Firms with fewer than 20 employees spent $6,975 per employee complying with federal regulations in 2000. That's 56 percent more than the amount spent by companies with 500 employees or more, says a new report by the SBA's Office of Advocacy.
"This cost differential is not brought on by any inefficiency in the ways they operate," says Thomas Hopkins, dean of Rochester Institute of Technology's College of Business in Rochester, New York, and co-author of the report. "It's just the hard facts of economies of scale."
The biggest differences come with environmental regulation and tax compliance. Outsourcing payroll can lower the cost of tax compliance, says Hopkins, but it doesn't buy you the efficiencies corporations get with in-house financial systems.
Rather than work around the regulations, Hopkins suggests lobbying Congress through trade associations or the SBA's Office of Advocacy. Says Hopkins. "Make sure the word gets through to the decision-makers in Congress and at the [regulatory] agencies that the problem is a real one," he says.
With 56 percent more cash spent per employee at stake, it's worth a letter.
Just before Christmas, small-business groups joined big businesses to help defeat a Congressional provision that would have expanded existing law, forcing group health plans to treat mental health coverage the same as medical coverage in companies with more than 50 employees. The legislation, promoted by Sens. Paul Wellstone (D-MN) and Pete Domenici (R-NM), would have forced group health plans to charge patients the same copayment for visits to general physicians and therapists, among other provisions.
Passage would have benefited employees, but business groups saw it as an intrusion that would have removed cost controls such as annual limits on the number of visits to a therapist. "It's another government mandate at a time when we're already experiencing health-care inflation," says Kate Sullivan, health-care policy director for the U.S. Chamber of Commerce.
Although plans for companies with fewer than 50 employees would not have been affected, National Small Business United president Todd McCracken also opposed the bill's passage. As the bill passed the Senate but not the House of Representatives, he expects another attempt to expand the regulations in 2002.
A call to your congressperson's office should determine where he or she stands on the issue. A check of your insurance coverage will let you know whether you'll be affected.
Business writer Chris Sandlund writes out of Cold Spring, New York.
(202) 293-8830, www.nsbu.org
Rochester Institute of Technology
(716) 475-7042, www.cob.rit.edu
U.S. Chamber of Commerce