Hiring, Benefits and Compliance: Where HR Can Alleviate Small Business Pressures

Small businesses fuel American ideology and the economy. But today’s small business owners are facing new and continued challenges in staying profitable and compliant. In G&A Partners’ inaugural SMB Readiness Report, we found that 87% of the 350 small to mid-sized business (SMBs) leaders surveyed say economic conditions have changed how they operate.

Much of that change is directly affecting their workforce, the backbone of small businesses. Hiring top talent has always been hard, but keeping them can be even harder. According to our report, 77% of SMBs have delayed or even stopped hiring due to economic pressure.

Workforce Challenges

The economic headwinds have been difficult to predict in the last 18 months. Many businesses are holding off on expansion or costly projects while keeping an eye on where the economy is headed. In fact, 70% overall have delayed expansion plans because of financial fears, and numbers are higher in front-line industries: 86% in hospitality, 74% in manufacturing, and 71% in skilled trades. A combination of politics, world affairs, climate, and automation has led to a feeling that small business owners may need to take a wait-and-see approach.

Many small businesses use furloughs — short periods with no work and no pay — as a way to hold on to their workforce during slow periods rather than resorting to layoffs. The hope is that conditions will change so they can bring their teams back without having to recruit and train new employees. But the pressure has been severe enough that 57% of SMBs report having conducted layoffs anyway as a cost-control measure. This reinforces just how far current economic conditions are testing admirable businesses trying to protect their workforce.

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Workforce Priorities

Despite some businesses facing layoffs, others have retained their workforce. And pay and benefits remain significant factors in employee retention — often the largest ongoing burden in a company’s ledger. The cost of health insurance continues to increase sharply, and as inflation rises, employees expect their pay to keep pace. When groceries, gas, and everyday essentials cost more, their paycheck can feel like it no longer stretches as far as it used to. That puts business owners in a tough spot: 83% have already raised prices to offset rising costs in order to keep up, but it’s often not enough. Just over half of SMBs have had to take out loans to sustain operations, and 30% of owners reported taking no pay for months to keep the business running.

It’s not surprising that 56% have had to delay or eliminate raises, bonuses, or promotions, and half have eliminated or decreased certain benefits or perks.

HR Capabilities

It should be an essential focus for businesses to hire and train leaders who will take care of both their workforce and the bottom line. This includes compliance with local, state, and federal employment regulations; performance management; workforce planning for tomorrow’s needs; and technology. That is a perennial challenge, and 51% of SMBs report rising compliance costs but only 28% are reallocating resources toward compliance, HR, and risk management.

Partnering with companies or consultants with this expertise can help in these areas, allowing business owners and leaders to focus on running and growing their business. Subscribing to and utilizing government or other legal resources, such as local or state chambers of commerce, employment law firms, or state websites, can help small businesses stay abreast of employment law changes.

The regulatory landscape has become more complicated with city, county, and state governments filling in the gaps between federal laws and protections, creating a maze of overlapping employment regulations that small businesses must navigate.

I get questions like these all the time:

• Am I covered by this law?
• What if I have remote workers?
• Do I really have to offer paid sick leave?

Even an unintended lack of compliance can cost small businesses time, penalties, fees, and potentially litigation.

Still Worth It?

In the face of all these challenges, is it still worth it to create or run a small business? Yes, it can be. The majority of respondents don’t regret or question their decision to own a business. But they must be nimbler in managing new challenges and recognize what resources are needed to hire and maintain an engaged workforce.

Small business owners should consider the strengths they leveraged to start their businesses. While key to their success, those strengths may not cover everything needed today. Identifying gaps and having strong team members will be essential, especially for the 57% of SMB leaders who still predict stability over the next 12 months, and the 40% who anticipate growth or expansion.

It’s difficult to predict where the economy will be next year, but businesses can start putting processes in place now to support their bottom line and their employees as conditions continue to change.

About G&A Partners

As a nationwide professional employer organization (PEO), G&A Partners helps businesses streamline HR outsourcing, reduce risk, and create workplaces where teams can thrive.

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[To share your insights with us, please write to psen@itechseries.com ]

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