The times… they are a ’changing.
On January 28, 2019 the Congressional Budget Office (CBO) – a nonpartisan agency for the U.S. Congress – published their report on The Budget and Economic Outlook: 2019-2029. There are some not-so-subtle hints of an economic slowdown illustrated by these lowlights extracted from the report*:
- Revenues and outlays are both projected to rise in relation to GDP, but the gap between them is projected to persist, resulting in large deficits and rising debt.
- U.S. debt equals 93% of GDP by 2029 and about 150% of GDP by 2049. Even at its highest point ever, just after World War II, debt was far less than that: 106% of GDP.
- Federal debt held by the public is projected to reach $16.6 trillion at the end of 2019. Relative to the size of the economy, that amount—at 78% of GDP—would be nearly twice its average over the past 50 years.
- If debt rose to the amounts that CBO projects, there would be troubling consequences including the likelihood of a fiscal crisis in the United States.
To add to the noise, the National Association of Realtors recently reported that pending home sales slid 2.2% in December of 2018 to a reading of 99, and were 9.8% lower compared to a year ago. This marks the 12th straight month of annual declines and is the lowest reading since April 2014.
How can you minimize risk and insulate yourself as an employer if a slowdown is coming?
Historically low interest rates and a diminished appetite for economic intervention restrict the government’s ability to react to the inevitable decline in the Nation’s economy. This downturn will undoubtedly have an impact on the size of your workforce and will likely force a slowdown in hiring. The problem is that you don’t know when or how bad it will be. Here’s where you need operating flexibility.
The fixed costs associated with employee wages are usually the largest line item in a company’s budget. In a period of uncertainty, your company strategy should be to make a larger percentage of your workforce variable so you can ebb and flow your hiring needs to meet the demands of your company.
This can be done in a number of ways:
- Use a staffing firm to fill your seats at a premium of up to 40%.
- Engage with new hires as W-2s, with full benefits, and payroll them through your payrolling partner at about half the cost and with greater flexibility.
- Engage experts in your market, on an as-needed basis, as Independent Contractors (ICs). But do so safely to ensure you avoid risk of misclassification.
- Restructure your talent model so that non-essential personnel are managed through your payroll provider as contingent workers.
What are the benefits of these options?
- Allows the ‘try-before-you-buy approach.’ You know it’s expensive to make a bad hire, so this option gives you and the worker a trial period to make sure that you’re the right fit for each other before making a full-time hire.
- Promotes a healthy culture. Avoid layoffs because you’ve not over hired before or during an unpredictable economic downturn. This model supports a positive morale for your employees and helps you avoid the regulatory procedures such as the Worker Adjustment and Retraining Notification Act (WARN Act), which offers protection to workers, their families and communities by requiring employers to provide a 60-day notice of covered plant closings and covered mass layoffs.
- Avoid the overhead and costs associated with adding and removing employees from your benefits plans.
- Minimizes your liability with SUTA and FUTA payroll taxes since you’ve avoided layoffs!
It’s not all doom and gloom
But the bottom line is, with an uncertain economic future in the United States, you can’t let this stop you from engaging top talent, and you can’t let it drive top talent away. Finding a partner to engage your valued workers as W-2s and provide them with exceptional support and benefits, helps to protect your employer brand reputation. It also protects your workforce and keeps them happy and productive, while insulating you from employer compliance risks and liabilities.
TalentWave can help
TalentWave has solutions to help you manage a variable workforce at a discounted rate to help get you started. Learn more!
*(See full CBO report and summary at https://www.cbo.gov/publication/54943 and https://www.cbo.gov/system/files/2019-01/54918-Outlook-VisualSummary.pdf).