Report: Smallest Businesses Hit Hardest by Hiring Regulations

According to new data from the U.S. Chamber of Commerce Foundation, small businesses are feeling the impact of government regulation when it comes to hiring new employees. The report shows that the regulatory costs for hiring one new employee add up to $11,700 per year on average for a small business. The costs of hiring regulation for the smallest businesses, those with 50 or fewer employees, are nearly 20 percent higher.

Small businesses have long been impacted by government regulation on a federal, state and local level, and many small business owners have looked to the Trump administration to ease that burden. Some changes have already started to take effect, such as Trump’s executive order on business regulations requiring federal agencies to cut two existing regulations for every new one.

According to the report, the regulatory cost of the largest federal rules totals more than $40 billion, with small businesses shouldering a disproportionate amount of the cost: a full 82 percent. Much of the regulatory burden comes in the form of minimum wage requirements, workers compensation, unemployment insurance and occupational licensing. The cost burdens are spread to small business owners through compliance, record keeping and reporting requirements. Small businesses with smaller staffs and limited access to legal expertise are less equipped to deal with such requirements. The cost of regulation on small firms is 36 percent higher than the cost of regulatory compliance for larger businesses, according to the report.

Nearly one in three Chamber executives interviewed for the study reported that they would not actively encourage new business establishment and relocation in their regions. More than two-thirds said that federal regulations have become more or much more significant over the past several years.

“Small businesses are the foundation of our economy and the embodiment of the promise of American entrepreneurship,” said Carolyn Cawley, president of the U.S. Chamber of Commerce Foundation. “Their vitality is our nation’s vitality, so we care deeply about what they need to succeed.”

Yesterday Senators Bill Nelson (D-Fla.) and Susan Collins (R-Maine) introduced a bill aimed at preventing small businesses from paying a higher tax rate than large corporations. Most small businesses are taxed through the individual rather than the corporate tax code. The bill would re-categorize small business income to reduce tax rates by as much as 4.6 percent.