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Helping employers who are concerned about debt and recession
Editorial by Christian Saint Cyr
National Director / Canadian Job Development Network
One of the key functions for job developers is to serve as subject matter experts in recruitment, retention and labour market information, but it’s also critical for job developers to understand the unique challenges employers are facing.
Mounting debt is a major factor for many employers, brought on by increased wages, inflation, higher borrowing costs and reduced consumer demand. According to the Canadian Federation of Independent Business’s monthly survey of their members, addressing rising prices and the cost of doing business are the biggest issues facing small businesses with 77 per cent of respondents noting these issues. About 2 in 3 business owners are still holding pandemic debt with an average debt of $107,702.
Last week, CEBA (Canada Emergency Business Account) loans came due for businesses who wanted to take advantage of the forgivable portion. CEBA was created to help employers impacted by the pandemic and provided interest-free loans of up to $60,000. If the loan was repaid in total by January 18, 2024, 33 per cent of the loan (up to $20,000) would be forgiven.
We’ve now passed this deadline, but a large number of Canadian businesses were unable to payoff or refinance this debt and now have this additional debt burden.
While a five per cent interest rate is now being applied to this debt, the business must now pay off this debt in full by December 31, 2026.
A large number of businesses took advantage of these loans. In total, 898,271 businesses were approved for a loan; 571,851 businesses applied for a loan extension to potential maximum of $60,000 and in total $49.2 billion in funds were distributed to businesses.
Just prior to the deadline, the CFIB reported that about 1 in 5 businesses didn’t think they would be able to make the deadline with the largest concentrations in these sectors: arts, recreation and information (26%); social services (30%); and hospitality (28%).
Debt and the struggling economy are taking a toll on employers' outlook for the future. According to the CFIB, business owner optimism has dropped 10 percentage points from February 2023. While 53 per cent of employers still report feeling somewhat optimistic about the future, this has dropped seven per cent since February. Meanwhile, those feeling somewhat pessimistic (23%) has increased six per cent and those feeling very pessimistic (10%) has increased four per cent.
Added to these debt challenges, employers continue to struggle with a skills shortage. According to Robert Half Canada, 54 per cent of hiring managers plan to add new permanent positions in the first six months of 2024 while another 40 per cent anticipate hiring for vacated positions.
Working within job development and employer outreach, we can act as a source of support to struggling employers. Financial supports are likely one of the key areas where we can provide this assistance.
Programs such as wage subsidy or the financial subsidy of working gear and training can be a tremendous support for employers looking to cut costs. And while these programs address an immediate need, a more comprehensive approach needs to be adopted by businesses to cut costs.
While employers are often told that employee turnover results in real costs, it’s helpful to speak to what this really looks like. As we reported last week, according to ADP the cost to recruit a new employee is $4,129 on average. This covers the cost of advertising, scheduling interviews and the interruption to business to undertake the process and onboard the employee. And yet, the real cost is quite a bit higher.
According to Express Employment Professionals Canada, employee turnover costs companies an average of $22,279 per year in recruiting costs and lost productivity, with 18% saying it costs their company $50,000 or more per year. This burden increases with company size, as 35% of large companies with 100+ employees say it costs them $50,000 or more per year, while only 3% at the smallest companies (2-9 employees) say the same.
When discussing a potential hire with an employer, we need to discuss the long term impact this individual can make.
According to LinkedIn, 20% of employees (1 in 5) fail to complete their probationary period, either quitting or being let go. As this is typically three months, for every new placement, we need to have a three-month-plan in place to check in with both the employer and the employee to address any unexpected miscommunications or a failure to understand expectations.
In this current business climate, employers are struggling with cost. And while the cost of employee turnover may be a challenge for employers to understand, we can help address this with frequent and intentional follow-up. This is how employers come to appreciate our role as subject matter experts and as a valuable community resource.
We’ll be discussing how to communicate the financial benefits of job development with employers at this morning’s meeting of the Canadian Job Developers Network, today Monday January 22nd at 8:30am Pacific; 9:30am Mountain; 10:30am Central; 11:30am Eastern; 12:30pm Atlantic; and 1pm in Newfoundland. Click here to join the session
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