News

Study: Small businesses travel bumpy road to make payroll

January 18, 2017

Employment issues continue to create volatile financial hurdles for businesses with fewer than 500 employees, according to news release about a study published on small business employment growth and payroll expenses management from JPMorgan Chase Institute.

Typically, small businesses reported that 18 percent of all business outflows went to payroll expenses, and most small businesses with employees had just 18 cash buffer days available. That compares to the number for all small businesses, which had substantially more than that — about 27 cash buffer days. 

All this information was collected from customer transactions for more than 45,000 small business customer accounts between February and October of 2015. During that time, 68 percent of smaller employers either reduced their number of employees or added fewer than the equivalent of one full-time staffer over the calendar year. Likewise, the study found that the average small business sees payroll expenses grow about 8.5 percent annually.

"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," JPMorgan Chase Institute President and CEO Diana Farrell, said in a news release.

Here are some other findings of the study for data collected between February and October 2015: 

• 36 percent of small employer businesses reduced payroll expenditures.
• 32 percent of small employer businesses increased such expenditures by less than the amount they would pay for one full-time worker, while 31 percent increased their payroll expenditures by more than the equivalent of a single full-time employee.
• 62 percent of small businesses had dramatic changes in payroll, like large spikes or dips or sustained gains or losses in full-time employees. This was particularly the case for businesses in existence for two years or less.
• Small businesses with big payroll dips, combined gains and losses, and both spikes and dips had the fewest cash buffer days, though small employers with spikes did not experience this problem as much.