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The impact of legislation on business

Types of Legislation

Legislation in an area will impact heavily on a business and how it operates. Since a company has to ensure it is working within the legal requirements of its country, the laws will change how it works, what it offers and the amount of money it pays in taxes. We have already looked at how legislation in consumer protection impacts upon how a business will work with its clients but legislation will also change the methods that a company employs to create goods and services as well as how it works with the local community. Businesses will be affected by a number of pieces of legislation such as:

  • Health and safety legislation – when the working environment is dangerous, a business will be accountable for the safety of employees. This means it will need to ensure that a minimum standard of safety is adhered to
  • Employment legislation – governments often pass legislation that protects people when they are at work. This will entitle individuals to minimum wages, capped working hours, protection from discrimination and equal opportunity
  • Environmental legislation – governments can also impose rules on businesses to ensure they work to certain standards in order to protect the earth. This may include restrictions on the amount of greenhouse gases that can be released, how many pollutants can be put into the earth and the methods used in production
  • Taxes and subsidies – governments can impose taxes and fines on businesses if they do not work in a manner that is desirable. Taxes and fines will be imposed that can be quite heavy but subsidies can also be given for businesses that work in a manner which is preferred

A business can face many costs due to legislation. Since the company must abide by laws that are set, there will be certain guidelines in place that operations must be within at all times. This can be very expensive for a business as specific equipment may need to be purchased and employees taken on simply to monitor the legality of the business’s operations. The consequences of not working within these pieces of legislation can be catastrophic. Therefore, despite the added cost and time spent ensuring the business is working to the right standards, few companies can afford to take risks when it comes to business law. If a business does not work within the guidelines set out by governments, it can face a range of consequences such as:

  • Putting staff at risk of injury or even death due to unsafe working practices
  • Getting fined by the government and having to pay compensation
  • Angry staff that feel unappreciated
  • Penalties incurred due to unpaid taxes
  • Causing risk to the local environment and planet as a whole due to poor environmental procedures
  • Being sued by individuals that are harmed by the business’s poor practices

The bonuses of meeting legislation

Government legislation is not put in place to simply put restrictions on businesses and make it harder for them. There is good reason why a local or national government will put specific guidelines in place as these are of benefit to everyone in that area. Since following legislation is beneficial for a government and a community, special incentives are often put in place to encourage businesses to work within the law. Some of these incentives may include:

  • Monetary incentives and tax breaks for certain activities
  • No unexpected fines that could cripple the business financially
  • New opportunities for business and exporting goods
  • Free goods and services to encourage correct practices
Government legislation

Not only will the government put in particular incentives but a company will want to work legally to ensure it is safe from other issues. Unhappy staff that feel underappreciated or in danger at work will be unlikely to stay loyal – leading to a high staff turnover. Not following legislation can also lead to a business being sued by an individual due to unsafe practices, discrimination or any other unfair practice. Making sure that all working practices are to the right legal standard will result in a business that is sustainable, safe and affluent

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