Nationwide Survey Creates Detailed Picture of Small Business Compensation, including Paid Leave, Overtime and Retirement Benefits

Date: January 21, 2016

Jack Mozloom, 202-406-4450 or 609-462-5610 (cell)

NFIB research indicates that one-size-fits-all labor rules would be highly disruptive for small businesses

Washington, DC (January 21, 2016) – Most small businesses offer paid time off but the vast majority don’t compartmentalize the benefit into vacation days, sick days or family leave.  That’s just one of the findings in a nationwide survey released today by the National Federation of Independent Business (NFIB) which creates a more detailed view of how small businesses compensate their workers.

“Labor issues have percolated up to the top of the policy debates in recent years and it’s important to understand that broadly-written mandates cannot adequately reflect such a wide diversity of practices,” said Holly Wade, NFIB’s Director of Research.

On paid leave, for example, 73 percent of all small firms offered paid time off to their full-time workers.  Among them, 67 percent offer two weeks or more. 

Ninety percent of small firms that offer paid sick leave allow workers to use personal sick days to take care of a child or relative.  Only 27 percent require a doctor’s note.  Roughly eight percent, have a formal policy regarding employees who request time off for a serious illness in the family.  Eighty-six percent handle such requests on a case-by-case basis.

“What we found is that small employers aren’t as regimented in their leave policies as larger firms,” said Wade.  “They know their employees on a more personal level so there’s a lot less formality.”

Wade cautioned that proposals to mandate certain benefits, like paid family leave, could complicate life for small employers and backfire on the workers.

“It’ll require a lot more record keeping, which they’re not doing now, and it will place restrictions on paid time off that don’t exist now in many cases,” she said.  “If you can only give your workers 10 days of paid time off and the government mandates five days of paid sick leave, then your employees have only five days left for vacation.”

Overtime is another form of compensation that differs widely from firm to firm.

The National Labor Relations Board (NLRB) last year effectively doubled the income threshold below which workers qualify for overtime.  But that rule, due to take effect this summer, is likely to have consequences that the regulators didn’t anticipate.

According to the NFIB research, 44 percent of small employers have workers who will be suddenly eligible for overtime pay, which means a 50-percent increase in hourly pay over 40 hours.  Can all of them afford the increase in labor costs?  That’s highly doubtful, according to Wade. 

“Many firms will simply have to restructure,” she said.  “In many cases they’ll have to reclassify salaried positions into hourly positons and that might not be optimal either for the business or the employees.” 

“For a lot of jobs the work hours aren’t predictable,” said Wade.  “If restructuring triggers overtime then your hours and salary might be cut to accommodate for overtime pay, or make room for more part-time positions.”

Roughly 40 percent of small employers offer a retirement plan.  About half of offering employers report that all of their employees participate in the program.

“That tells me that many employers are offering based on their employees’ interest in participating,” said Wade.

In the small business sector, flexibility for owners and employees seems to shape decisions about compensation, according to the NFIB research.

“Compensation is the most important point of negotiation between small business owners and their workers,” said Wade.  “It’s also highly complicated and varied depending on business type, firm size and many other factors.

“Policies that assume that all workers want or need the same benefits, and which assume furthermore that every business can operate under the same broad rules, tend to oversimplify the issues,” she continued.  “They also tend to add more layers of complexity to the job of running a small business, which is already very difficult.”

The NFIB research can be found here:  https://www.nfib.com/foundations/research-center/topics/labor-employees/ 

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