Recruiting Qualified Employees Tops List Of Challenges Facing Small Businesses

From the pandemic to supply chain snarls to record inflation, the past few years have reminded managers that running a business is not for the faint of heart.

“Finding qualified employees remains the overwhelming challenge facing all small business clients but has lessened from September,” according to the latest small business outlook report from the ADP Research Institute. “The economy continues to be a far greater challenge for smaller clients, whereas employee retention is a much bigger issue for larger clients. All clients find employee absenteeism more of a challenge than previously, especially larger clients.”

Businesses ranked their top concerns this year:

  • Finding qualified employees, 45%
  • Economy, 35%
  • Wage inflation, 29%
  • Increased input or production costs, 24%
  • Supply chain disruption, 22%
  • Cash flow, 18%
  • Reduced customers or sales, 18%
  • Taxes, 14%
  • Trouble retaining employees, 14%
  • Employee productivity, 13%
  • Shipping or production delays, 12%
  • Employee absenteeism, 12%
  • Work-life balance with kids at home, 10%

The research looked at how employers are addressing their biggest challenges.

Attracting and retaining employees. Special bonuses and increased pay are pivotal for attracting and retaining employees.Offering flexible work hours and schedules, special bonuses and increased pay, continue to be the most important tactics to attract and retain employees in smaller companies of one to 49 employees.

Larger companies with 50 to 499 employees cite retirement plans and special bonuses or increased pay as most important for attracting and retaining employees. All companies place far greater importance on career development and training to help attract employees.

Employee offerings. Larger companies offer twice as many benefits to their employees as smaller companies do. Although company size influences what is offered to employees, retirement plans top the list regardless of size.

The study identified gaps between what is offered (or not offered) and what is perceived as important to offer to attract and retain employees. These are the benefits that companies often fail to offer despite believing they should:

  • Smaller companies — career development training and lower out-of-pocket medical costs.
  • Larger companies — Lower out-of-pocket medical costs and increased PTO and sick time.

Labor costs and wages. Although uncertainty about the economy is a key factor in pausing hiring, higher labor costs are playing a much greater role in the decision. Focusing on retention is the primary means of dealing with increased labor costs. Wages are likely to remain the same for the next three months.


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