Average U.S. Business Employs Fewer People Than Just 10 Years Ago, DOL Report Says

Small Business Payroll Size TrendsThe number of workers on the average U.S. business establishment’s employee payroll has fallen, and not just because of the recent recession and the slow pace of recovery from it. In fact, the mean number of employees at each U.S. business establishment – defined as a single physical business location, regardless of its affiliation with a larger company – has fallen steadily for more than a decade, according to a study published by the Department of Labor (DOL) in March.

The DOL report, which was authored by two economists in its employment statistics bureau, put the number of employees per establishment at 15.7 in 2010, up slightly from the year before but significantly down from a high of 17.5 in 2000. The figure had risen steadily during the tech boom of the 1990s, but began declining after the tech bubble burst and has trended steadily downward ever since.

Very small business payrolls – those with five or fewer employees on them – began to represent an increasing share of the total U.S. workforce throughout the 2000s at both the establishment level and the firm level (the total number of workers at all of a company’s physical locations combined).

Since the trend toward smaller staff sizes began during a period of economic expansion in the early 2000s, well before the late-2000s recession, the authors of the DOL study suspected that there are forces contributing to a downsizing trend that have nothing to do with the overall health of the U.S. economy.

Some of the possible explanations for decreasing establishment size would be:

  • the need for fewer workers in both support and production roles because of advances in computer and machine technology
  • the possibility that today’s telecom and information technology enable a single firm to establish more geographic locations to serve customers while still keeping each of those establishments minimally staffed
  • the increasingly available option to farm out support functions via moves such as outsourcing payroll, human resources functions, accounting and business tax management
  • a greater number of employees working remotely from home
  • increased use of independent contractors

Another obvious possibility would be that as the American economy changes, proportionally more companies are in industries that require fewer workers on average. To test this idea, the DOL economists broke down the average establishment size by industry over the years. While the size of establishments has been shrinking in “old economy” industries such as manufacturing and utilities, the same trend also showed up in fields such as information, finance and technical or scientific services.

However, the authors of the study came to the surprising conclusion that the factor that correlates most strongly to the size of a business establishment is its age. Newer companies, perhaps because of some of the reasons mentioned above, typically start out smaller and add employees more slowly than they used to, across all industries.

Newly established businesses in the 1990s started up with an average of 7.6 workers. By 2001, the average was down to 6.8 workers, and by 2011 it had fallen to just 4.7 workers. As some older firms inevitably go out of business, newer companies employing fewer workers on average make up a larger and larger share of the economy.

A New York Times business writer commenting on the DOL report suggested that if each new company is employing  fewer workers on average, only the creation of more startups can keep the number of available jobs on pace with the size of the American workforce.

For small businesses in search of an expert payroll specialist to provide accurate and timely payroll services, Padgett Payroll Services is the one to call. Padgett offers affordable state-of-the-art payroll administration and payroll management tools.  Call now at 877-244-5842 to learn more about how Padgett Payroll Services can help your enterprise succeed in today’s competitive economy.

Outsourcing Payroll? Hiring a Reliable, Experienced Payroll Processor is Vital

Payroll OutsourcingMore and more small businesses are finding out that hiring an outside payroll processing company is an efficient and cost-effective way to take care of employee payroll duties. Indeed, handing off the routine tasks of payroll management to a contract payroll processor frees up valuable time for the owner of small business and his or her limited workforce to concentrate on things more directly related to the survival and success of the company.

It’s important to keep in mind, though, that using a third-party payroll manager does not legally shift the blame for any payroll mistakes that might occur. Employers are ultimately responsible for correctly compensating employees and complying with all federal, state and local labor laws as well as regulations pertaining to withholding and remittance of taxes.

Payroll errors are unnecessary headaches that cost time and can possibly hurt employee morale. And, as we discussed previously in this blog, the potential fines that could result are not trivial, and could be particularly crippling to a small business. Improper withholding or late remittance of income taxes, or of deductions for Social Security, Medicare or unemployment insurance, can be severely penalized, especially for repeat offenses. The law even provides for jail time as a punishment for flagrant and willful violations.

