Employee Turnover Low for Small Businesses

Nearly half of all small businesses, 49 percent, experienced no employee turnover during the past 12 months, according to a National Federation of Independent Business Small-Business Poll on unemployment compensation.

Quitting a job is the most frequent reason employees leave a small business, the study determined. Yet 59 percent of small employers had no workers voluntarily depart during the period. Another 13 percent experienced only one willing departure. Over those months, 73 percent, of the small firms fired no one, and 87 percent were not forced to lay anyone off for economic reasons.

Among those who did fire one or more workers, 22 percent did so in response to unsafe work practices; 2 percent took the action to deal with some form of harassment.

Twenty-two percent of all small firms—41 percent of those that had an employee leave for any reason—were the object of unemployment claims. A total of 53 percent said they did not think the last claim filed against them was justified and 51 percent took formal action to oppose the claim. A total of 78 percent, presented their challenges in writing and about 10 percent making the effort to appear, or sending a designate, to a hearing. Five percent brought in lawyers to represent them.

Slightly more than half said they challenged an unemployment claim when a worker was fired for cause. The second most common reason for bringing a challenge (36 percent), was that an employee voluntarily quit. Seventy percent of employers did not challenge claims they felt were justified.

Small-business owners are woefully uninformed about the Federal Unemployment Tax Act payments they are required to make, according to the poll. Two-thirds could not or would not estimate the amount of FUTA taxes they pay per employee each year, and about half admitted that they had no general idea about how those levies were calculated.

They do, however, take action that either directly or indirectly minimizes their experience-based FUTA payments. For example, 59 percent of small employers annually verified their unemployment compensation accounts to ensure accuracy; 36 percent got resignation letters from workers who left voluntarily; 59 percent examined each claim whether challenged or not; and 67 percent kept records of events or circumstances concerning employee termination.

Still, more than half, 56 percent, have one or more policies in writing.

Trade-union representation in small businesses is minimal; just 3 percent have any unionized employees. And while it does not appear that a concerted effort to unionize such employees is currently underway, it should be noted that organized labor is seeking to change the basic certification rules that could, if enacted, have a significant impact on the nation’s small firms.

The study concluded that while small employers do hold the idea that their actions matter in unemployment compensation outcomes and take some steps to reduce their liability, they could benefit by broader and more frequent action.