SMB leaders feeling optimistic, despite struggling with new rules and regulations in 2020

HR leaders at small businesses adjusted remote work plans throughout the year and added benefits to help employees cope.

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The State of HR 2021 Report found that small- and medium-sized business owners found complying with federal, state, and local laws to be an even bigger challenge than usual in 2020.

Image: ThinkHR

Small businesses scrambled to respond to the demands of the pandemic in 2020, but quickly adapted and continued to adjust remote work strategies throughout the year. This is one finding from a new survey from ThinkHR, "The State of HR 2021 Report." The survey also found that many companies added a remote work stipend for employees and found other ways to customize benefits to fit the needs of their employees. ThinkHR provides a SaaS platform and consulting services to help small- and mid-sized companies manage human resources tasks.  

The remote workforce changed throughout the year at the small businesses represented in the survey. At the start of the year, 92% said less than half of the workforce was remote. That number dropped to 55% in April but went back up to 71% in October. The survey also found that 85% of employers don't anticipate increasing the remote workforce this year. 

Nathan Christensen, ThinkHR chief executive officer, said that this reflects the nature of many SMBs that rely on foot traffic or provide in-person services and often have a more people-centric culture.

Compliance got more complicated in 2020 due to new regulations driven by the COVID-19 pandemic. This includes new requirements set out by the federal Families First Coronavirus Relief Act and changes in state paid leave laws, as well as new local health and safety regulations. 

Christensen said that compliance is always a challenge for his clients but these requirements got more complicated in 2020.

"HR has gotten more challenging for SMBs and basic compliance with state, local, and federal laws are the top three pain points," he said.

When a relevant law changes, ThinkHR sends a notice to clients that the employee handbook needs to be updated. 

"We show them the language that we suggest using and they can accept it, adjust it to fit their company, or reject," Christensen said.

Seventy-nine percent of survey respondents said their business outlook was very or somewhat optimistic in June and that number was 73% in October. 

The pandemic has been hard on SMBs, but it also has allowed these companies to lean on a unique strength, he said. 

"Small businesses have a people-centric culture and people work at those companies because they want to build relationships with the owner and their co-workers," he said. "Because of the intimacy they have with their employees, they can create benefits and personalized experiences for people."

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He shared the story of a Mellow Mushroom restaurant near Atlanta that had to furlough employees at the start of the pandemic. The owners acted quickly to help people who had lost their income.

"Each week, the restaurant sent out benefit boxes to workers that included supplies for making pizza as well as toilet paper and other things that they needed," he said.  

The survey found that 59% of employers added to or expanded benefits in 2020. The most common new benefit was covering remote work set-up costs. 

In addition to responding to the new conditions of the pandemic, employers addressed the call for racial justice in 2020. Christensen said that SMBs responded to the social pressure as well as the moral and business imperatives related to diversity, inclusion, and equity. 

"Companies are doing this not only as a way to support the goodness of the community, but also make sure their business attracts the people they want," he said.

Christensen said that companies need to update handbooks to make sure basic protections against discrimination are in place and to add a mechanism to report harrassing behavior such as an anonymous reporting line or other communications channel.

The outlook for HR departments at SMBs

Overall, survey respondents said that HR departments were "maintaining" over the course of 2020, with 51% choosing this description in May and 50% saying the same in October. In May, 25% described HR as "scrambling," but that number dropped to 10% by October. 

The survey also asked about HR technology, meaning software that supports HR-specific tasks. Ninety-two percent of survey respondents said that they use these platforms to reduce administrative burden and ensure compliance. Employers used online training, employee handbooks, and workplace health and safety programs to meet legal requirements. Payroll was the most common software used by survey respondents followed by online compliance training, learning management systems, and handbook and policy management. 

Most employers updated their handbooks at least once a year, according to the survey, but 35% said they completed this task infrequently or didn't track updates.

The survey included 2,225 people in the US and was conducted in October and November 2020. Sixty-seven percent of respondents worked in a HR role and 64% worked at companies with under 200 employees. Industries represented included non-profits, manufacturing, and healthcare.

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