Small Business Employees Returning to Work – But with Fewer Hours and Lower Pay

Small business employees are returning to work.

But there’s a caveat.

They’re coming back with fewer hours and less pay for now. Why is that happening? Will it change?

Small Business Employees Return to Work – Fewer Hours, Less Pay

What’s the source of this information? Well, it’s Gusto, which is a benefits and payroll provider for more than 100,000 small businesses nationwide.

“The information is new platform data – not a survey or poll,” said Sallie Sangiorgio, communications for Gusto. “The data shows a growing gap.”

“For the second straight month, small businesses are bringing on more staff – but at reduced pay and fewer hours,” she added. “This new data comes as many small businesses find themselves running low on relief funds – or stretching them as far as they can to make ends meet.”

What Are the Key Findings?

Headcount upswing continues: The total headcount grew 2.4 percent in June compared to the previous month. The headcount growth was driven by new hires, which accounted for 82% of all workers hired in June.

Back to work, but less money: The number of salaried workers that have had a wage cut of 10% or more increased by 80%. Hour and pay rate reductions were 33 and 27%, respectively. Furloughs accounted for 25% of reduced wages.

More employees are quitting: In June 3.4% of employees left their companies voluntarily. This was a 32% increase from May.

Delving Deeper into the Gusto Numbers

We asked Gusto Data Scientist Sarah Gustafson to take us deeper into the data and explain what the numbers mean. Sarah was kind enough to take time for a Q and A session to answer some questions for Small Business Trends.

Here’s what we learned.

SBT: As the headcount grows, are the employees new hires or returnees?

Gustafson: The hiring rate in June ‘20 (7.5%) was very similar to May ‘20 (7.3%). New hires made up more of the hiring percentage than rehires in June, though rehires are at a higher rate than we saw prior to when COVID took hold.

SBT: Do you think this is happening as employers strive to keep everyone happy? By that I mean, instead of bringing back 3 full time employees they are bringing back 10 employees but restricting hours.

Gustafson: Some of Gusto’s data might be reflecting employer’s desire to help out their employees (bring more people back, but with compromise).Case-in-point, at The Pioneer Collective, two Washington-based coworking spaces, owner Christopher Hoyt made the decision to cut employee hours instead of hourly wages in order to maintain morale among his workforce.

In his view, wage reductions would feel, to his employees, like a demotion based on performance, whereas reduced hours would feel more like what they really were—a decision based on the state of the business.

Gusto’s data also suggests small businesses are running at reduced capacity due to redacted demand, so they want to ensure hours worked are appropriate for what needs to be done.

SBT: It’s no surprise that the hardest hit industries are tourism and accommodations. Do you think employees in those industries account for the increase in the “quitting” numbers?

Gustafson: For starters, the industries that were hardest hit by COVID (e.g. tourism, accommodations, restaurants, retail, etc) generally tend to have higher employee turnover and higher employee quit-rates than desk-based professions.

In general, “quitting” rates are an indicator that employees feel confident that if they quit their current job, they can find a new job elsewhere. Gusto saw a steep decline in the “quit rate” in April and May during lockdowns, but this rate is beginning to increase to pre-COVID levels across the board.

Gusto has been seeing a slightly steeper increase in the voluntary terminations (quit rate) for industries that were hardest hit (accommodations, arts & entertainment, food & beverage, retail, salon & spa, sports & recreation, and tourism) than other industries (e.g. technology, legal, healthcare, etc) in recent weeks.

This could be for a couple of reasons:

It could possibly be because workers in these industries are actively changing jobs or industries more frequently in this COVID landscape than before. For instance, a restaurant employee who is anticipating future rolling lockdowns and decides that a different job might have more security. Another example would be a restaurant worker who works for a restaurant that hasn’t yet reopened, so they decide to jump to a restaurant that has opened already.

Additionally, it is summertime, which means a portion of the uptick in Gusto’s data involuntary terminations could be due to seasonal hiring patterns (e.g. college students who were working on campus leave for the summer for another job, hourly employees switching jobs for tourist seasons, etc).

SBT: According to the data, companies having the highest growth include sports and recreation, food and beverage, transportation. I would have thought those were tied into tourism and accommodations.

Gustafson: During necessary shelter-in-place orders between March and May, these industries (e.g. restaurants, accommodations, etc) terminated or furloughed their workers at historic levels. In order to get going again, they need to rehire those employees or hire new employees—which is driving the growth Gusto’s data is showing.

For more information, go to www.gusto.com, and find the full June 2020 data report.

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