There is good news and bad news for the small-to-medium-sized businesses we represent. The first half of 2019 is now history. The “good news” is that for our client profile, which includes businesses ranging from 10 to 150 employees, it’s been a stellar year featuring a strong, growing economy and a high rate of job growth. The “bad news” is that is has become more and more challenging to recruit high-caliber talent, owing to historically low unemployment.
This creates a defensive posture for our clients. Through this December, our clients will be motivated to hold fast to the economic gains of the first half of 2019, while also holding their expenses and costs down. So, how about we examine some of the more important issues that small-to-medium-sized businesses will face the rest of the year.
Oppressive government regulations choke small business.
Small businesses have to remain perpetually vigilant to oppose increasing governmental regulations wherever possible. The U.S. Chamber of Commerce Foundation finds that overly onerous regulations strangle business growth, draining small businesses of funds:
“Federal regulations … are growing and have a disproportionate impact on small business and free enterprise in America. Federal regulations alone are estimated to cost the American economy as much as $1.9 trillion a year in direct costs, lost productivity, and higher prices. The costs to smaller businesses with 50 employees or fewer are nearly 20% higher than the average for all firms.”
Despite the Trump Administration’ much publicized cut of regulations in 2018, federal agencies Said Richard Armstrong, President of Armstrong the Law Firm, “The bottom line for the businesses we represent is that the less time and money they have to spend on regulatory compliance, the more they can contribute to the local, state, and national economy and workforce. They can also bankroll money for the leaner years, and we can legally assist them in doing that.”
Retaining Talent in a Full Employment Economy
In a U.S. labor market that touts historically low unemployment, our business clients are fighting with competitors to recruit the most qualified candidates and talent. In such a labor market, it’s becoming critically important to invest in current employees to reduce temptations to shop their talents elsewhere. It costs far less to retain an employee than to recruit, hire and train a new one. Turnover causes lost productivity and overworks other employees.
“So,” you ask, “What can be done to hold onto my key personnel?”
As your company lawyers, we advise considering key employee contracts that both offer incentives to motivate your employees, and the sense of gravitas that comes with a written agreement. Sit down with your financial guy and your attorneys and figure out what you can really afford. An employee stock option plan? Bonuses of non-voting stock for employees that stay with you 3-5 years or beyond? What about good old-fashioned cash bonuses for sales employees, or severance pay for executives? There are misconceptions floating around that entering such contracts binds you to an employee and ties your hands to terminate the employee if you need to. This need not be the case, if the employment agreement is properly drafted. And, even if you are reluctant to enter such agreements, there are oft-neglected documents known as employee policy manuals. Perhaps you have never done one because you don’t know where to start. This is in a business attorney’s wheelhouse, or should be. A properly drafted policy manual can provide a clear motivational path for key employees without the formality of a contract. It also gives you consistent, objectively applied criteria by which to measure and reward performance of key employees.