Are Benefits Enough? How Small Businesses Are Faring in A Tight Labor Market
By Nancy Mann Jackson
The U.S. economy has reached its lowest unemployment rate in 30 years, and the employed share of the adult population is at an all-time high. While full employment is good news for the U.S. economy, it presents challenges for small business owners who need to hire workers: They must compete for talent with businesses of all sizes, and quickly evolving technology means it's often difficult to find workers who have the optimal skillset.
One-third (33 percent) of small business owners plan to hire in the next six months, an increase from 25 percent just a year ago, according to Capital One's fall 2018 Small Business Growth Index Survey. But the hiring process isn't always easy. Thirty-four percent of small business owners report that the skills gap is the top factor impacting their ability to hire, closely followed by competition from other businesses (30 percent), financial resources (30 percent) and the tight labor market (28 percent).
"Small businesses are fighting with big businesses, startups and the entrepreneurial spirit of today's emerging workers for scarce talent," says Jill Santopietro Panall, owner of 21 Oak HRConsulting in Newburyport, Mass. "They have to defeat cash-cow big businesses waving around money and benefits, the exciting world of startups and also the general inclination of many younger workers to just 'start their own thing' rather than coming into an established business. That's an uphill battle."
How Small Businesses Can Compete
Attracting and keeping qualified workers may not be easy, but for many business owners, it's essential to building and maintaining their companies. Here are a few actions small business owners might consider to attract talent and boost retention rates:
Rethink Benefits. Thirty-eight percent of small business owners say their biggest hiring competitors are larger businesses that can offer more robust benefits packages. Healthcare benefits, while costly, remain highly valued by employees.
Even if you're offering benefits, employees will still have to pay co-pays and deductibles. "The minimum contribution from employers is 50 percent of individual benefits premiums and 33 percent for a family plan," Panall says. "Some of my clients can't offer more than the minimum contribution, and that's still leaving a lot [of financial responsibility] on a younger worker or a lower-wage worker. If you're offering health benefits, try to offer the best ones possible."
Fifteen percent of small business owners have changed their benefits packages to be more attractive, and 9 percent have plans to change them. But 68 percent of small business owners who offer benefits are confident that their package is competitive.
As valuable as health benefits are, they aren't the only benefits that can make a difference in your ability to attract and retain workers. "Healthcare is important, but I find that work-life balance and vacation time is more important to certain demographics," says Matthew Burr, an HR consultant at Burr Consulting in Southern Tier, N.Y. "If organizations can offer work-life balance perks, it will put them at an advantage."
Those benefits include things like flexible work hours or the ability to work from home, offered by 47 percent of small businesses, or paid time off, offered by 57 percent. Other valuable options include free meals, snacks or other tokens of appreciation (such as gift cards), or partnering with other local businesses to offer reduced rates for yoga or fitness studio memberships, says Wendy Silver, founder of Beyond the Workplace, an HR consultancy in Massachusetts.
Boost Training Options. Ninety percent of small businesses with two or more employees offer benefits, and the most frequently offered benefit is employee training (provided by 67 percent). For employees who want to continue to increase their marketability, training is a valuable perk — and can be offered affordably.
Consider building employees' skills and knowledge with a book club, suggests Samantha Reynolds, communications coordinator for Helpside, a professional employer organization (PEO) that provides small businesses with HR, employee benefits, payroll and risk management services. "There are many great personal and professional development books available," Reynolds says. "Many can be found online at great prices, and others may be available at your local library. If books aren't interesting to your employees, consider a podcast or video series that might draw their attention. TED Talks can also generate a robust discussion, and most are 15 minutes or less."
Other easy ways to boost learning include hosting "Lunch and Learns" or using online learning resources such as LinkedIn Learning, Udemy and Coursera, some of which offer training at no cost, Reynolds says.
Lean on Your Network. Referrals and networking continue to be among the best ways to find great talent, Silver says. Because current employees are often the best referral source, consider offering a referral bonus or perk to current staff who refer a candidate who is ultimately hired.
"I advise that employers who do this create a formal policy around when and how such bonuses are paid," Silver says. "[The perk] could also be as simple as a gift card or an extra vacation day."
In addition, consider posting open positions in places where the ideal candidate may hang out. "This could include everything from professional association websites to Facebook pages," Silver continues.
Focus on Culture. While large companies may offer robust benefits packages, small businesses can offer employees a unique culture and environment that is worth their loyalty. "A lot of smaller businesses haven't had the time, money or expertise to build an intentional culture," Panall says. "I find that folks often have a great idea, product or service, and then [they] just start selling and doing the work without taking time to slow down. [It's important to] set the vision and really think about how they want to work versus just thinking about what they want to do."
Rather than dismissing the idea of culture-building as something that will slow you down, taking the time to truly develop a unique culture can be "incredibly important to attracting employees and particularly for retaining employees," Panall says. "You can sell people the dream and attract good employees, but if they get in the door and it's all smoke and mirrors, they will leave — quickly."
Learn more about the Capital One Small Business Growth Index at: http://www.capitalone.com/smallbusinessgrowthindex