For the third consecutive year, the National Small Business Compliance Pulse Survey revealed that small business employers continue to grapple with complex employment laws and their impact on business. In particular, participants indicated uncertainty about their ability to handle investigations or legal actions related to these laws. And new this year, the survey also identified growing concern about legally hiring or firing employees, along with the sensitive issue of harassment in the workplace.
Sponsored by ComplyRight, the survey targeted owners, CEOs and other professionals responsible for HR and administrative tasks at 300 small businesses (five to 100 employees) across the U.S. The results shed light on how small businesses are navigating a rapidly changing labor law environment — one that involves a measurable increase in state and local employment-related legislation, an immigration crackdown that has affected hiring and employment practices, and a growing threat of legal claims due to heightened awareness and action around harassment.
Among the key findings, the survey revealed that only about one in four businesses is “very confident” in their full awareness of employment laws and regulations at the federal (23%), state (26%) and city/county (29%) levels. Specifically, there was a jump from 2018 to 2019 in participants expressing a high level of concern about “legally hiring or firing employees,” with one out of five employers highlighting “new limitations on what you can ask a job candidate” as their top HR concern.
Further still, the survey identified that the proportion of small businesses with a “high” or “moderate” level of concern about the potential for employee lawsuits increased significantly during the past year (from 30% to 47%). Barely half (48%) of small businesses are “very confident” they are well-prepared to handle investigations or legal actions related to labor law compliance.
There’s a possible explanation for the diminished confidence with employment law awareness and preparedness, particularly when it comes to hiring and firing. Under the current administration, deregulation at the federal level has led to a rise in legislative activity at the state and local levels (such as bans on asking about criminal history and salary history when hiring) — a trend that may be contributing to these concerns.
How do small businesses keep abreast of changing employment laws and related posting requirements? While about half (54%) of participants consider companies that provide HR products and services to be “useful” in this regard, far more of them (78%) rely on colleagues and friends to keep them informed of changes in employment law. About two-thirds (68%) say they also depend on written notifications from federal and state agencies (a curious response, as most government agencies don’t provide this communication).
It would seem that a primary obstacle to complying with labor laws (and, in turn, to feeling confident) may be the heavy reliance on non-expert resources for information about these laws.
The survey also set out to capture how small businesses manage employee-related administration – the day-to-day tasks stemming from applicable employment laws. There was a fairly even split between approaches: 31% informal/manual processes, 31% formal/manual processes using standardized business forms and 38% more sophisticated processes.
However, those using a modern HR system are substantially more likely to be “very confident” about their awareness of employment laws/regulations. In fact, more than 50% of small businesses who use a modern HR system are “very confident” in their awareness of employment laws and regulations vs. 20%-34% among those using other approaches to manage HR tasks. This appears to be a clear argument for exploring and switching to emerging online HR solutions.
A new area of exploration with the 2019 annual survey was employer attitudes and behaviors related to workplace harassment – a topic that has dominated the headlines in recent years. One in five (20%) small business employers report an increased level of concern about harassment in their workplaces, a number that more than doubles (to 41%) for employers with 20+ employees.
One in five small business employers report an increased level of concern about harassment in their workplaces, which doubles among employers with 20+ employees.
To address these concerns, at least three-quarters of small business employers proactively address the issue using a combination of strategies, including a zero-tolerance anti-harassment policy (79%) and ensuring employees know how to report harassment (76%). Yet, anti-harassment training is not as prevalent among these employers: Only 59% conduct training and awareness programs for employees, and 60% provide similar training for managers and supervisors. This is concerning, as regular harassment training is considered a critical component and a “best practice” in harassment prevention.
The National Small Business Compliance Pulse Survey yielded interesting findings and possible takeaways regarding the ever-changing landscape of employment laws and trends. Certainly, the lack of confidence and preparedness underscores the importance of keeping current with changing laws, turning to reliable sources for support and taking the proper steps to protect your business from legal risk.
Download the full Executive Summary to learn more about the dominant attitudes, pain points and responses of small businesses.
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