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Practice Management > Building Your Business

Small businesses face challenges attracting qualified employees

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When it comes to attracting “the best and the brightest” employees, it is incredibly difficult for small businesses to compete with larger employers, in at least four ways: wages, benefits, perks, and recruiting programs.


When it comes to pay scale, most small business owners find it almost impossible to compete with most larger employers. According to a Bureau of Labor Statistics (BLS) report, titled “December 2013 Employer Costs for Employee Compensation,” private industry employers spent an average of $29.63 per hour worked for total employee compensation ($20.76 in wages and salaries, and $8.87 in benefits). Small business employers with a large number of minimum wage jobs available certainly can’t compete with these numbers.

And, for better or worse, pay scale is “front and center” these days with employees working in small businesses. LegalShield commissioned two surveys in 2014, one called “Small Business Survey 2014,” and the other called “Small Business Employee Benefits Analysis.”

One point noted in the first survey was that 55 percent of small business employers found it difficult to hire good employees.

In the second survey, it was reported that 61.7 percent of small business employees ages 18 to 34 said they had looked for new jobs last year, and 44.7 percent reported that they will be looking for new jobs in the coming year. And it’s not only younger workers looking to move on. It is also those who have more education, whether they be younger or older. The survey found that, while only 40 percent of employees working in small business who had high school or vocational degrees searched for new jobs last year, 54.3 percent with bachelor’s degrees did the same.

The number one reason these employees were looking for new jobs? Almost 50 percent (46 percent) said “better pay/salary,” while in distant second place (13 percent) was “better opportunities and advancement potential.” And, when asked how small business employers could improve job satisfaction, the number one response (57 percent) was “better pay, more raises, more money.” The second place reasons charted only 14 percent.

“Small businesses typically cannot attract top-quality employees, because their pay scales are far below those in large corporations,” said Jerry Thomas, president and CEO of Decision Analyst, the firm that LegalShield hired to conduct these surveys. “These percentages are not surprising in light of declining U.S. household incomes among the majority of the population. I don’t think you could conclude from these numbers that money is the most important aspect of their jobs. However, it is uppermost in their minds right now because of economic distress.”


It is also equally difficult for small business employers to compete with larger employers when it comes to offering benefits. Not only are smaller employers usually unable to offer as wide a range of benefits as larger employers, they are also usually unable to pay as much of the cost of the benefits as larger employers are, leaving employees to pay higher percentages of the premiums.


By nature, smaller businesses offer less opportunity for employees to advance in their careers, since there are fewer levels in the organization, and fewer employees in each level.

In addition, while many small employers try to attract new employees, especially younger employees, by offering a more flexible work environment, this often turns out to be a challenge. That is, many small businesses want to offer alternative programs that emphasize “lifestyle flexibility,” such as flexible hours, additional days off, and part-time employment. However, these can be problematic, in that small businesses often aren’t able to hire enough employees to cover for each other. For example, when large numbers of young employees want weekends off, it can be difficult for small businesses that are open weekends to find enough employees to cover these shifts, especially businesses that are limited to offering minimum wage.

Recruiting programs

Finally, while large employers often have large advertising budgets to attract new employees, in addition to well-staffed human resources and recruiting departments that spend almost all of their time “in the field” recruiting potential applicants at job fairs and college career days, small employers do not enjoy these luxuries. Often, their primary source of new applicants is “word of mouth” from existing employees.


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