Hiring outlook: Small and midsized businesses cautiously optimistic

As America’s small and midsize businesses continue to weather economic uncertainty and rising business costs, many are keeping tight reins on hiring.

Only a quarter of businesses with one to 500 employees surveyed recently by Sage North America have increased or plan to increase the size of their workforce in 2013, and nearly half plan to keep it the same.

The results of the snapshot survey of hiring plans, conducted among 973 executives of small and midsize businesses in the U.S., appear to reflect recent unemployment numbers from the U.S. Bureau of Labor Statistics.

As reported in April, the country’s unemployment rate was little changed at 7.5 percent, with an estimated 11.7 million people unemployed. Employment did increase slightly in professional and business services, food services and drinking places, retail trade, and health care — many of which are small and midsize companies. The survey was conducted by Sage in May 2013, and the margin of error is +/- 3 percent with a confidence level of 95 percent.

According to Sage’s survey, the hiring outlook is best in companies with more than 100 employees, with half planning to increase the size of their workforce this year. A third of companies with 20-99 employees plan to add to their workforce, and just 18 percent of companies with one to 19 employees plan to expand.

Fortunately, layoffs are not in the works for most; less than 10 percent of all small and medium businesses surveyed plan to decrease workforce size in 2013. Moreover, across the board, small and medium businesses that plan to hire will offer permanent positions, with 82 percent looking for full-time help.

This year’s outlook may be only slightly better than last year’s as small and midsize businesses continue to proceed with caution. Among companies that hired in 2012, 43 percent of those with 20-99 employees plan to increase hiring compared to 2012, and 47 percent plan to stay the course. More than 40 percent of companies with fewer than 20 employee plan to add more to their workforce this year than last; 46 percent plan to keep it the same.

The outlook is better in larger companies —more than half of those with 100 or more employees plan to hire more people this year than last, while 30 percent plan to keep hiring levels the same.

While the government’s report showed that manufacturing employment was unchanged in April, nearly a third of small to midsize manufacturing firms surveyed expect to increase the size of their workforce in 2013. About half plan to keep it the same. More than one in three Americans who work in manufacturing work at a small to midsize business.

When respondents who planned to increase the size of their workforce in 2013 were asked about the factors influencing their hiring decisions, more than 83 percent of all businesses surveyed cited a stronger demand for their company’s products and services. About a third said an improved economic outlook helped drive the decision.

The outlook was less favorable for respondents who planned to decrease their workforce size or keep it the same.

Forty percent said demand for their products or services was steady or weakened, and expressed uncertainty about the economy. Health care costs and the Affordable Care Act were cited by more than a third of businesses with more than 100 employees, and nearly a quarter with 20-99. The costs of doing business (other than health care) were an issue for 31 percent of the 20-99 group, and 26 percent of the smallest businesses.

Until small and midsize businesses feel more confident about the future, hiring is likely to be slow. Economic uncertainty and the costs of doing business are making it more important than ever for small and midsize business manufacturers to streamline their operations and take advantage of technology and tools that help them run smarter, more cost-effective businesses. That may mean finding ways to cut costs, such as reducing fees, automating manual tasks where possible, and taking advantage of new technology that streamlines time-consuming functions such as payment processing and accounting integration.