Small businesses employ almost half of all workers in the United States and have been responsible for much of the post-2008 economic recovery through their hiring efforts.
Over the past year, hiring activity has been on an upward trend for small businesses, with plans to add workers hitting the highest level since 1999.
SCORE’s latest Megaphone of Main Street Small Business Jobs Report surveyed more than 1, 700 small business owners to rate their hiring experiences of employees and contractors.
Difficulty filling positions
More than 50 percent of small businesses said it was very or somewhat difficult to fill open positions, with about 55 percent of micro businesses, or those with 0 to 4 employees, in agreement.
Twenty-seven percent of openings went unfilled in the past six months, which was consistent across different small business sizes and locations. Business owners cited problems finding skilled, qualified applicants as a primary reason for not filling positions.
Offering competitive wages and salaries is another common challenge, along with a lack of healthcare and other employee benefits. Hiring takes time, too — about 18 percent of all small businesses said it was too time-consuming to hire qualified workers - they’ll just do the job themselves.
Small businesses use job-posting sites, recommendations from other business owners, networking groups and online platforms drive hiring efforts, but by far, recommendations from other workers proved most fruitful in finding new employees.
Our infographic, “The Megaphone of Main Street: Small Business and Employment, ” identifies more hiring challenges faced by small businesses.
The gig economy and small business
The area of largest hiring growth among those surveyed was in one-time project or gig workers at 37 percent.
Eighteen percent of businesses reported replacing employees of any type with contractors over the past six months.
Of those business owners, 50.8 percent reported choosing a contractor or temporary worker for the benefit of their specialized expertise. Forty-one percent reported only having seasonal or temporary needs; 35.1 percent said they preferred hiring a contractor over needing ongoing cash reserves for payroll. The costs and complexities of offering employee benefits like healthcare and retirement plans also drove the decision to hire a contractor.
Forty-seven percent of solopreneurs reported hiring other people for part-time help running their businesses. Their firms had an average of 3.2 workers, including the owner.
Contractors are most likely to be called in to complete technical, accounting, bookkeeping and marketing tasks. Other important roles for contractors include manufacturing, sales, business planning and logistics.
When respondents noted their reasons for hiring an employee over a contractor, consistency of work and commitment to the company were primary. Having the same person in a position rather than a rotating contractor was another major factor, as was the ability to direct work tasks and schedule work hours.
Some business owners commented that their concerns about correctly following IRS regulations— and dealing with related paperwork — guided their decisions whether to hire a contractor or an employee.
For more insight on the growth of the gig economy, see our infographic “The Megaphone of Main Street: The Gig Economy.”
How does your experience hiring qualified employees and contractors fit in with our findings? Meet with a SCORE mentor about how to ensure you find the best talent for your growing small business.