Small Businesses To Tackle Long List Of Challenges In 2023

NEW YORK – As 2023 begins, small businesses will face a mix of old and new challenges. A looming recession, high (but easing) inflation and labor woes are just a few issues that small businesses will have to deal with after 2022. There are also new rules, such as a proposal to change how gig workers are classified and the fact that more states are making it a law that pay must be made public. After three difficult pandemic years, what happens in 2023 will significantly impact whether small businesses across the country can stay afloat.

RECESSION ANGER

In some ways, whether or not the economy is headed for a recession is less important for small businesses than day-to-day operations.

According to Nela Richardson, chief economist for payroll company ADP, small business owners should concentrate on larger issues such as Labor and wages.

“For the most part, the recession is an academic question,” she said. “We won’t know for several months until it happens, and no one on Main Street makes that call. It has nothing to do with hiring and turnover.”

Given the economic uncertainty, small businesses will need to keep costs under control and operations running as efficiently as possible, according to Ray Keating, chief economist for the Small Business & Entrepreneurship Council.

Technology, according to Keating, can help with efficiency, and one way to keep costs low is to cast a wider net in terms of suppliers.

BUSINESS INFLATION

Businesses must keep a tight grip on costs because inflation appears to have peaked last summer but remains high. According to the most recent government data, consumer prices rose 7.1% year on year in November, down from 7.7% in October.

According to experts, inflation is unlikely to return to pre-2020 levels owing to higher wages and low employment. According to the monthly employment report released on Friday, wages increased by 4.6% year on year in December, with the unemployment rate remaining at 3.5%.

“We want unemployment to rise because if it doesn’t, wage growth will slow, and not only is there no evidence of that happening, but wage growth is about to get rocket fuel this time of year when wages rise,” said David Lewis, CEO of HR consulting firm Operations Inc.

He expects inflation to remain in limbo.

“I don’t see inflation falling significantly… but I don’t see it is rising above that 8% level,” he said.

LABOR

Hiring and retaining employees is a constant challenge for small businesses. The situation is especially bleak at the start of the year. Because companies typically give raises or bonuses at the end of the year, many employees use mid-January to mid-April to determine whether they need to change jobs.

“Everything we’re seeing or hearing suggests that companies need to look at increases that are double what they used to do in the last, on average, 15 years to keep up with everyone,” said Lewis of Operations Inc. “Unfortunately, smaller businesses have the fewest resources to contribute.”

Because small businesses need help to keep up with raises at larger corporations, they will need to find new ways to retain employees in 2023.

According to Keating of the Small Business & Entrepreneurship Council, more extensive on-the-job training could be one solution for small businesses in 2023.

“Not that they don’t train them now, but they need to go deeper than they have in the past and train across the board. “That’s one of the solutions to these labor issues,” he said.

THE GIG WORKER RULE PROPOSED

The Labor Department has proposed a rule that would make it easier to classify independent workers as employees, contributing to a long-running debate over whether gig workers such as Uber drivers or Instacart delivery workers are contractors or employees.

According to the Labor Department, the proposal will protect workers and “level the playing field” for businesses that correctly classify their employees, reducing the number of misclassified employees.

Employees are eligible for benefits such as the minimum wage and Social Security. However, critics of the proposed rule argue that gig workers only sometimes want employee status and that the new rule will burden small businesses.

The proposed rule is “much too broad, unwieldy, arbitrary, and confusing,” according to Karen Kerrigan, CEO of the Small Business & Entrepreneurship Council. “If enacted, it will drag countless numbers of independent contractors and freelancing individuals into the misclassified pit,” she added.

The proposal only applies to Labor Department-enforced laws, such as the federal minimum wage. Employers and courts, however, frequently use Labor Department rules as a guideline for larger issues.

The final Labor Department decision is expected this year, likely in the first quarter.

CHANGES IN THE MINIMUM WAGE/STATE REGULATIONS

Finally, small businesses should be aware of upcoming regulatory changes, particularly state regulations, that will take effect in 2023.

In 2023, 27 states will raise their minimum wages. In Michigan, for example, the minimum wage is set to rise from $9.87 to $10.10 per hour. California has set the minimum wage for all employees, regardless of employer size, at $15.50 per hour. This is shifting from $15 for employers with 25 or more employees to $14 for employers with fewer than 25 employees.

Pay transparency legislation is also taking effect. California began requiring employers with 15 or more employees to list salary ranges on job postings on January 1. In New York, a salary transparency bill requiring pay ranges on job postings is set to take effect in September.

Minimum wage and pay transparency laws vary greatly by state, so small businesses should stay current on any local laws changes.

SOURCE – (AP)