In a constantly changing regulatory environment, small business owners are forced to make difficult choices to keep their doors open. Karen Harned, executive director of the NFIB Small Business Legal Center, covers the most common regulatory obstacles small business owners are facing and provides tips for navigating tough conversations with staff.
The Big Issues
The following factors may force small business owners to make cuts to employees’ jobs, wages, and benefits:
1. Overtime woes
In 2016, the Department of Labor doubled the overtime threshold so that all salaried workers who earn less than $47,476 will be eligible for overtime. To comply, small business owners will have to increase salaries or reclassify workers from salaried to hourly and monitor, limit, or prohibit overtime hours. In November, a federal judge granted a temporary injunction against the rule.
2. Health insurance headaches
Health insurance costs have risen by 50 percent over the last decade. According to NFIB’s 2016 Small Business Problems & Priorities report, only 29 percent of small businesses still offer employer-sponsored health insurance (down from 42 percent in 2004).
3. Paid leave mandates
When paid leave mandates are implemented, small business owners must decide how to make ends meet. The choices often come down to layoffs, cutting hours, freezing wages, or eliminating other benefits, such as 401(k) matching.
Sticky Situations: How to Have Tough Conversations
1. Candor is the best medicine.
Be honest about the business reason for this decision—which in many cases will be that it’s simply not affordable. At the end of the day, Harned says, pay or benefit decrease decisions are made to avoid job cuts, and it’s good for employers to reiterate that.
2. Don’t discriminate.
The change must treat everyone equally and not discriminate against any particular group of employees. For example: Health insurance can’t be offered to only younger employees.
3. Give plenty of notice.
Some states require advance notice for wage changes for nonexempt, hourly employees and the date of discontinuation for health insurance should be announced in time for employees to take advantage of open enrollment, which typically begins Nov. 1.
4. Be proactive
If your business is impacted by an Employment Retirement Income Security Act statute, contact your plan administrator about any legal steps that must be taken to institute a change. Stay organized. Update your employee handbooks and policies to reflect any changes. Share those changes with staff.