Small Business Hiring Took a Hit in August

Many small businesses have likely had to change their approaches to a number of different aspects of their day-to-day operations in the last few years, and the most recent data suggests these may not all be positive.

Hiring in August was down slightly in all regions of the country on a monthly basis, as well as from the previous year, according to the latest Small Business Scorecard from SurePayroll. Nationwide, small business hiring was down 0.2 percent from July and 1.8 percent from August 2012, led primarily by companies in the Midwest and Northeast, both of which had monthly drops of 0.3 percent, and suffered falls of 3.2 and 4.1 percent, respectively, year-over-year.

However, it’s important to note that the average amount of money paid to workers already employed at small businesses rose marginally on both bases, the report said. Pay per check was up 0.2 percent from July and 0.3 percent from a year ago, and the reasons why were more of a mixed bag. For instance, the South saw pay rise 0.4 percent from 30 days earlier, while it spiked 3 percent in the Midwest on an annual basis. Only the Northeast suffered declines in both instances, with pay slipping 0.1 percent and 1.9 percent during the two respective periods.

The number of small business owners nationwide who say they’re optimistic slipped somewhat on a quarterly basis, falling to 72 percent from 75 percent just three months earlier, but is still well above levels observed earlier this year and in late 2012, the report said. Through the end of February just 59 percent of those polled said they had rosy outlooks about the future of their companies, more or less in line with the three in five who responded similarly in November 2012.

Why shift away from traditional hiring?
The drop in new jobs may largely be due to the ways in which small business owners are filling roles they may have a need for, the report said. Today, 22 percent of entrepreneurs said they hired contractors rather than take on another full-time worker, as 6.74 percent of all workers at these companies are now paid using 1099 tax forms. This represents a fairly new trend in small business hiring practices, but owners seem to be more willing to take advantage of the potential diminished costs that such workers provide as the economy’s growth remains somewhat uncertain, and slightly more than half say that it’s easier to hire someone to do one job than create an entire new position.

“The results of our SurePayroll Small Business Scorecard survey show an emerging trend for small businesses, as nearly one in five said they are more likely to hire an independent contractor than a full-time employee,” the company noted. “Small business owners said the ability to take advantage of specialized skills in areas like marketing, IT and administrative work while reducing the costs of taxes and benefits, has made independent contractors an attractive option.”

Another 36 percent of owners polled said that they hired contractors rather than new full-time workers because they wanted to keep their tax- and benefit-related expenses as limited as possible, the report said. Slightly less than one in four also said that they’re worried about the implications of the Affordable Care Act’s mandate about insuring workers when companies employ 50 or more people full-time.

Owners who are looking to reduce their companies’ operating costs may want to consider ways in which they can reduce their small business insurance premiums. Finding more affordable workers’ compensation or general liability insurance, for example, can be a major help to any enterprise’s financial flexibility.