Why Small Businesses are Scared to Hire and What Recruiters Can Do

First the good news: the economy is growing and companies are adding jobs.

The bad news? The growth is slower than everyone would like and has slowed since the beginning of the year.

Why?  Well as ADP CFO Jan Siegmund explained in an interview with Fortune Editor-At- Large Geoff Colvin, small businesses in particular are still scared to hire due to a number of economic factors.

"Since the beginning of the year, we believe that potentially the tax rate changes had an impact, anticipation of the healthcare reform may impact hiring decisions as well as the reemergence of payroll taxes," Siegmund said.

Hiring appears to be particularly slow for companies in the 30 to 50 employee range, he said. This is most likely due to the employer mandate of the healthcare reform law known as the Affordable Care Act (ACA) or Obamacare. In 2014, the employer mandate will require employers with 50 or more full time or full time equivalent employees to provide healthcare insurance to those employees. Employers who are close to the 50-employee threshold may choose not to hire to avoid being subject to the employer mandate, Siegmund said. 

This could be bad for recruiters who depend on hiring for their livelihoods.  Or it could create an opportunity for them to position themselves as a strategic partner for their clients.  Simply not hiring to avoid Obamacare is not going to be a good strategy for companies trying to grow. Recruiters can provide a viable solution.  You can provide contractors who are W-2 employees of a contract staffing back-office.  That way, small companies can get the help they need to continue growing without being subject to the employer mandate.  As the employer for the contractors, the back-office assumes all the employment responsibilities, including Obamacare compliance.

To get started, simply let your clients know that you can provide contractors and align yourself with a quality back-office. By providing options to your clients, you can help both them and yourself navigate through this roller coaster economy.

Debbie Fledderjohann is the President of Top Echelon Contracting, Inc.

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