Prior to the COVID-19 outbreak, a shortage of talent was regularly the top-cited complaint by small business owners in the National Federation of Independent Business’s monthly sentiment survey. With the unemployment rate in America having surged as a result of the economic fallout from the coronavirus and related containment measures, it is easy to assume that small businesses are finally having a better time filling job vacancies, but this simply is not the case. Indeed, during the early part of the crisis surveyed owners were more concerned about sales and cash flow than the supply of labor, but this was short-lived, and as evidenced by the June NFIB poll quality of labor has already returned to being the biggest challenge currently facing small businesses (tied only with taxes last month due to concerns about the rapidly approaching November elections).
Moreover, roughly one in three surveyed owners in June said that they had job openings they were unable to fill, which a majority attributed to “few or no” qualified applicants. More small businesses last month naturally responded to this environment by announcing plans to boost worker compensation, but to be most effective such efforts should target not just wages but also benefits because the latter encourages continued work. Further, a Millennium Trust Company survey found that 88 percent of small business employees said they give a lot of weight to retirement benefits when considering whether to accept a job offer, and younger respondents were by far the most likely talent group to say that they look closely at the retirement savings options offered by prospective employers. It is also worth noting that in the post-pandemic economy benefits could become much more critical if the work from home (WFH) shift continues to gain momentum. This is actually great news for small businesses since the flashy offices and other on-site luxuries that many large corporations often use to attract talent could become less important to job seekers who would be predominately working remotely.
Many smaller firms, though, may not be ready to excel in this new environment because the MTC survey also found that nearly half (45 percent) of owners said they have never taken any time to research the retirement programs that could be offered to their workers. As for the small employers who at least looked into providing a retirement benefit, 22 percent still cited a lack of understanding about the available options as a major obstacle in the way of adoption, and almost nine in ten business owners said they were concerned about the potential cost hurdle. Such responses agree with an earlier study by The Pew Charitable Trusts, which found that many surveyed small employers would like to offer a variety of retirement savings options to their workers but feel that they face numerous barriers to doing so. Thirty-seven percent of owners, for instance, said that offering a retirement plan is likely too expensive to set up, and 22 percent cited a lack of organizational resources as another hurdle. Fortunately there are tools available that can help such small businesses stay competitive with their benefits offerings.
For example, multiple employer plans (MEPs) allow two or more employers to participate in employee benefit plans that are maintained as a single plan. This pooling of plan assets can lead to a significant reduction in the barriers to entry (costs) associated with offering a high quality defined contribution plan, and lower administrative burdens and reduced fiduciary responsibilities are possible as well. More than a quarter (26 percent) of the business owners in a Transamerica survey that expressed doubts about being able to sponsor a 401(k) or similar plan encouragingly said that they would consider joining a multiple employer plan offered by a vendor who handles many of the fiduciary and administrative duties at a reasonable cost. More information on the advantages of MEPs can be found here, and additional options will become available over the next two years via the new pooled employer plan (PEP) and group of plans (GoP) structures established by the Setting Every Community Up for Retirement Enhancement (SECURE) Act.
Sources: U.S. DoL, NFIB, MTC, Pew Research