Small businesses are hiring across the country – but they’re struggling to retain employees. A new study conducted by ADP, found that small companies, ranging from 1 to 49 employees in size, added 95,000 jobs in September, while large businesses of 500+ employees lost 83,000 jobs in the same time span.
“We are seeing a steepening decline in jobs this month,” said Nela Richardson, chief economist at ADP. “Additionally, we are seeing a steady decline in wages in the past 12 months. Despite the growth in available positions, the study found that many small businesses struggle to compete with larger companies who can often pay their employees more.
According to the study, the most commonly cited challenge in retaining employees was the “demand for higher salaries.” Salaries of employees at small businesses have seen very little growth over the past year.
The annual salaries for workers at small businesses ranging from 1 to 49 employees saw increases of only 5% to 5.9% since last year – the lowest growth rate compared to medium and large sized companies.
Most small companies don’t plan on increasing wages any time soon, either. According to the study, only 18% of small businesses plan to increase wages in the next three months, compared to 50% of mid-sized businesses and 58% of large businesses.
So what can small companies do to increase their retainment? Tina Wang, vice president of HR at ADP says, “Culture and career development are two areas where small businesses can differentiate themselves to drive retainment.
“Culture can be a strong selling point for employees to stick with a small business. Employees want to work for companies they can connect with. For example, something like a community effort the small business is passionate about and that employees feel equally connected to. When a small business and its employees share the same values and same sense of purpose, everyone begins to row in the same direction, and this can lead to amazing culture, chemistry, and growth. Other things like offering flexibility, checking in with consistent communication, celebrating wins as a team, and championing employee mental health all help define the positive culture of a small business and can make employees want to stay.”
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The study found that 27% of small businesses said their biggest priority over the next three to six months is to “improve the employee experience.” Similarly, 25% of small businesses said they will focus on “upskilling current employees.” Finally, 24% of small businesses said they will focus on “expanding employee benefits.”