation itself. There is still significant scope for improvement in the way regulators engage with small businesses' Commissioner Dr Warren Mundy said.

To secure benefits for small businesses and, importantly, also for the broader community, the report proposes a suite of changes which need to be implemented by Commonwealth, state and territory, and local governments:

  • Regulators should adopt a multi-channel approach to communicating with small businesses with a focus on the brevity, clarity and accessibility of information.
  • Compliance and enforcement strategies should be proportionate to risks posed to communities and facilitate voluntary compliance.
  • Regulators should commit publicly to target timeframes for key processes, report on their performance in meeting targets, and consider other measures to improve timeliness.
  • Regulators should have access to a sufficient range of enforcement tools and be resourced to do their job effectively, to avoid the shifting of direct and indirect costs onto businesses.

The Commission found that leading practices in regulator engagement with small business were more commonly adopted by regulators that have implemented a risk based approach. A stronger focus on risk was found to limit unnecessary intrusion on lower risk small businesses, free up resources to improve frontline guidance and advice services and enable them to more effectively address higher risks to communities.

The Commission also found that regulators with effective risk based engagement policies and procedures were more likely to be better resourced and to have senior leadership that invests in, and fosters, a business focused culture among their staff.

  • Preliminaries
    • Cover, Copyright and publication detail, Foreword, Terms of reference and Contents
  • Overview
  • Recommendations
  • Chapter 1 Scope of the study
    • 1.1 Background to the study
    • 1.2 Small business in Australia
    • 1.3 Regulators and their engagement with business
    • 1.4 Conduct of the study
  • Chapter 2 Influences on regulator posture
    • 2.1 Introduction
    • 2.2 Regulation design sets bounds on posture
    • 2.3 Regulators' institutional environment
    • 2.4 Ongoing influences on regulator posture
    • 2.5 Conclusion
  • Chapter 3 Is a different approach needed for regulating small business?
    • 3.1 Introduction
    • 3.2 Compliance is a challenge for small businesses
    • 3.3 Strategies to contain regulatory compliance costs
    • 3.4 When is different regulatory treatment appropriate?
    • 3.5 Does a risk based approach result in the efficient treatment of small businesses?
    • 3.6 Conclusion
  • Chapter 4 Compliance and enforcement strategies
    • 4.1 Introduction
    • 4.2 Compliance and enforcement approaches that are commensurate with risks
    • 4.3 Ensuring requirements on business are the minimum necessary
    • 4.4 Ensuring enforcement responses are effective and proportionate
    • 4.5 Improving the quality of processes and decision making
    • 4.6 Conclusion
  • Chapter 5 Communication, information and consultation strategies
    • 5.1 Introduction
    • 5.2 Achieving better communication
    • 5.3 Streamlining reporting requirements
    • 5.4 Promoting regulator coordination and information sharing
    • 5.5 Strengthening consultation and feedback
    • 5.6 Better handling of complaints and appeals
    • 5.7 Conclusion
  • Chapter 6 Driving better regulator performance
    • 6.1 Introduction
    • 6.2 Regulator capacities
    • 6.3 Transparency and accountability
    • 6.4 Evaluation, review and performance monitoring
    • 6.5 Conclusion
  • Appendix A Study participants
  • Appendix B Survey of regulators
  • Appendix C Definitions of small business
  • Appendix D Risk based delivery of regulation
  • Appendix E Cumulative burden on small business
  • Appendix F Enforcement tools
  • Appendix G Communication modes
  • References

Printed copies

Printed copies of this report can be purchased from Canprint Communications.

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