According to the Principal Financial Well-Being Index, small businesses are expected to continue their growth into the next year. Employers have also grown increasingly optimistic over the past six years with close to 30% seeing an increase in year over year growth and financial improvement.
Main Street Businesses in 2020
Small businesses are expecting to stay in growth mode over the next year while investing to stay competitive in a tight U.S. labor market. According to the index, despite recognizing challenges in 2020, six in 10 of them expect to grow with higher financials.
However, these challenges don’t seem to deter owners from across the country. And this is what Amy Friedrich, president, U.S. Insurance Solutions at Principal, explains in the release.
Friedrich says, “While there continues to be speculation over an economic pull-back on Wall Street, Main Street businesses are expecting the momentum to continue for them so long as they stay competitive in the race for talent.”
Nevertheless, there are still some issues business owners have to deal with.
What Keeps Employers up all Night
Despite the optimism, issues remain that have businesses antsy. The cost of healthcare and the challenge of growing revenues are both tied at the top for 76% of the respondents. Not surprisingly the rising cost of providing health insurance to employees is one of the top financial pressures facing owners of small and midsize companies. And with a strong competition in today’s market, growing revenue still remains an issue.
Coming in a close third is the cost of offering benefits for employees (72%). With more jobs than professionals in the U.S. economy, coming with a competitive benefits package can be a challenge. Particularly with some 67% of employers stating they are trying harder to keep their workforce.
Other concerns that businesses face include cybersecurity, taxes and trade wars. Cybersecurity weighs more on white collar (68%) businesses then blue-collar (57%) businesses.
However, depending on the generation of the business owner’s views do vary. Millennials are struggling more with attracting/retaining staff, while baby boomers are more worried about the cost of healthcare/benefits. Boomers believe their ‘family’ culture sets them apart, while millennials believe benefits differentiate them from larger businesses.
Millennials offer more benefits for a higher Return on Investment (ROI) from their employees. Focusing on healthier employees (61%), improve employee performance (47%) and investing in employee satisfaction/morale (42%).
Thirty percent of millennial owners say they are likely to increase their budget to pay for employee benefits and perks to retain talent versus only 14% percent of baby boomers.
While baby boomers offer fewer benefits due to costs, they have more altruistic intentions. Such as increasing employee satisfaction/morale (68%) and ethical responsibility of the company (53%).
How they are Dealing with It
Regarding the high cost of healthcare and benefits, employers are responding aggressively. Running the full gamut with new benefit offerings, reskilling or upskilling, and leaning on long-term staff with experience. This includes technology, which is increasingly becoming the most important issue.
More than three-quarters of employers in the survey say technology is changing the skills they need from their employees. While 65% of SMB owners plan to reskill or upskill employees as the first measure to address technological change, millennials say they are more likely than baby boomers to replace staff. Over a third or 34% of millennials say they will replace staff versus boomers (8%) or decrease staff (30% of millennials versus 7% of Boomers).
When it comes to offsetting the cost of benefits 45% of businesses are looking towards cutting their budget. While 43% have stopped hiring, others have opted to reducing bonuses (31%) and stopped or slowed down investments in the business (31%).
As healthcare becomes more expensive, businesses are also looking to beef up perks as an alternative to taking care of their staff. In fact, businesses offer at least three perks to employees as a substitute for healthcare/ benefits. Among these 50% are providing flexible schedules, while 42% have abandoned dress code within the workplace. A third (34%) offer free food to entice staff to remain within the company.
Small businesses look towards long term factors such as providing a family atmosphere compared to enterprise companies. As such, retention is a major pain point, with poor work/life balance playing a considerable role in employees’ decision to leave.
Those employers that continue to provide their employees with health coverage do so because they feel their staff are part of their extended family. In fact, 68% who provide health coverage do so because they feel a responsibility to their employees. While a marginal 32% do so because they consider it as part of doing business.
On the subject of responsibility towards employees, three prominent areas came out from the survey. Employers see providing medical insurance (92%), helping employees save for retirement (79%) and providing a retirement plan (77%) important factors.
The Principal Financial Well-Being Index was carried out from August 13th – August 21st, 2019. The participants came from companies with 2 – 1,000 employees in the U.S. The majority or 72% were small businesses with 2 – 10 employees followed by 26% with 11 – 100 employees.