How has this year been treating small businesses? So far, the world of small business in the U.S. has been going well. “Job openings and plans to create jobs remain historically very strong,” says William Dunkelberg, Chief Economics of the National Federation of Independent Business.
Business owners themselves agree: according to a CNBC survey, over half (56%) of respondents say that current business conditions are “good.” Many say they are expecting business expansion, increased revenues, and additional hiring.
But business owners are facing some serious challenges when it comes to recruitment.
Small businesses clearly want to hire. They’re just not always successful at it. Half of small businesses made no hires in 2018, and that may not change in 2019. According to the NFIB Small Business Optimism Index, 58% of small businesses reported either hiring or trying to hire, but 50% said that there were few or no qualified applicants. Demand for workers persists at record levels, in other words, but filling those roles is another story entirely. It’s even worse for areas facing specific staffing shortages, like financial services, cybersecurity, and manufacturing.
Labor is expensive.
The biggest obstacle seems to be labor costs. Salaries, for example, are rising rapidly given the historically low unemployment rates. The CNBC survey found that nearly half of companies expect the cost of labor to increase at a faster rate than the cost of raw materials or the cost of capital. In short, workers are becoming more expensive to acquire.
But there’s good news!
Fortunately, small businesses have many options for dealing with both the difficulty in recruiting (finding qualified workers for skilled positions) and in rising labor costs. For example, specific tactics like upskilling, using contractors, and keeping retirement-age workers longer can help with staffing shortages.
And one way to deal with rising labor costs is to reduce turnover: increasing employee retention reduces the need to hire as many workers. Since the cost of high turnover is higher than most employers realize, this automatically reduces labor expense.
Many recruiters and hiring managers also make common mistakes that make the recruitment process more difficult than it needs to be. Avoiding these errors can increase hiring effectiveness and efficiency. That said, recruitment requires more specific and in-depth subject matter expertise than ever. Consulting with third-party specialists can pay off significantly in the long run.
CoAdvantage, one of the nation’s largest Professional Employer Organizations (PEOs), helps small to mid-sized companies with HR administration, benefits, payroll, and compliance. To learn more about our ability to create a strategic HR function in your business that drives business growth potential, contact us today.