Daily Management Review

Trump's labor market initiatives are hitting American small business


09/08/2017


Companies should always be aware of changes made to labor legislation. However, cost of these changes has increased dramatically when Trump came to power, and American small businesses was the first to suffer from it.



Michael Vadon
Michael Vadon
Kronos Workforce Institute recently conducted a survey of more than 800 leaders of various American companies. More than half believe that every normative change costs an organization of $ 100,000 on average. More than two thirds say that compliance with regulations and rules became more expensive procedure last year, and 74% said that compliance with rules is more expensive than ten years ago.

Under the current administration, 64% of respondents expect that complying with labor standards will be a more difficult task, and only 14% expect less difficulties in this process. These costs can become an obstacle to the growth of companies and will be a burden in the process of dismissal of workers. In addition, it will create additional stress for HR specialists who are forced to react to the changing situation.

The study also showed that half of the enterprises state that they are not given enough time to prepare for changes in labor legislation. Preparation of changes can take from 60 to 90 days, then they are adopted at the legislative level, and organizations have to immediately implement new standards. Half of the interviewed business leaders said they need 120 to 150 days to prepare for changes adopted at the legislative level.

Currently, more than thirty bills have been adopted at the legislative level, and most of them are focused specifically on labor standards. Most of these new laws abolish rules of the Obama administration period, and, despite everything, companies are forced to incur certain costs. Although these laws are meant to save companies money at the expense of deregulation, in fact, the opposite happens. The cost of regulatory changes covers a wide range of activities, including consultations with the legal counsel, training of specialists in personnel and wages and informing about changes.

And if employers have to take the time to react in time to the changes, they have less time to communicate with customers and work to increase profits.

There have been several key changes over the past few months. First, the White House has just announced that it will repeal the ruling that companies must report compensation to employees on the basis of race, gender and ethnicity.

Secondly, Trump cancelled a rule that allowed states to create a pension savings plan for private sector employees. Thirdly, he signed a bill that repeals the law, according to which employers must register injuries in the workplace.

Finally, he ruled out that government contractors should disclose previous violations of labor law.

All these changes in the legislation can turn into a serious financial burden for companies that simply cannot cope. More than half of the respondents report that they have witnessed how their colleagues try to bypass the rules from time to time. In this case, companies can be fined, having to pay a certain amount over the initial expenses. Only larger companies have HR departments big enough to quickly cope with the changes introduced.

And if large enterprises have enough reserves to deal with changes in the regulatory system, then small businesses are actually suffering. Since their overheads are mainly allocated to labor, they have to make tough decisions about compliance with rules and operating costs. The Small Business Administration study found that small firms spend 80% or more per employee on compliance with changes compared to large enterprises. In many cases, the general director himself must react to new strategies and make changes throughout the organization, rather than focusing on the growth of his company.

President Trump is often unpredictable, so it is almost impossible to predict what the next changes in labor policy will be.

source: wsj.com






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