SmallBizResource Blog -- Economy

Recession Won't Freeze Small-Business Hiring

Posted by Gayle Kesten Friday, Mar 27, 2009, 05:06 PM ET

Just as consumer confidence influences the performance of the market, employer confidence influences their business' response to it.

That's the basis (and secondary headline) for a new white paper (PDF) that looks at how small, high-performing companies are responding to the recession. The overall conclusion: the higher the level of market optimism, the lower the volume of company layoffs and other cutbacks.

The paper, published by San Leandro, Calif.-based TriNet, an HR outsourcing company that specializes in small businesses, surveyed 430 TriNet clients, which have an average business size of 20 employees, an average employee wage in the $100K ballpark, and the majority (37%) of which hail from technology companies. According to the paper's author, TriNet VP of products Jack Midgely, the findings "shine a light on how small employers are evolving their human capital management practices in a down economy, and how employer practices are directly influenced by whether the small business owner is considered bullish or bearish."

Midgely's findings:

• The glass is half empty and half full: A little more than half (54%) of respondents expect market conditions to worsen this year vs. last. TriNet calls them "economic pessimists/bears." The rest, labeled as "economic optimists/bulls," include those who either expect conditions to improve or, at least, remain the same. (Clearly more fodder for "flat is the new up.")

• Cuts accelerate, but have their limits: Layoffs since October 2008 exceeding 6% of the workforce at bears are more than double the layoffs at bulls (37% vs. 17%). That said, almost all bulls and bears offer COBRA and outplacement help.

• Severance is better from the bears than the bulls: Perhaps you can spin this as a silver lining, but if a bear lays you off, you have a better chance at receiving a severance package. According to TriNet's survey, 69% of pessimistic bears offer some form of severance payment, while 57% of optimistic bulls do.

• 2009 hiring increases will be carried by the optimists: Although one-third of surveyed companies have reduced staff and another one-quarter plans to do so by June, more bulls (28%) plan to hire for new positions or fill old ones than bears (4%).

• Cost controls spread, but employee health plans remain safe for now: Cost-cutting at bear companies -- either already done or under consideration -- is more pronounced than at bull companies in terms of reductions in salary (60% vs. 43%, incentives (57% vs. 38%), and healthcare plan contributions (30% vs. 19%).

Economy