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CAREER CORNER
Access to benefits at small businesses might be declining [by Michael Kinsman] As a small-business owner, Barry Dorrity knows that he has to watch every penny closely.
That’s one of the reasons the operator of the
pay an average of $7.40 per hour in benefits
worker builds skills and gains experience, he
Genesis Mold tool and die shop in San Diego
to their employees, or equivalent to about
or she comes to expect some sort of pension.
keeps his overhead low with a small staff.
29 percent of their compensation costs. It also reports that access to benefits such as
But few companies can offer defined-benefit
Currently, only Dorrity and his son are em-
health insurance, sick pay, vacation pay and
plans, which pay workers a fixed monthly
ployed at the machine shop.
pensions is more restricted at small busi-
amount upon retirement. So when small
nesses. “If you’re a small business, you have to do
businesses do offer pension plans, they are usually defined-contribution plans, or 401(k)
that,” Dorrity says. “You have to learn to cut
“There are signs that access to some of
plans that offer an employer match if work-
corners, or you’ll go out of business. I can’t
these benefits is declining,” the SBA report
ers set aside their own money in the plan.
really afford to have employees.”
warns. “While there is little evidence that the share of workers with access to paid leave
Not only does this typically cost small
The cost of employee benefits and the where-
benefits has changed significantly, health
employers more, it also requires that the
withal to offer them are sizable problems
insurance is not as available as it was prior
individual workers manage their own invest-
for all small businesses, according to a new
to the 2001 recession.”
ments.
survey by the Small Business Administration. In 1999, 67.9 percent of workers in private
“The nice thing about a 401(k) or something
That study laments that small businesses
companies with more than 1,000 employees
like that is that it is portable,” Shaw said.
find themselves at a competitive disadvan-
had access to health insurance, compared
“But it is costly and requires more effort on
tage with larger companies that can offer
with 54.2 percent for companies that em-
the part of the worker.”
broader benefits packages for less cost per
ployed 25 to 99 workers, and 32.9 percent for
employee.
companies with fewer than 10 workers, the
The benefits dilemma is vexing for all
SBA reported.
companies. They need to find the right mix
And because economists continue to predict
of benefits to attract and retain the workers
a shortage of workers in the second half of
Three years later, the percentage of workers
this decade, the disadvantage is sure to grow
in large companies with access was down to
more important for small businesses.
64.3 percent, while companies that employed
Yet, Dorrity says, the smallest companies
25 to 99 workers covered 50.4 percent, and
struggle to provide even a basic benefit such
“Small businesses compete for the same
companies with fewer than 10 workers cov-
as health insurance.
labor pool that large and medium-sized
ered 31.5 percent.
businesses compete for,” said Michael Shaw,
they need. No one wants to overspend.
“Guys I know who have offered benefits to
assistant state director of the National
“Every four years, we survey our members
their workers for years are starting to find
Federation of Independent Businesses, a lob-
about benefits,” the NFIB’s Shaw said. “For
out that they just can’t afford them anymore,”
bying group for small business.
20 years, the cost of health care benefits has
he said. “That tells me I’m not the only one
been at the top of the list of their concerns.
that feels this.”
“More than two-thirds of all jobs are created
More importantly, it’s becoming increasingly
by small business. It’s not a healthy situation
important to them.”
when they can’t afford to offer the benefits they need to compete.”
Small companies also wrestle with the cost
The SBA study reports that U.S. business
of retirement plans. Shaw says that as a
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