The tax reform bill passed by the US Congress in December, which drastically lowered the corporate tax rate from 35 to 21 percent, has prompted numerous large employers to announce raises, bonuses, or upgrades to their benefits packages as a means of passing on some of their tax savings to their employees. On Wednesday, the restaurant chain Chipotle announced a round of one-time cash bonuses and stock grants, as well as increased parental leave coverage for many employees. On Thursday, CVS said that it would boost hourly employees’ pay from $9 to $11 per hour, among other pay rate increases, and now provide up to four weeks of paid parental leave for full-time employees. Walmart, Starbucks, Disney, Wells Fargo, and other large companies have made similar moves.
What remains unclear, however, is whether these rewards (most of which consist of one-time bonuses rather than permanent wage increases) are sustainable and whether the benefits of the tax cut will redound to the majority of Americans who don’t work for large corporations. Small business owners are reluctant to make similar moves, much as they would like to, until they have a better sense of how much money they will actually save from the tax reform. As the Associated Press’ Joyce Rosenberg pointed out this week, smaller companies have less clarity on that issue than large corporations do, and questions remain as to how new deduction rules will pan out for small business owners. In addition, small and mid-sized businesses have nowhere near the same cash reserves or credit lines as big companies do, which makes the awarding of bonuses and raises a much riskier endeavor.
Wages at small businesses in the US are beginning to grow at a pace more common to larger companies, the Wall Street Journal’s Ruth Simon reported last week, driven by increasing demand for talent as well as the impact of pay transparency websites like Glassdoor and PayScale. An analysis of ADP data by Moody’s Analytics found that average raises at companies with fewer than 50 employees stood at 1.07 percent over the past three years, significantly more than the 0.69 percent average increase the analysis found for firms of all sizes.
Small businesses have found it necessary to offer more competitive pay packages both to attract new talent and to keep their current employees from getting poached by larger and wealthier firms. Employees, particularly younger workers, also have a better sense of what kind of compensation they can expect to earn with their skills and experience, and are not shy about demanding the pay they think they deserve.
The problem, Simon adds, is that these smaller companies tend to have fewer resources to work with overall, so increases in employee compensation tend to be balanced by cuts in other investments, such as equipment purchases or upgrades. This likely exacerbates the inequality between smaller and larger firms, as companies with larger war chests are better able to pay top dollar for in-demand talent while also investing in other aspects of the business.
Just weeks after launching its highly anticipated machine learning-enhanced job search feature Google for Jobs, the search giant has rolled out Google Hire, a recruiting app, as part of its G Suite of enterprise software offerings, according to an announcement on Google’s company blog:
Hire and G Suite are made to work well together so recruiting team members can focus on their top priorities instead of wasting time copy-pasting across tools. For example, you can:
- Communicate with candidates in Gmail or Hire and your emails will sync automatically in both.
- Schedule interviews in Hire with visibility into an interviewer’s schedule from Calendar. Hire also automatically includes important details in Calendar invites, like contact information, the full interview schedule and what questions each interviewer should focus on.
- Track candidate pipeline in Hire, and then analyze and visualize the data in Sheets. …
Now, all U.S.-based businesses under 1,000 employees that use G Suite can purchase Hire to land the best talent.
We first caught wind of Google Hire in April, when word got out that the company was testing it. A Google executive explains to Mike Prokopeak at Workforce why they decided to only make it available to small businesses:
Businesses of that size have a different set of hiring needs than larger enterprises, said Dmitri Krakovsky, a vice president at Google. “Small businesses don’t have deep pockets,” he said. “We wanted to level the playing field for them.”
Oxford evolutionary psychologist Robin Dunbar is most famous for his theory that humans can only maintain personal relationships with about 150 people at any given time, so much so that the figure is referred to as “Dunbar’s number.” Quartz’s Kevin Delaney explores the application of Dunbar’s number to management in the context of growing startups:
“There is no question that the dynamics of organizations change once they exceed about 150 or so,” says Dunbar. “The [Hutterite faith group] deliberately split their communities at this size in order to avoid having to have both hierarchies and a police force. Keeping things below 150 means you can manage the system by peer pressure, whereas above 150 you need some kind of top down, discipline-based management system.”
