HR Forced to Confront New Issues in 2013

Small BusinessesOver 120 million people are currently employed in the United States. Organizations employing fewer than 20 people account for over 20 percent of this population. These small businesses make up America’s start-up organizations, the melting pots of entrepreneurial spirit, which catalyze economic growth and innovation.

Unfortunately, the modest nature of these firms renders them more susceptible to the small policy changes
that are easily absorbed by the larger industry conglomerates. This year, human resources management
(HRMS) will be forced to overcome new obstacles brought on by reforms in general taxation, minimum wage, immigration, and healthcare.

The projected federal deficit for 2013 currently hovers around one trillion dollars. A large part of the US Treasury’s annual loss in revenue is a result of the tax-exempt status of employee benefit programs. To
minimize these costs, it is likely that the government will begin to implement changes in public policy to
reform tax codes. This will result in an examination of current bonus packages and retirement programs.
Other perks, including transit compensation and education assistance, may be impacted as well.

Additionally, mandatory minimum wage is on the rise. Currently set at $7.25 per hour, it is expected to steadily
increase to $10 within the next two years. This change will directly affect small businesses because a great deal of their profits goes into everyday operating expenses like utilities, lease payments, and equipment costs. These are set costs, and will not be directly influenced by wage reform.

The most significant costs to small businesses are employee wages and benefit packages, which are the central expenses that can be controlled by the employer. A higher minimum wage undermines this flexibility and cuts the small business’s employment budget, forcing the company to hire fewer employees and/or downsize in order to comply with the new laws. This shift could potentially lead to an increase in unemployment across the country.

President Obama has indicated that immigration reform is among his top priorities. For many small businesses, illegal immigrants complicate fair enterprise. There is an uncomfortable dichotomy between honest employers, who obey US labor laws, and their dishonest competitors, who disregard legality in order to reap the benefits of cheap, untaxed workers. A leveling of the playing field will lead to an influx of legal employees, allowing more small businesses to flourish, especially in sectors where domestic laborers are reluctant to work.

Most significantly, 2013 will bring about sweeping changes in the US health care system. Currently, the health care system foists heavy costs to small businesses such as fixed administrative rates, broker fees and adverse selection. These costs for the small business owner average out to be 18% more per worker than larger companies with the identical insurance policy. These inconvenient expenses are often passed down to the firm’s employees in the form of lower wages. This levy also hinders the company’s budget for research, development, and investments.

Because of these higher health care costs, small businesses are far less likely to offer healthcare options. In fact, between 50 and 80 percent of these companies offer healthcare, opposed to 99 percent in businesses with 20 or more employees.

The proposed changes would accommodate small businesses whose average profits fall below a certain threshold by allowing them to choose among a selection of plans that would provide better coverage at lower rates than are available in the market, as it exists today. This would also include a tax credit to alleviate the cost, therefore encouraging more firms to provide healthcare coverage.

The reform would also include the creation of SHOP, the Small Business Health Options Program, an insurance exchange to provide better low-cost options for low-income workers in businesses that do not offer health insurance. This exchange would provide subsidies, dependent upon the individual’s income bracket, to help him or her purchase insurance. Additionally, insurers would not be allowed to screen potential enrollees for pre-existing conditions.

Above all else, the proposed healthcare reform would provide incentives for Americans to pursue new business ventures, thus increasing the pool of workers employed by small businesses across the country. Increased availability of healthcare allows entrepreneurs to take chances because it allows them to forego careers undertaken for security reasons in order to pursue their dreams.

About the Author
Carolyn Sokol writes about small businesses issues such as human resources, HR management software, and HRIS systems. She is a founder of and contributor to, both of which help match businesses to the right HR or payroll service provider for their particular needs. Her background is in marketing and communications, employee education and training, development of policies and procedures and the ongoing delivery of outstanding customer service.