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ADP Study Finds 1.5 Million U.S. Small Businesses Spend Billions to Manage HR as an 'Ad-Hoc' Function

Research reveals that almost 75 percent of ad-hoc human resources managers are concerned about adhering to HR compliance regulations.

ADP is No. 17 on the DiversityInc Top 50 Companies list


Small business owners and their employees wear a lot of hats. One day it's sales maven, the next it's marketing guru or back-office ace. It seems to be the nature of the beast. But that approach — especially for small business owners who already push the boundaries of a 24-hour day with limited resources — has a startling downside and tangible hidden cost, according to a recent ADP study.

The study indicates that as many as 70 percent of small businesses in the United States -- which equates to potentially 1.5 million of them -- handle the human resources (HR) function with staff members who manage it on an "ad-hoc" basis in addition to their primary job. The study also shows that these ad-hoc HR managers spend more than 13 hours a week on average on human resources tasks, taking significant time away from their core responsibilities.

Based on this time spent and the average wage of a small business employee, the study calculates that these small businesses are essentially paying $18,800 a year to have untrained staff manage the HR tasks of the business, which could equate to an annual total cost of $27 billion across the small business market. Despite this estimated loss of investment in core business functions, 98 percent of survey participants say they don't plan to hire trained HR personnel.

Ad-hoc HR managers, or aHRMs as the study calls them, are small business owners, business leaders, office managers, accountants and finance staff who take on the HR role because there is no trained staff to do it. According to the study, this group says they don't enjoy having HR responsibilities added to their work duties, and would prefer to give them up.

"Managing the HR function traditionally has been challenging for small businesses," said Brian Michaud, senior vice president of ADP TotalSource. "So it's not surprising that small business owners have had to resort to handing the HR function to an employee who might not have an HR background. That's just the way many small businesses evolve.

"We understand these challenges very well," Michaud continued. "But handling employees' crucial HR information, compliance activities, and benefits enrollment is no place to skimp. Small businesses may benefit from access to a dedicated small-business HR support team that can help them implement rock-solid HR best practices and navigate the effect of changing regulations on their businesses."

ADP embarked on the research to explore who in small businesses handles HR and human capital management tasks and responsibilities; how small businesses delegate the work for this function; what impact that choice has on small businesses' operations, and to gather a glimpse into the opportunity cost of this phenomenon.

The company surveyed a nationally representative sample of U.S. businesses with between five and 49 employees. More than 1,000 business representatives completed the online survey. Of those respondents, 75 percent characterized their firms as "established" or "mature," which indicates that this practice isn't primarily a start-up business phenomenon, as one might expect.

Many aHRMs, it found, are concerned about the risk inherent in non-trained staff managing HR; that their lack of training could put their companies at risk. The top areas of concern are talent management, compliance, HR policy enforcement, and employee safety. Only one in five aHRMs is fully confident in his or her ability to manage HR tasks without making a mistake. And four out of five are concerned about their ability to keep up with future changes in HR regulations.

Other findings from the study revealed that:

  • Almost 75 percent of aHRMs are concerned about accurately and consistently adhering to HR compliance regulations.
  • 82 percent of aHRMs have no formal HR education or certification.
  • Half of aHRMs are not certain that the employees of the business know where to turn with HR questions, and two-thirds have some concerns about employees getting the correct benefits information necessary to protect them and/or their loved ones.
  • Half of aHRMs handle the HR tasks manually using paper or spreadsheets, and fewer than one in four fully agree they have the tools to do the job properly.
  • The number one thing aHRMs feel would help them manage their HR tasks is to partner with an HR expert.

"These findings tell us that we have a tremendous opportunity to help small businesses possibly avoid costly HR mistakes and potentially save precious time and money by making our HR expertise available to them," Michaud said. "We've found that when we do what we do best, we can help companies do what they do best as they manage their businesses, and workforces, for growth."

An action paper and infographic featuring results from the ADP Ad-hoc Human Resource Management Study can be found on the ADP website.

The Conversation

ADP: 5 Energy Tax Credits and Incentives You May Not Have Considered

Creating a more energy efficient organization isn't just helpful for the environment — it can also make a big difference for your bottom line.

Originally Published by ADP's Newsletter.

Want to lower your electricity bills and taxes? Energy tax credits could be the answer.

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ADP Acquires Celergo, Strengthening Global Payroll Capabilities

The multi-country payroll outsourcing market is over $3 billion today and is growing rapidly as companies are looking for greater visibility over their increasingly global workforce, while efficiently managing the compliance elements of multi-country payroll.

Originally Published by ADP.

ADP announced that it has acquired Celergo, a leading provider of global payroll management services. The acquisition will enhance ADP's international payroll offerings with a strong platform and new solutions, including cross-currency and expatriate payment services.

