This draft report was released to assist participants in preparing a submission to the commissioned study into Regulator Engagement with Small Business.
Members of the public are invited to examine this draft and provide written comment. The deadline for all written responses is Wednesday 14 August 2013.
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.
Small businesses primarily ‘experience’ regulation and much of its associated compliance burden through engagement with regulators in their delivery of regulation. While regulators are generally committed to effective engagement and to minimising unnecessary burdens, it is apparent that 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 noted by industry and government as having effective engagement practices have adjusted their culture by focusing on senior management priorities, training and skills of enforcement staff, performance monitoring, stakeholders feedback, and rewarding behaviour consistent with the desired practices.
Regulators can be more responsive to small business needs and capacities in their communications. In particular: greater use of industry associations to disseminate information; tailoring information requirements around data already collected by businesses; and proactive sharing of compliance information between regulators would generally 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 derived from strict application of a small business definition.
Governments can improve engagement outcomes by ensuring the institutional and governance frameworks within which regulators operate do not inhibit adoption of leading engagement practices. This includes ensuring regulators have access to an appropriate range of compliance and enforcement tools, and resourcing to effectively deliver 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 transparency and accountability measures with regulator guidance provided on use of discretion and, where feasible, a separation of education and enforcement roles.
More widespread use could be made of formal cooperation arrangements between regulators to minimise the overall interaction burden on business. Lead agency models to facilitate joint compliance checks and inspections and regulator forums to exchange views on good practice and build professional capacity are effective means of improving engagement.
Ongoing monitoring by regulators of the effectiveness of delivery approaches and costs imposed on business is essential to improving regulator performance. Governments should require regulators to report against engagement principles and ensure low cost mediation services for the resolution of disputes, particularly with local governments.