Immigration Regulations Loom as a Major Challenge for Small Businesses in 2019

Immigration policy is front and center as one of our nation’s most challenging and controversial policy debates for 2019. With the continuing swirl of discussion on the topic, it can be difficult to determine the potential impact of policy changes, not only for people, but also for the U.S. economy.

When you look beyond the politics and differing philosophies, however, one practical economic fact is apparent: Employers will need to keep pace. That responsibility and the uncertainty around where the changes might come can put many small businesses at a disadvantage. Small businesses often don’t have dedicated HR staff to keep up with rapidly changing regulations, and in many industries, small businesses heavily depend on workers who have legally immigrated into the country.

E-Verify

It’s a challenge that shouldn’t be ignored; with small businesses accounting for nearly half of the U.S. gross domestic product, they represent the engine of our economy.

Among the various immigration policy proposals under consideration, there seems to be momentum toward mandatory E-Verify, a federal system designed to confirm whether job applicants are legally seeking work in the U.S. The system is available for employers across the U.S. today, but requirements for use are determined by the states. Currently, only eight states require E-Verify for all new hires, with a handful of other states requiring the use of the service for certain positions, such as government or government contractors.

While mandatory E-Verify for every new hire across the country is currently just a possibility, the need to validate eligibility of employment is more important than ever for small businesses. U.S. Immigration and Customs Enforcement workplace enforcement actions more than doubled in the first seven months of FY18, compared to all of FY17, putting all employers at greater audit risk than ever before. Consequently, proper management of Forms I-9, and E-Verify where applicable, is critical for businesses of all sizes.

A recent Equifax Workforce Solutions survey of 500 human resources practitioners shed light on the potential varying impact of a potential move to mandatory E-Verify. While the majority of respondents from midsize and larger companies felt they were adequately prepared for regulatory changes related to immigration, nearly two-thirds of respondents from small businesses (63%) said they were concerned about the potential expansion of E-Verify. Beyond that, more than half of the small businesses that responded said that keeping up with federal, state and municipal employment regulations was a challenge.

These results highlight the discrepancy between small and large businesses when it comes to immigration policy, larger companies being better staffed with experts to manage change. Many small businesses are understaffed in HR and, as a result, are more concerned about the potential for expanded regulatory compliance needs. For many businesses with fewer than 50 employees, the head of HR also carries another title, such as owner, office manager or even CEO. In other cases, HR work is added to the job responsibilities of an employee who does not necessarily have experience in the area.

Finding qualified applicants

Small businesses are competing in a historically tight job market. Data from last year showed more than 7.1 million job openings, compared with about 6 million job-seekers. Without sufficient HR resources, many small businesses could face competitive challenges as they seek to fill and validate the eligibility of the candidates applying for their open positions.

One more driver of concern for small businesses is this simple fact: These businesses often depend on immigrant workers more than many larger businesses. When you look at the industries employing the most immigrant workers, you see a mix that naturally skews toward smaller businesses, including personal services, food service, hospitality, construction and agriculture.

Immigrant workers make up 17.1% of the total U.S. workforce, with an estimated 24.7 million workers in the U.S. in 2017. The fact that many of these workers are employed by America’s small businesses—most of which may not have sufficient, dedicated HR staffing—illustrates the scope and magnitude of the challenge.

Regardless of political positions on immigration reform, the practical impact of any changes or expansion of the current requirements on small businesses must be considered. For small business owners or HR managers, education on current regulations and processes is a critical first step. Many states provide resources and training for HR managers.

The technology side

Technology solutions or third-party services that help automate the processes and maintain audit trails related to Form I-9 and E-Verify are another resource for small businesses. For example, Equifax Workforce Solutions offers a suite of I-9 management solutions that helps businesses manage and maintain Form I-9 compliance with E-Verify, as well as solutions to help onboarding alignment with federal, state and local regulatory requirements.

It will take people, process and technology to help small businesses keep up with changing employer requirements around proof of employment eligibility in the months ahead. Small business owners may sometimes be short on the people part of the equation, but starting to explore process and technology options to plan ahead can minimize the scramble to meet new guidelines in the future.