As markets continue to shift, American small businesses remain focused on growing their businesses this year. Though, while small businesses (with 19 or fewer employees) are hiring according to recent data from the ADP National Employment Report, they are still faced with challenges when growing their business. In fact, in a recent ADP Market Pulse Study, one-third of small businesses surveyed cited growing their business as a top challenge they’re currently facing – a challenge that can be examined through four key trends. These trends impacting small business include finding and retaining workers, staying in compliance with changing laws and regulations, navigating economic change and leveraging emerging technologies. Let’s dig into these trends further.
Talent: Recruitment, Retention and Employee Engagement
Even in a tight labor market, small businesses still have strong hiring plans, according to ADP’s recent Market Pulse Study. While 39 percent of small businesses surveyed have paused or plan to pause hiring, fifty-two percent are not planning to pause hiring. Additionally, 22 percent plan to increase employee wages in the next three months.
To attract and retain talent, a powerful tool for small business owners is to mine HCM data to pay workers a competitive wage and offer the kind of benefits they want. Compensation benchmarking is a data-driven process of determining how much to pay an employee based on what competitors in the area are paying people in similar roles, taking into account geographic region, industry, business size, cost of living, job responsibilities, candidate education, and candidate skills and credentials. This data can help give small business owners the job market intelligence they need to compete with other businesses, even larger businesses.
This data can also help small businesses tailor their benefits to their employees’ needs. You don’t have to be a large company to offer a variety of benefits. HR outsourcing, specifically professional employer organizations (PEO), for example, can provide access to more plan choices at competitive pricing. Employees can enroll online using state-of-the-art self-service technology. More benefits, better pricing and easy access can help small business owners recruit and retain good people.
ADP’s recent Market Pulse Study found 44% of small businesses surveyed are focusing on training and skills development as a top workforce priority. This includes upskilling and reskilling to ensure their people are equipped to navigate new demands and technologies. In a small business, career paths often look much different than the ladder many envision in larger companies. But small businesses still have opportunities to help develop their workforce; they just may look different, focusing on lateral movement and skill-building through stretch assignments. Paying attention to employee development can help small businesses drive employee engagement and ultimately higher employee retention.
Compliance: Keeping Up with Changing Labor Laws
Amid a continuously changing regulatory landscape, small businesses can fall behind, especially if their employees are in more than one geographic location. In the past 12 months alone, there were over 200 HR, payroll and tax compliance changes, from paid sick leave to pay transparency. With more local and state governments passing pay transparency laws, for instance, organizations must be sure that their compensation approach is compliant and based on valid data. Employing a data-driven approach can inform a pay audit, helping to achieve compliance and keep pay competitive.
Leveraging HCM technology and partner expertise can help HR stay on top of potential compliance changes or issues. For example, this past April the U.S. Department of Labor (DOL) released a final rule which updated and revised the provisions of the Fair Labor Standards Act (FLSA) exempting executive, administrative and professional employees from minimum wage and overtime requirements. This means employers must review the salary amounts paid to any employees are currently treated exempt and determine if their compensation is sufficient to meet the new rule. Data-driven HCM technology can not only provide this information but offer streamlined methods for budgeting and making the necessary changes.
Tax Credits: Navigating a Changing Economic Environment
Often, small business owners are the first to feel the impact of economic changes, like wages and inflation, but driving healthy cash flow through programs like available tax credits can help.
If your organization is growing, training, relocating, investing in facilities or consolidating, you may be eligible to take advantage of a variety of federal, state and local tax credits and incentives. There are many tax credit programs available that small businesses might not be aware of or have guidance on how to leverage. For example:
- The federal research and development (R&D) tax credit is available to all organizations that engage in certain activities to develop new or improved products, processes, software, techniques, formulas or inventions.
- The Work Opportunity Tax Credit (WOTC) program incentivizes companies to hire veterans and other individuals who have traditionally faced obstacles to employment.
Accountant and HR advisory partners as well as HCM technology can help small businesses identify and execute on tax credits they might be eligible for, helping them capture incentives for their growing business.
Technology: Driving Efficiency
Many small businesses are also leveraging new technologies to help drive efficiencies. They are focused on reducing their tech stack and looking for opportunities to consolidate and consumerize the tools they provide their employees. Through embedded solutions and integrations, they can curate a tailored ecosystem to manage their business and people in a way that’s personalized to their specific needs.
Using data and embracing new technologies like AI is enabling small business owners to take advantage of automation, freeing up time on administrative tasks and giving more time to focus on tasks that support business objectives and growth.
Technology can help create efficiencies in HR too, like streamlining tasks, validating payroll information, helping to prevent errors from manual data entry, and improving operations. For example, time and attendance solutions can better manage overtime or catch errors before they become a major problem.
Partnering with experts or managed service providers can alleviate the challenge of implementing and maintaining these technologies, helping small business owners stay focused on strategy and business growth.
No one knows for sure what the next year will bring but these trends can present opportunities for small businesses to drive growth by leveraging technology to hire, provide competitive benefits, streamline processes and foster a more satisfying work environment for employees.
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