The financial health of U.S. small businesses is a tale of two economies.
Our survey of more than 300 businesses with less than 250 employees in December 2020 reveals that as the pandemic steamrolled over the economy last year, federal pandemic relief funding offered much-needed support. Yet as small businesses prepared for 2021, some were planning to rehire workers or add new employees, while just as many were downsizing hours, planning furloughs or layoffs.
Remarkably consistent throughout all these businesses, considering the financial strain and economic uncertainty they have been weathering, is that benefits planning has remained stable. Three-quarters of employers are keeping their benefits packages intact or adding more benefits in 2021.
As they continue to protect the financial and physical health of their employees this year, small businesses should lean on their carrier and broker partnerships for increased efficiency and expertise.
Small businesses are struggling, but as the COVID-19 pandemic revealed in so many other areas of our society in 2020, there are wildly different realities being experienced across the U.S.
Job creation tanked in the spring of 2020, rebounded slightly over the summer, and stayed relatively flat throughout the fall for small businesses of all sizes.
On the other hand, employment increased and even thrived in certain industries, including professional and business services.
Our survey reveals this story of two economic realities in hiring plans for small businesses. Over a third of small businesses plan to hire new employees in 2021, yet this trend is driven primarily by larger companies with 100-249 employees (49%), with only 26% planning new hires in the 1-99 employee range. On the other hand, many are planning on downsizing their employee base with either furloughs (22%), permanent layoffs (10%), or reducing salaries, hours or shifts (29%).
Question: Thinking about your organization’s business outlook for 2021, which of the following actions is your organization likely to take in response to expected changes in workforce needs? Respondents could choose more than one answer.
As precarious as this picture is, it could have been much worse without the early round of federal funding provided under the Coronavirus Aid, Relief, and Economic Security (CARES) Act last year.
Small businesses on “Main Street” had a rocky start tapping into the CARES Act federal funds, while large and well-connected firms were quickly approved. Still, about half of small employers we surveyed received federal relief funding.
The late December expansion of the CARES ACT and offered small businesses another welcome round of financial relief for 2021.
Hover over over graph for details
Of the small businesses offering critical illness policies to employees this year, 39% are including an infectious disease rider. This offers a lump sum benefit for hospitalization for treatment of COVID-19 and other infectious diseases — for example, the Colonial Life rider offers more than a dozen other infectious diseases, including antibiotic-resistant bacteria, Legionnaires’ disease, meningitis, Lyme disease and sepsis.
Olivia Jones
Territory Sales Manager for
Washington and Alaska, Colonial Life
While employers look to control benefit spending, they should be cautious so they can stay competitive, as employees still consider benefits very important.
According to the 2020 Workplace Wellness Survey, conducted by the Employee Benefit Research Institute (EBRI) and Greenwald & Associates:
Voluntary benefits are a viable option for small businesses that help retain talented employees without adding costs to their bottom line. Given the heightened awareness around health and security, employers can use voluntary benefits to cover gaps that most health insurance coverage doesn’t cover.
When looking for ways to save money, small businesses also don’t need to cut voluntary benefits. Instead, they can reward employees by adding benefits.
Steven Vermette
Vice President, Colonial Life
Technology and digital processes have gained significant traction with small businesses in both benefits enrollment (45%) and benefits administration (50%). However, many small businesses are still dependent on manual processes, such as paper and spreadsheets for enrollment (41%) and for benefits administration (34%).
Nearly one in five businesses rely on their agent/broker to handle their benefits enrollment and benefits administration, which frequently means a manual process in getting the information to them. Smaller businesses (1-99) were more likely than the larger segment (100-249) to rely on agents/brokers for enrollment and benefits administration.
For businesses using manual processes for benefits enrollment, paper is the leading method (25%) followed by spreadsheets (16%). For benefits administration, spreadsheets is the more prevalent manual process (18%) with paper-based (16%) just behind.
Question: What is the primary approach your organization uses to manage each of the following HR functions?
Despite this reliance on manual processes, two-thirds of employers do not plan to add any new technology/digital capabilities in 2021 for handling any of their HR functions (67%). This is especially evident with the smaller segment, with 71% in the 1-99 range compared to 60% with 100-249 employees.
“When you think about the amount of change that we've all experienced in 2020, we’re all probably at a place where the idea of more change can be incredibly intimidating,” said Katie Johnson, Territory Sales Manager, Colonial Life.
The few who are planning new capabilities most frequently mentioned:
“Staying on top of life event changes create incredible challenges in an environment where you're not at your desk and neither is anyone else in your organization,” said Johnson.
“It’s critical that small businesses find a benefits provider or agency that can help them solve that challenge. There are effective solutions out there that don’t have to cost employers anything at all. And those digital solutions can deliver a great benefit experience and manage the administration component without it being so cumbersome for the HR person.”
This is where high-tech, high-touch benefits providers can provide great value to small businesses. Benefits don’t have to be complicated, particularly during a global health pandemic.
Lean into your provider for the technology, tools, educational services and employee-paid benefits that can simplify HR tasks, so you have more time to focus on your employees.
Many leading benefit providers offer online benefits management capabilities that dramatically cut down HR administration time, with end-to-end digital benefits from onboarding to claims.
Katie Johnson
Territory Sales Manager, Colonial Life
Virtual enrollment technology is another tool that is proving to be effective in today’s world. According to the 2020 Workplace Wellness Study, employees are interested in a more online enrollment experience. The most popular online services include a portal for selecting benefits, decision-making tools and online brochures.
Brokers can connect employers with benefit providers who can provide such enrollment services, and the educational materials that help employees make appropriate benefit decisions.
Source: Source: Employee Benefit Research Institute and Greenwald & Associates, Workplace Wellness Surveys, 2020.
For open enrollment, employees said they most wanted to have an online portal for selecting benefits, online tools to help them make decisions and online brochures.
Finally, brokers and benefit providers can help small businesses by offering affordable benefit options that provide real value for employees, while limiting the costs on employers.
Voluntary benefits such as supplemental health, disability, life insurance and Employee Assistance Programs help provide financial protection when employer-paid group coverage isn’t an option. Employees can still get the coverage they need at affordable rates they wouldn’t be able to find on the individual market. And small businesses can keep a tight rein on additional benefits spending while times are tough.
As Katie Johnson explained: “If your current carrier or broker isn't giving you options that can help you to still give employees access to benefits at little to no cost, then find a new one. Because there are great options out there that can keep your employees protected without any extra cost to your business.”
