The SME test analyses the effects of upcoming EU legislative proposals on small and medium-sized enterprises (SMEs). Assessing costs and benefits of policy options for SMEs promotes the 'think small first' principle and improves the business environment. The SME test is an integral part of the European Commission’s regulatory impact assessment process.
The SME test consists of
- identifying businesses likely to be affected
- consulting SMEs and SME representative organisations (such as SME envoys and the EEN)
- assessing the impacts on SMEs (cost-benefit analysis)
- exploring policy options reduce negative effects on SMEs or considering mitigating measures if needed
The European Commission is committed to applying the SME test systematically and proportionately, based on the relevance of an initiative, as outlined in its impact assessment guidelines. The SME test is presented in the Better Regulation toolbox (tool #23), last updated in November 2021.
SME filter
To ensure SME-friendly legislation, the Commission created the SME filter – introduced in its 2020 SME Strategy. As part of the process, the SME Envoys network screens EU initiatives published on the Have Your Say portal and identifies those likely to impact SMEs. ‘Relevant’ initiatives must include a proportionate analysis of their effects on SMEs in their impact assessments.
EU SME Envoy
As part of the SME Relief Package, the Commission will appoint a dedicated EU SME Envoy. Reporting directly to the President and the Commissioner for the Internal Market, the Envoy will champion SME interests by identifying and addressing regulatory impacts on SMEs, ensuring their concerns are central in EU policymaking and legislation. This role reflects the Commission's commitment to reducing regulatory burdens and increasing support for SMEs across the single market.
SME test in other EU institutions
In the Interinstitutional agreement on better law-making, the European Commission, the European Parliament and the Council agreed that impact assessments should address the effects on competitiveness and administrative burdens, especially for SMEs, in line with the ‘Think Small First’ principle (which calls on policy-makers to consider small companies in their work).
The Parliament and Council also agreed to carry out impact assessments on any of their substantial amendments to the Commission's proposals when deemed appropriate and necessary for the legislative process. Each institution defines what qualifies as a 'substantial' amendment.
SME test in EU countries
The Commission actively encourages EU countries to apply the SME test in the policy-making process systematically. SME Envoys’ Network reports show how EU Member States are evolving in assessing the impact of new legislative proposals on SMEs and in implementing the necessary procedures.
The OECD also increasingly recognises the importance of integrating SME test in regulatory policy-making (see OECD Regulatory Policy Outlook 2021 report box 2.9) and reviews how countries use SME tests to mainstream SME perspectives in their policy-making. See the policy paper on SME and entrepreneurship policy frameworks across OECD countries.
The Network of SME Envoys reports on the using the SME test in EU countries.
- SME Envoys report on the implementation of SME test in EU countries (2016)
- SME test for better regulation - Use of the test in EU countries (2024)
Supporting documents