At a startup, once the staff exceeds 150 people, employees are no longer the single, cohesive, culture-reinforcing unit they were during the company’s earliest days. Staffers become more specialized and entrenched with their teams, which are probably sprawled across an office, perhaps on multiple floors or in several locations.
The new overtime rule announced by the US Department of Labor back in May, which will raise the salary threshold for exempting employees from overtime pay from$23,660 to $47,476 a year when it goes into effect on December 1, is expected to hit small businesses particularly hard. Today, the National Federation of Independent Businesses, the country’s largest association of small businesses, urged the Labor Department to delay implementation of the rule, USA Today reports:
“In many cases, small businesses must reorganize their work forces and implement new systems for tracking hours, record keeping, and reporting,” says NFIB president Juanita Duggan. “They can’t just flip a switch and be in compliance.” The group is asking for a delay until June 1.
But in a statement, David Weil, administrator of Labor’s wage and hour division, says officials provided businesses 190 days to comply, “more than three times what’s legally required.” He added, “The December 1 implementation date is a sufficient amount of time (more than six months) for employers to adjust to the new salary level.” …
The requirement will affect about 44% of the 5.5 million U.S. businesses with fewer than 500 employees, NFIB says. About 3.2 million of them employ 10 workers or less. Large corporations with “lawyers, accountants and human resources specialists” who read technical federal notices “may prove able to cope with the new (rule) in a 25 week window of time,” NFIB said in its petition. “But the department cannot reasonably expect America’s small businesses to match them.”
In addition, as Bloomberg BNA notes, the National Retail Federation, Chamber of Commerce, and the American Hotel and Lodging Association are among almost 100 business groups backing a piece of bipartisan legislation which “would phase the rule in over three years and eliminate automatic increases to the salary threshold under which workers are eligible for overtime pay.”
Over the past year, the US Department of Labor has been putting pressure on businesses whose relationship with an employee is mediated through another entity, such as a franchise, contractor, or temp agency—and holding them responsible for the compensation and work conditions of these employees. The department contends that an organization in this type of relationship exercises enough control over workers to be considered a “joint employer,” meaning that these employees may be entitled to bargain collectively with that organization, take it to court for labor law violations, or benefit from wage and hour protections afforded to employees of large enterprises but not small ones. Employers and business associations, obviously, disagree. The department’s interpretation is not law—and several states have since passed laws clarifying that franchisers are not joint employers—but its theory is being tested in court.
While the conversation about this new rule has mostly centered on what it means for large organizations, some of the franchisees and other small business owners caught in the middle tell the Wall Street Journal’s Melanie Trottman that they are worried about what it means for their ability to expand:
Franchisees … say they could lose their independence to hire, fire and manage workers as they please. They are also concerned about becoming too independent: Some say their franchisers have scaled back worker training tools and other guidance, fearing regulators would view such involvement as joint-employer-like control. Businesses say they are in a regulatory limbo because the new standard is vague about what constitutes control. The previous test measured the direct control one business had over working conditions of people employed by another business. Now, even indirect control can count.
At least in the US, a college degree is no longer optional for employment in the professional realm. More Americans hold bachelor’s degrees than ever before (nearly a third of Americans over 25, according to the National Center for Education Statistics), and employers know it. A CareerBuilder survey conducted late last year found that employers were increasingly hiring college graduates for jobs that used to only require a high school diploma, and advanced degree holders for jobs primarily held by BAs. Now, CareerBuilder’s Pete Jansons presents more findings showing that small enterprises are also a part of this trend:
According to recent CareerBuilder research, more than 1 in 4 small business employers (26 percent) say they have increased their educational requirements for jobs over the last five years. One in five employers (20 percent) are hiring more employees with master’s degrees for positions that primarily had been held by those with college (4-year) degrees, and 3 in 10 (30 percent) are hiring more employees with college degrees for positions that primarily had been held by those with high school degrees.
Higher degrees are also influencing promotion decisions. Thirty-five percent of small business employers say they are unlikely or highly unlikely to promote someone who does not have a college degree.