According to recent data provided by the Organisation for Economic Co-operation and Development, SMEs (small or medium enterprises) account for over 95% of businesses and 60% to as much as 70% of new and concurrent job creation around the globe. Small and medium sized businesses have proven to be agile, and able to adapt quickly to consumer service and product preferences. They are run on a lean business model that tightly controls costs and have been proven to weather economic changes and be strong performers in recessionary and pre-recession economies.
In spite of the rapid growth of the small and medium sized business (SME) sector worldwide, business owners still face a variety of challenges when it comes to recruitment and retention of the employee’s they need to help their business grow. Our global recruiters work with SME’s as well as corporate clients and share the top five challenges that small/medium sized businesses face, when resourcing new staff.
1. Corporations Can Offer Better Employee Programs, Perks and Benefits
By and large, the average career professional sees more job security and opportunity in a larger business or corporate environment. After all, a large company is presumed to have more financial resources, and the opportunity for a newly hired candidate to advance into one of many possible roles and department areas.
Larger organizations also tend to provide perks and benefits that are very desirable to skilled workers, such as generous vacation time allotments, profit sharing or bonuses, and health and wellness benefits. Administered through group plans that are discounted by having a large team of employees, it is easier for corporations to provide the incentives that add-value to a career opportunity. The cost of scale for small businesses makes these benefits more expensive, and more difficult to provide.
In the currently tight labor and candidate driven market, corporations are also struggling to find suitable talent. With the number of skilled professionals that are planning retirement within the next 5-7 years, the shift upward through departments means more businesses are hiring now, and legacy planning for the leadership and skills they will lose, when senior workers retire. Many companies now offer signing bonuses that can be as generous as $5,000 to $10,000 or more; something that is not usually an affordable option for an SME.
2. The ‘Warm Body’ Syndrome
Small and medium sized businesses can be under increased budgetary pressure (particularly during high-growth phases) that prohibit them from hiring the experienced talent that they need to grow. Nothing is more frustrating than hosting a hiring event for one or more roles, and to find the perfect candidates at a salary rate that is beyond what the business can allocate for salary.
To work around this, many businesses hire less experienced personnel, which of course, come with entry-level salaries that are much more affordable. This can work, if the business is prepared to invest extensively in training and development of quality new hires. An internship program is one way to bring fresh new ideas and technological experience to your business, but the soft skills and experiential level will not be there.
With entry level staff, some organizations also experience a problem with work ethic. Sometimes (although this is not always the case) a lower salary can also mean less integrity and a lower performance orientation. Lower paid employees may not stay, and retention can be a significant issue that fails to compensate the employer for any free training they engage in, to develop entry level staff.
Furthermore, younger workers will seek entry-level jobs specifically for this training; acquire it, and then actively pursue higher paying jobs. So, while the ‘warm body syndrome’ or having someone with low experience in a role may seem cost effective in the beginning, over the long run it can cost businesses a great deal in productivity, retention and rehiring expenses.
3. Geographic Location
Small businesses are often remiss to hire remote workers. The model of the average small and medium sized business is to work closely with the team, in one onsite location. However, most SMEs are located where commercial space is more affordable, and that can mean an area that is less accessible to pedestrian or public transit workers.
Geographic location can be a significantly limiting factor for businesses. Slowly but surely, many SMEs are starting to invest in intranet technologies that facilitate remote or work from home professionals that they can add to their team (as salaried or contract workers). This presents a tremendous opportunity, as it widens the selection of professionals that are committed to working remotely from a home office.
Prospective employees who may be former freelance professionals, who have a large variety of technology, creative, time management and productivity skills that can be an asset to a growing small or medium sized business team. Any professional can work remotely and adhere to business hours for small or medium sized business employer, and many studies share that remote workers are often more dedicated and productive.
4. Changing Regulations Regarding Contract Workers
In some recent cases in the United States, the status of a contract worker has been disputed and clarified. For instance, in California a case between Dynamex Operations West v. Superior Court, the California Supreme Court applied a 3-factor test to ascertain whether contract workers were misclassified employees of the business.
Many small and medium sized businesses rely on independent service providers, freelancers and contractors to avoid some of the costs of employing full-time staff. It has been a competitive advantage for some time, but in America, the laws are rapidly evolving to challenge the status of a contract worker, and whether he or she should have the same entitlements as a full-time salaried employee. This includes provisions for paid vacation time, health benefits, pension contributions and other expenses that have not been previously shouldered by SMEs.
When you work with our team of international recruiters at reesmarx, we build a persona of your business culture and accurate profile of the needs of the role we are helping to fulfill. We search our extensive database of skilled professionals, and research other possible candidates to provide our clients with the best and most suitable applicants.
Start today by scheduling a meeting with our team at reesmarx.