Over One-Third of Small Businesses Lost Employees in a Year, & Most See Employees Come & Go, New JPMorgan Chase Institute Dat...
January 18 2017 - 06:00AM
Business Wire
New Report Shares Insights from Analysis of 65
million US Small Business Transactions
The JPMorgan Chase Institute released its newest report today on
the financial health of small businesses and employment challenges
they continue to face. The first-of-its-kind report reveals new
information about small business employment growth and the
volatility small business owners experience when managing payroll
expenses.
“The Ups and Downs of Small Business Employment” reports that
most small businesses experience substantial volatility in payroll
expenses. Moreover, more than two-thirds (68 percent) of small
employer businesses either reduced their number of employees or
added less than the equivalent of one full-time employee in a
calendar year. The typical small business saw payroll expenses grow
by 8.5 percent per year. These payroll expenses were significant
for small employer businesses, with the typical owner paying
$18,700 in payroll expenses a month, or 18 percent of all outflows
for their business. Making their financial situation even more
difficult to manage, small businesses with employees had only 18
cash buffer days, compared to 27 cash buffer days for small
businesses overall.
“Payroll is a significant expense for employer small businesses
and managing it has an impact on not only the health of their
business, but also the people they employ,” said Diana Farrell,
President and CEO, JPMorgan Chase Institute. “With increased focus
on the positive impact small businesses can have on the economy,
it’s critical to understand what these new insights mean for job
creation and policies that aim to support both small businesses and
their employees.”
The Institute analyzed 65 million anonymized transactions from
45,260 small business customer accounts over the nine non-holiday
months from February 2015 to October 2015. This unique dataset
provides a granular view of payroll growth and volatility and their
impact on employment at the individual business level.
Key Findings: The Ups and Downs of Small Business
Employment
- Finding One: Payroll for most small
employer businesses grew by less than the equivalent of one
full-time employee in a calendar year, with median annualized
payroll growth of 8.5 percent.
- 36% of small employer businesses
decreased their payroll expenditures.
- 32% of small employer businesses
increased their payroll expenditures by less than the equivalent of
one full-time employee.
- 31% of small employer businesses
increased their payroll expenditures by more than the equivalent of
a single full-time employee.
- Finding Two: Payroll expenses were a
material outflow for employer small businesses, which held fewer
cash buffer days than nonemployer small businesses.
- Payroll expenses varied from a median
of $11,700 per month in the Restaurant industry to a median of
$36,600 per month in the High-Tech Services industry.
- Payroll as a percentage of outflows
varies substantially across industries—payroll only comprised 10
percent of the outflows of a typical wholesaler or retailer, but 27
percent of the outflows of a typical High-Tech Services firm.
- The typical employer small business had
only 18 cash buffer days, compared to 27 cash buffer days for the
typical small business overall.
- Finding Three: Most employer small
businesses experienced unstable payroll and employment volatility
including job gains and losses and other spikes and dips in
payroll.
- 38% of small businesses experienced
payroll changes that are likely more stable and small – perhaps
taking on a part-time employee or changes in hours worked by
employee(s).
- 62% of small businesses experienced
changes in payroll that are less stable: large spikes and/or dips
in payroll (possibly paying employee bonuses or catching up on a
missed payroll expense) and sustained gains and/or losses in
full-time employees that increase payroll volatility.
- Finding Four: The typical small
employer business experienced substantial volatility in payroll
outflows, and volatility was highest for younger small employer
businesses.
- While most firms had payroll volatility
that tended to reflect large payroll gains and losses that were
greater than the equivalent of paying one full-time employee, their
overall net payroll growth rate was still less than the equivalent
of one full-time employee.
- Payroll volatility was substantially
higher for firms less than two years old than for firms greater
than two years old.
- Finding Five: Small employer
businesses with more volatile payroll patterns tended to have fewer
cash buffer days.
- Small businesses with dips, combined
gains and losses, and both spikes and dips had the fewest cash
buffer days.
- Small employers with spikes were one
exception to this rule, which may reflect businesses that pay
bonuses or commissions with growing revenues.
Read more about the impact of payroll expenses on the financial
stability of US small businesses here.
The JPMorgan Chase Institute is a global think tank dedicated to
delivering data-rich analyses and expert insights for the public
good. Its aim is to help decision makers – policymakers,
businesses, and nonprofit leaders – appreciate the scale,
granularity, diversity, and interconnectedness of the global
economic system and use better facts, timely data and thoughtful
analysis to make smarter decisions to advance global prosperity.
Drawing on JPMorgan Chase & Co.’s unique proprietary data,
expertise, and market access, the Institute develops analyses and
insights on the inner workings of the global economy, frames
critical problems, and convenes stakeholders and leading thinkers.
For more information visit: jpmorganchaseinstitute.com.
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version on businesswire.com: http://www.businesswire.com/news/home/20170118005065/en/
Media:JPMorgan Chase & Co.Nicole Kennedy,
215-864-5732nicole.kennedy@chase.com
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