As of April 2018, the national unemployment rate was just 3.9%. A National Federation of Independent Business (NFIB) survey identified finding qualified employees as the single most important problem facing small business owners right now. In this competitive job market, signs in windows can be found up and down Main Street saying “hiring” and “opening available.” So, how can small-to-medium businesses (SMBs) compete with larger companies for talent in the current job market? What can SMBs do to fill their openings and get work done?
Here are three ideas:
As a result of the Tax Cuts and Jobs Act lowering the corporate tax rate to 21%, many large employers have been able to offer cash bonuses, increase employee compensation, and offer an expanded menu of benefits to their staff. SMBs, which are largely pass-through entities, find themselves at a tax disadvantage, which makes it difficult to compete with large companies to attract and retain qualified workers. SMB owners pay tax on their share of profits based on graduated individual tax rates up to 37%; they may or may not qualify for a personal tax deduction of 20% of their share of business profits. They likely can’t afford to match what large companies are doing compensation-wise.
SMB employers should consider workplace strategies that don’t involve big outlays to appeal to workers. Consider arrangements that enhance employees’ work-life balance and boost employee loyalty without busting the company’s budget, such as:
SMBs may also want to revise requirements for some positions within the company. Perhaps you don’t need someone with years of experience or an advanced degree and are willing to engage someone who you think can handle the position with less experience or education.
Expanding your business often means adding more employees to make it happen. If you’re falling short in finding the talent you need to grow, here are some options:
You may be able to favorably impact your bottom line by taking advantage of tax incentives for hiring certain people to fill open positions. For example, the Work Opportunity Tax Credit (WOTC) rewards employers for hiring someone from any of the following categories:
If you hire anyone from one of these targeted categories, be sure to note this requirement. You must first request certification by filing IRS Form 8850 with your state workforce agency within 28 days after the eligible worker begins work.
Additionally, offering certain types of benefits to employees, such as health insurance or a qualified retirement plan, can cut your out-of-pocket costs by claiming tax credits. Examples: