Thinking Outside the HR Box in 2020

Transforming your vision into a lucrative small business is empowering yet challenging. Still, this is possible if you know the ins-and-outs of what makes a small business succeed. If you are a small business owner – or plan to become one – you need to familiarize yourself with the most recent trends that challenge small businesses in 2020. The SBA Office of Small Business Advocacy says that success of a small business depends on the right planning, flexibility, and funding. Every year, 1 in 12 businesses close and only 4 out of 100 businesses survive past the 10-year mark. According to a US Bank study, 82% of companies fail because of cash flow problems. This emphasizes the need to regularly analyze cash flow statements to make sure you’re on top of it. However, during the Covid-19 pandemic and resulting economic recession, small businesses need to untangle the web of state and federal legislative stimulus programs that interplay with each other. In this article, we will discuss three critical areas of HR that can help small businesses to think outside the HR box.

1. Access to Capital for small businesses (SMBs) is the life-blood of the U.S. economy. SMBs comprise 99.9% of all businesses in the US. Each month, 545,000 new micro and small businesses are launched, employing more than 47.5% of the private workforce in the US. Access to capital is the keystone to micro and small business survival and, as it turns out, it really does matter who you know. The average SBA loan is $417,314, and the average SBA microloan is $13,000. However, the size of the bank had a direct impact on the size of the loan and amount of capital received. The average SBA loan amount from large national banks was $59,000 and $165,000 from small banks. Generally speaking, small banks lent more money through SBA loan programs than large national banks and provided better service during the Paychex Protection Program (PPP). As we consult our clients on their PPP loan forgiveness, we anticipate the trend to continue and are prepared to advocate for our clients through their forgiveness application and appeals process.

2. Unemployment Insurance is a joint state-federal program that provides cash benefits to eligible workers. Each state administers a separate unemployment insurance program, but all states follow the same guidelines established by federal law. The U.S. Department of Labor's unemployment insurance programs provide unemployment benefits to eligible workers who become unemployed through no fault of their own and meet certain other eligibility requirements. Each state sets its own unemployment insurance benefits eligibility guidelines, but you usually qualify if you:

• Are unemployed through no fault of your own. In most states, this means you have to have separated from your last job due to a lack of available work.
• Meet work and wage requirements. You must meet your state’s requirements for wages earned or time worked during an established period of time referred to as a "base period." (In most states, this is usually the first four out of the last five completed calendar quarters before the time that your claim is filed.)
• Meet any additional state requirements. Find details of your own state’s program.

Throughout the 2020 covid-19 pandemic, state unemployment offices were overwhelmed and inundated with claims from the recently unemployed. Business owners receiving and managing the unemployment claims grew frustrated by the dizzying administrative process that lacked transparency. Millions of Americans in the private-sector were either furloughed, a term typically reserved for the public-sector, or terminated from their jobs. Clients needed to understand how the PPP loan forgiveness rules would apply with regard to furloughed and terminated employees, and they needed guidance on navigating the requirements to ensure their loans would be 100% forgiven. Complicating matters was the Federal Pandemic Unemployment Assistance program that provided unemployed workers an additional $600 per week on top of their state unemployment benefits. In many instances, employees were earning more unemployed than they were on their employer's payroll. Employers with access to HR and financial expertise were able to navigate these treacherous waters, while "Do-It-Yourself" businesses found themselves struggling to stay afloat.

3. Workshare Programs are unemployment benefits schemes that permit participating employers to reduce hours and corresponding wages temporarily for some or all of their employees. The affected employees, in turn, become eligible to collect partial unemployment benefits, enabling them to recoup some of the lost pay. Employers contemplating partial or full layoffs aren’t always aware of the availability of reduced hours or “Short-Time Compensation (STC)” programs as an alternative to layoffs. Commonly referred to by participating states as “Workshare” or “SharedWork”, they should not to be confused with “Job Sharing” arrangements where a job’s duties are split between two employees. The spirit of these programs is to keep employees working while also allowing them to receive partial unemployment benefits for a portion of their reduced hours. The recently enacted CARES Act provides for federal reimbursement to states with existing workshare programs up to a maximum of 26 weeks for each participant. For states without an existing workshare program, the federal government will reimburse one-half of the workshare benefit costs, up to a maximum of 26 weeks for each participant. However, employers considering workshare programs should be mindful of its interaction with and potential impact on federal stimulus programs such as the Paycheck Protection Program (PPP), where loan forgiveness is based on the ability to maintain certain payroll and headcount levels. The administrative burden in maintaining a workshare program, as well as potential risks associated with reducing hours for exempt employees, should also be taken into consideration. Each state operates their workshare program independently, so, while there are commonalities across states, eligibility rules and administrative compliance differ. Without access to experienced HR professionals, small businesses with limited HR resources frequently struggle to adhere to the strict requirements and tracking of workshare programs, especially when they also have a PPP loan.

In conclusion, 2020 will be remembered as a pivotal moment in U.S. small business history. While it is important to be mindful of small business failure statistics, do not let them demoralize you. Starting a small business has inherent risk and, the truth is, you’re bound to face some serious challenges along the way. Thinking outside the box by planning properly, remaining flexible, and maintaining reliable access to capital will likely differentiate your company from the pack and position it for prosperity. Knowing the rules of the game will allow you to make critical personnel management decisions and to leverage state and federal programs to help you survive and thrive as we head into the latter part of the year. While we do not know what is to come, having a team of trusted advisors to help guide the way is imperative.

Jonathan Boehmer is a graduate of The Catholic University of America, B.A. He went on to study law at The Catholic University of America, Columbus School of Law. Jonathan is recognized as one of the early thought-leaders in the HR outsourcing industry having spent his entire career in the HR and Benefits industry. Jonathan also served in the United States Marine Corps and is a veteran of Operation Enduring Freedom and Operation Iraqi Freedom. He currently resides in Boston, MA with his wife Cynthia, and his two children, Sophia and Jack.