Employers are also responsible for following wage garnishment orders for employees who owe child support, back taxes, criminal restitution and student loans. Failing to comply with a garnishment order from a court or duly authorized government agency can result in fines, and the employer may be held liable for the employee’s financial obligation itself.

The point is not that you should be afraid to turn over your payroll functions to someone else – the advantages of doing so are too great. But obviously, you should be very selective when choosing your payroll processing company. Look for an experienced payroll firm with a solid reputation and a proven track record of accuracy, reliability, responsiveness and experience.

For the greatest assurance that your company’s payroll administration is being done with the precision it deserves, hire an experienced payroll specialist from Padgett Payroll Services. Padgett has been helping small businesses since 1966, and today we perform payroll services for thousands of companies across the U.S. Call Padgett Payroll Services today at 877-244-5842 and get the convenience of payroll outsourcing along with the peace of mind that Padgett’s knowledge and professionalism bring.

Excessive Absenteeism Can Hobble Your Business, But Beware the Pitfalls of ‘Presenteeism,’ Too

PresenteeismAbsenteeism due to illness obviously affects a company’s productivity and level of service to its customers, especially for a small business that has a small number of employees on the payroll to do the work in the first place. But employees who come into work when they’re sick may not be doing their employers much good, either. So-called “presenteeism” – employees dragging themselves into the workplace regardless of their health – can be just as harmful to the bottom line as absenteeism, perhaps even more so.

But because the effects of presenteeism can be much harder to see and measure than those of absenteeism, some business owners and managers may not realize the extent of the negative consequences that it can have. Anyone who has worked in human resources or payroll administration long enough has probably come across records of veteran employees who’ve racked up hundreds of hours of unused sick leave over their years of service. Some of these workers may be the type who proclaim that they’ve never been sick a day in their lives, but chances are most of them were under the weather from time to time and felt motivated to come into work anyway. Such people may be understandably hailed for their loyalty to the company, but there’s a good chance that their rigidly consistent attendance has had a downside, too – the spread of colds and flu to other employees.

The irony, of course, is that one infectious worker’s presenteeism can cause absenteeism among multiple co-workers who catch their bugs and who don’t have the same physical constitution or psychological motivation to keep working during an illness. And, the worker who does soldier on in spite of being sick is normally nowhere his or her normal level of productivity anyway – from the employer’s point of view, the employee might as well be home in bed.

The word presenteeism was coined in the 1980s with a somewhat different, more positive meaning, but by the mid-90s it came to mean, in a nutshell, the habit of showing up for work sick. Still, in the last two decades that it has been a business concept, presenteeism has not been studied anywhere nearly as extensively as absenteeism has. The main reason for the lack of attention to presenteeism is probably that its effects are more difficult to measure.

Still, some business researchers have attempted to study the bottom-line effects of presenteeism. A 2004 study by Cornell University and the health information company Medstat concluded that presenteeism might be responsible for as much as 60 percent of illness-related productivity losses among U.S. companies. That same year, a Harvard University study of Lockheed-Martin employees put the annual cost of presenteeism to that company at $34 million. In 2005, one business website estimated that the total cost of presenteeism to the U.S. economy was $150-250 billion and growing.

In one of the most recent pieces of research on presenteeism, conducted last year by a business management professor at Concordia University in Montreal, the 444 workers questioned for the study averaged 1.8 days off due to illness for a six-month period. For the same period, however, the same group of workers had come into work sick for an average of three days.

When employees fall ill, advanced payroll services like employee self-service payroll can be a convenient way for them to check sick leave accruals and log their time off. Padgett Payroll Services offers online payroll and other services that will increase the efficiency of your business. Call the professionals at Padgett Payroll Services today at 877-244-5842 to learn find out more about the advantages of making us your company’s payroll specialist.