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TheStreet Open House

New ADPA® Study Reveals Primary Concerns Of Midsized Business Owners

Stock quotes in this article: ADP

ROSELAND, N.J., Nov. 1, 2013 /PRNewswire/ -- The cost of health coverage and other employee benefits, the Affordable Care Act (ACA), and the level and volume of government regulations are cited as the top three concerns of midsized business owners and executives, according to a new study by the ADP Research Institute ®, a specialized research group within ADP®, a leading global provider of  Human Capital Management (HCM) solutions.

(Photo: http://photos.prnewswire.com/prnh/20131101/NY07484-INFO-a )(Photo: http://photos.prnewswire.com/prnh/20131101/NY07484-INFO-b )(Photo:  http://photos.prnewswire.com/prnh/20131101/NY07484-INFO-c )(Photo: http://photos.prnewswire.com/prnh/20131101/NY07484-INFO-d )(Photo:  http://photos.prnewswire.com/prnh/20131101/NY07484-INFO-e )

In its second year, ADP's study, " Top Concerns and Challenges of Midsized Business Leaders in 2013," examines the concerns, perceptions, challenges and plans of more than 1,000 business owners and executives at U.S. midsized companies, categorized as those with 50-999 employees.

Topping the list of midsized business challenges in 2013 is the cost of health coverage and benefits (70%), made even more complex by employer requirements associated with ACA regulations.  Two-thirds of midsized business owners say that the cost of providing employer-sponsored medical health insurance to employees is a barrier to achieving business goals.

ACA legislation rates second among business owners' concerns (59%).  The study reveals that as ACA regulations loom, there is a stark disconnect between executives' perceived ability to comply with the regulations and having a thorough understanding of the legislation and its implications on the organization.  In fact, 70% of midsized company executives believe that their firms will be in "complete compliance" with ACA, while 66% of HR decision-makers are not confident they understand ACA, and nine out of 10 are not confident that their employees understand the impact of ACA on their benefits and benefit choices. Even more interesting is the double-digit increase year over year of ACA as a ranked concern – a 16% increase from 2012.

The third most pressing business concern is the level and volume of government regulations (54%), as issues related to compliance and management of employee records are often more burdensome for midsized businesses.  While the vast majority of respondents (83%) are confident that they are compliant with payroll tax laws and regulations, nearly one-third of all respondents report unintended expenses as a result of noncompliance in the past 12 months, pointing to a potential "compliance overconfidence" among executives.  Furthermore, this overconfidence is costing businesses – of those fined or penalized, midsized firms report an average of six fines or penalties per year.  These are costs businesses can ill afford in today's economic environment.  Interestingly, organizations processing payroll in-house received almost twice as many fines or penalties as those that outsource processing to a third-party firm.

"As we assess this year's top concerns among midsized business owners, it is clear that health care is at the forefront – whether it is the cost of benefits, understanding ACA or having mechanisms in place to ensure compliance – business owners continue to struggle with human capital management challenges," said Regina Lee, Division President, ADP.  "The Affordable Care Act has added greater complexity to the health care issue, making it critical that business owners understand and effectively manage human capital needs."

As midsized business owners manage more complex issues in an age of digitalization and globalization, ADP's study found that a large percentage of midsized business owners are putting themselves at risk of costly security breaches, natural disasters and noncompliance.  Consider that a majority of midsized business owners surveyed (57%) still rely on paper-based records for storing and managing employee records, and nearly six in 10 have felt a financial impact of inaccurate data.  Further, 20% of midsized business owners and executives said their company has been impacted by some kind of natural disaster in the past two years.  And with 13% of midsized businesses reporting operations outside of the United States, the risk midsized businesses face regarding the security and accessibility of their employee records is increasingly critical to business operations.   

These business concerns play a role in midsized business owners' economic outlook for the coming year, which the ADP study also assessed.  In fact, this year's study reveals a gap between perception and reality as business owners struggle to anticipate economic performance.  When surveyed in 2012, only 15% of business owners expressed confidence in 2013's economic outlook.  However, when surveyed this year on last year's performance, 61% judged that the economy had improved in the previous 12 months

While their overall outlook on the economy remains weak, respondents may be better adapting to economic realities that in the past have impacted their ability to meet business objectives.  Compared to 2012, there are significant declines in the number of respondents who expressed concern about economic issues including fuel costs, cash flow, supplies and credit availability.

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