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How Will Rising Salary Expectations Affect Small Businesses?

Small businesses look to stay competitive as salary expectations among workers rise

Jose Laurel, director of recruitment services for G&A Patners, shared his thoughts on how the economic rebound has caused increased compensation expectations for employees of small businesses with Catherin Conlan of 

Will salary levels go up in 2016 for small business?

The recession took a toll on businesses of all sizes, and dampened salary levels as well.

But as businesses have rebounded, so have compensation expectations for employees at small businesses, says Jose Laurel, director of recruitment services for G&A Partners, a human resources services provider in Houston.

When it comes to compensation, small businesses are drawing on their own strengths to attract top talent. “Small business salaries have shown a measurable increase for a variety of reasons, including the fact that smaller businesses have more flexibility when it comes to structuring compensation plans,” Laurel says.

The insights below will help your small business as you set 2016 salary levels.

Ongoing pressure in high-demand positions

Small businesses involved in health care are feeling the pressure of recruiting healthcare talent, Laurel says. The aging population and more people being eligible for healthcare coverage have been a factor. Physician assistants, nurses and physical therapists are in high demand, he says.

Katie Bardaro, vice president of data analytics at PayScale, says she’s seen the same 2016 salary trends in tech jobs. “Small businesses that are hiring for tech positions are finding they are dealing with upward wage pressure as they compete with larger companies and tech firms.”

Ripple effects from an increased minimum wage

The debate over an increased minimum wage, while often focused on large employers, affects small businesses as well, experts say.

Small companies that set entry-level wages below $10 will feel pressure to raise wages as more large companies such as Walmart, the Gap, TJX, Ikea and McDonald’s phase in increases in through 2016, says Holly Sklar, CEO of the advocacy group Business for a Fair Minimum Wage.

“The push for higher minimum wage will be very strong in 2016 as efforts to raise the Federal minimum wage continue and more states and cities consider increases through legislation and ballot measures.”

Tighter labor markets will also continue to affect small business salary levels, says Holly Wade, director of research and policy analysis at the National Federation of Independent Business Research Foundation. Small-business owners will need to balance that with cost pressures from regulations such as family and sick leave laws, health insurance requirements and other actions, especially if economic growth remains moderate, she says.

On the positive side, a higher minimum wage, whether your small business employs minimum-wage employees or not, is increased worker buying power. Sklar cites the reason why. “Workers are also customers. Minimum wage increases boost sales at local businesses as workers buy goods and services they could not afford before.”

While small businesses have been worried about weak consumer demand since the recession, 2016 minimum wage increases could provide an important boost to consumer demand and the local economy, says Sklar.

A poll conducted for Small Business Majority by Public Policy Polling points to a favorable view of raising the minimum wage. Sixty percent of small businesses surveyed across the nation support a gradual rise in the federal minimum wage to $12 by 2020, as well as an annual adjustment to keep pace with the cost of living. Almost 60 percent of respondents who pay their employees $12 or less an hour said they support raising the minimum wage to $12 an hour, and 56 percent of small businesses in retail and restaurant industries support the raise.

The small-business advantage

Small businesses are facing pressure from higher salaries as they compete on compensation. But small companies have other options, Bardaro says. Companies that lack the liquidity to support a higher salary can win top candidates by offering other in-demand benefits, such as flexibility and telecommuting, she says. “These are ‘free’ benefits that are highly valued by people filling those roles.”

Attracting top talent is a big issue for Mike Jones, managing partner at Resound Creative, a small marketing agency in Tempe, Arizona. “As our company expands and brings on more employees, I often find we are up against much larger companies who attract talent through higher wages,” he says. Jones uses a comprehensive benefits package (full health insurance, dental, life and retirement plans) along with profit-sharing and flexible schedules to attract top talent.

As 2016 salary trends become clear, small businesses should look to stand out with these benefits and workplace flexibility if they can’t keep up with salary levels.

“While small businesses certainly face limitations, overall they are staying competitive with larger firms and attract the top talent they need to continue to grow,” Laurel says.

This article was originally published on’s HR blog. To view the original article, click here.

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