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ADP: U.S. Wages Grew 3.0 Percent Over the Past Year, Large Firms Experienced Accelerated Wage Growth

Annual job-switching rate slowed slightly to 20.7 percent from 21.2 percent while wage growth for job switchers accelerated to 4.8 percent from 4.1 percent.

Originally Published by ADP.

Wages for U.S. workers grew 3.0 percent over the last year, increasing the average wage level by $0.80 to $27.46 an hour, according to the ADP Research Institute®Workforce Vitality Report (WVR) released today. The growth, steady at 3.0 percent annual as of June 2018, was driven by strong wage gains for workers in the professional and business services industry representing almost 17 percent of the workforce (3.4 percent wage growth, $35.04 average hourly wage), in the Northeast (3.5 percent, $30.88) and from large businesses (3.5 percent, $28.50). Employees in the resources and mining industry saw their wages decrease (-3.7 percent, $33.84) and businesses with 500-999 employees experienced the slowest wage growth (1.6 percent, $28.73).

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ADP Marketplace Continues Tremendous Growth Thanks to Leading Solutions Providers

Inaugural ADP Marketplace Partner Connections Summit Recognizes Partners who Demonstrate Excellence in Sales and Service.

Originally Published by ADP.

As the world of work changes, companies are increasingly seeking innovative solutions to meet the evolving needs of their employee base and their businesses. For more than four years, ADP® Marketplace, the largest human capital management (HCM) app store, and its world-class partners have helped create a unique ecosystem, where clients can tailor their HR solutions through apps that leverage ADP platforms and data.

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Celebrate Pride Month!  ADP Promotes Diversity and Inclusion with LGBTQ Employee Self-Identification

Self-identification can help companies to better develop programs and benefits that meet the needs of LGBTQ associates and to better attract and retain a diverse talent pool to stay competitive in today's tight labor market.

Originally Published by ADP.

Numerous studies have shown that having a diverse workforce brings a wider range of opinions to the table which leads to better problem solving and drives innovation. But to benefit from diverse perspectives, companies first need to understand the makeup of their employee population beyond gender, ethnicity and race.

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The Future of Pay is Here! New ADP Innovation Helps Employers Tailor Payments to the Preferences of All Employees

Wisely Pay by ADP Combines Global Cash Card and ADP Capabilities to Create Best-in-Class Payment Offering

Originally Published by ADP.

Changes in talent demographics, working arrangements and technology are impacting how employees need and want to be paid. To meet these shifts, paycards and digital accounts are increasingly becoming attractive options, allowing employees to access their pay how and when they want. Additionally, employers now have the opportunity to take an active interest in the financial wellbeing of their workers to help them get the most out of their pay.

ADP is continuing its innovation momentum by revolutionizing the way people are paid by introducing Wisely Pay by ADP. Wisely Pay is the next step in ADP's constant evolution to put clients and their workers at the forefront of macro trends shaping the employment landscape, including the growing number of freelance individuals.

"The world of work is changing and our clients look to us as the market leader in payments, to help them better engage with their entire workforce," said Doug Politi, president of Compliance Solutions at ADP. "Wisely Pay is leading the way people get paid in the future as a true bank alternative, with innovative services like instant pay, savings, digital wallet, and other financial management and wellness features that are better aligned with the evolving workforce."

The functionality of digital accounts, including paycards, and ease of access to funds have made them particularly popular among Millennials. According to a recent report commissioned by ADP, almost half of Gen Z (47 percent) and nearly a third of Millennials (31 percent) would turn down a job if they were unable to choose their method of pay. Additionally, this report revealed that 47 percent of Millennials and 66 percent of Gen Z have used a pre-loaded payment card in the last 12 months.

Wisely Pay is the first offering resulting from ADP's acquisition of Global Cash Card and provides the administrative tools and support to enable employers of any size, industry and workforce blend of full-time, part-time and/or freelance workers to enjoy:

  • Advanced technologies: Best-in-class experiences for cardholders and administrators from ADP's in-house digital payments platform, built by Global Cash Card and ADP's award-winning Instant Funding APIs.
  • Pay flexibility: Wisely Pay offers multiple ways to receive, spend, and manage money, including fully electronic options like peer-to-peer transfers, instant pay, and mobile digital wallets by Apple Pay®, Samsung Pay® and Android Pay®.
  • Attracting and retaining talent: The multi-generational workforce places unique demands on employers and Wisely Pay helps satisfy the needs of workers by offering a banking alternative with numerous funding options, easy cash access, broad purchasing capability, ability to avoid paper check fees and modern financial management tools.
  • Peace of mind: With a 50-state electronic pay program, backed by market-leading expertise and experience in the regulatory landscape, employers can rely on ADP Compliance Solutions, advanced data security and single point-of-contact resolution for all employer support or cardholder issues (e.g. fraud prevention, dispute resolution).

The Wisely paycard will first be available to employers who select to offer sponsored accounts for employees in September 2018 in the United States.

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