The Zenefits Crystal Ball: State of Small Business in 2020

At Zenefits, we’re 100% focused on removing or reducing the staffing challenges that small and mid-size businesses face, whether it’s smarter hiring, choosing the right health benefits, fairly compensating a diverse staff or ensuring regulatory compliance.

At Zenefits, we’re 100% focused on removing or reducing the staffing challenges that small and mid-size businesses face, whether it’s smarter hiring, choosing the right health benefits, fairly compensating a diverse staff or ensuring regulatory compliance. To help you prepare for the new year, we asked our team of experts about what’s in store for 2020.

Daniel Speros, People, Talent, and HR Lead  

Daniel is dedicated to developing and continuously improving the employee experience at Zenefits by hiring and retaining great talent. Here’s what this seasoned HR pro said about what to look out for in 2020:

What challenges do you think SMBs will face when hiring over the next year?

Small and mid-size businesses will face a continually shrinking pool of candidates and increased competition for talent in 2020. Fears of a recession may cause small businesses to think twice before making hiring decisions and make sure they are making strategic investments in talent. 

What should job candidates be wary of?

Job candidates should be wary of promises that seem too good to be true: “Once we IPO, your stock value will be $X” or “You’ll be promoted within X months.”                                                 

Those are always things to be wary of but especially poignant in today’s economy. Candidates should also be wary of jobs that are at risk of being downsized or replaced by automation. This doesn’t just apply to manufacturing roles but to office jobs as well. Technological advancements have been making workers more productive for decades, but in the process, jobs that were once a staple of the office have been replaced or can be done by fewer people. Software automation and even applications like Zenefits do the work that people used to do manually. The goal for candidates and the workforce is to ride that wave of technology and not get swallowed up by it, to be one of the employees leveraging ever more powerful tech to accomplish ever more valuable goals and work.

In 2020, what should SMBs be prioritizing in the hiring process?

“Small and mid-size businesses should prioritize hires that can help meet their business needs — both now and for the foreseeable future. Find people who can do the work needed now but who also have shown a track record of learning and growing and an openness to change, so that as the needs of the business evolve, the employees can grow to meet them.

What should HR heads and/or SMB owners be taking into consideration, or putting into action, to hire the best possible talent in 2020?

Emphasize diversity in looking to hire the best possible talent in 2020. Our research shows that in general, small and mid-size employers are half as good as they think they are when it comes to fair pay across genders. For example, in the midwest, 91% of employers say they are paying fairly, but that is the region of the nation with the widest SMB pay gap for women, who on average earn 43% less than men. However an organization is doing on hiring a diverse and talented team, there is always room for improvement. A diverse organization outperforms industry norms, solves problems better, and attracts talented people who want that diversity in their workplace. Actionable items include posting positions and recruiting people in different places, reviewing job postings for gender neutrality using tech like, and bringing a diverse team into the interview and selection panel. It also helps to focus a little less on the résumé and more on what the candidate can bring to the organization. All too often, organizations are looking for someone who has done the exact same job before. Experience is a good indicator, but look at different types of experience that can be applied to the role and open your aperture to include people with different backgrounds.

Parijat Sarkar, Senior Director of Product Management

We have Parijat and his team to thank for the seamless user experience of the Zenefits People Platform. One important thing he says SMBs should be watching in 2020? Regulations around the gig economy.

With the landmark AB5 ruling in California, the line between contingent worker roles and employee continues to change. We’ll see benefits that were traditionally offered to the historically stricter definition of an employee being offered to the newly classified workers. 

California won’t be the last state to apply the ABC test and as a result, employers across the US will need to adapt in how they manage their entire blended workforce and will need their HCM tools to adapt with them. As for workers, understanding what benefits they’re eligible for and making the best decisions on how to make the most of what is offered to them will be paramount and the user experience of HCMs will need to adjust to help them navigate these changes. The focus on the employee experience, that has been a recent trend in the HCM market for user-centric offerings, will need to evolve to a focus on the worker experience as a whole.

Colin Rogers, Senior VP and GM of Benefits Solutions

Colin works on delivering access and choice in healthcare and benefits for all of Zenefits’ customers. Here’s what he said about the state of healthcare access for SMBs in 2020:

What changes will the health insurance space see in 2020 that will impact SMBs?

I think one of the things that’ll be interesting, at least on the regulatory and political front, will be the expansion of Health Reimbursement Arrangements (HRAs), which essentially is the Trump Administration’s attempt to open up small business’ options for buying government-approved healthcare under the Affordable Care Act (ACA). Today, many small businesses purchase ACA-based plans, which allows them to avoid penalties with regard to the ACA regulation. Now, according to this new guidance that goes into effect in 2020, small businesses will be able to fund an HRA account and have their employees use those funds to buy specific plans, which will count towards ACA credits. This regulation will probably spawn some innovation on the product front, but also hopefully will lead to wider healthcare access for small businesses.

Secondly, I see the non-ACA type benefit offerings like short-term medical or hospital indemnity — supplemental type plans — continuing to gain momentum over the course of the next year. I think of those as alternatives and/or as an adjunct to ACA plans should small businesses want to get into the game but buy down, meaning buying into bronze-level plans versus gold or platinum. If that trend continues, then I think we’ll see some heightened adoption of these supplemental type plans.

What should HR heads and/or SMB owners be wary of going into 2020 around healthcare access for employees?

Some of the guidance that’s come out specific to HRAs has been in flux given all the turmoil in DC. So although some of these alternatives look really good and we should be aware of them, I do recommend some caution. It’s been a fairly fluid and dynamic environment in Washington around proposed regulations that get put out there versus the ones that get officially implemented. On a more positive note, I think we’ve seen some drop in rates with the ACA set of programs. So, perhaps less a word of caution and more a note to pay close attention to those rates as we move through 2020. We’ve actually seen some positive trends in terms of what those premiums look like. So if small businesses haven’t yet gotten into the game, this may be the year to continue to pay close attention to where those premiums are.

What is one trend you think will shape changes in the industry in 2020 and beyond?

When we look at the landscape of small business owners and the demographic change amongst them, we see that increasingly, millennials are the owners of these businesses. They’re increasingly wanting to engage with technology specifically around benefits, how they purchase benefits and how they review their options. So I think holistically as an industry, we want to continue to stay in front of that trend and ensure that we’re putting forth a tech platform that enables access specifically for that type of buyer. That means we’re going to do some innovative things on the back end with our carrier partners to offer unique and more streamlined ways for buyers to purchase and evaluate benefits online.

Jay Fulcher, CEO

A seasoned entrepreneur, Jay interacts with Zenefits’ customers representing more than 11,000 small and mid-size US businesses and leads our own mid-sized organization. This gives him front-row insight into the opportunities and pain points of 99.7% of American businesses — those with less than 500 employees. Here are his insights on how HR Technology can address a few of the top trends for 2020:

What are the most important changes SMB owners and operators will have to deal with over the next year?

The battle for talent will rage on in a world where unemployment is lower than GDP. Assuming the strong economy persists, SMBs will need the applications, technology, and priorities to create a great culture and attract and retain the talent they need to succeed.

What general economic and/or cultural trends do you think will help SMBs the most in 2020?

Employee experience now trumps process and clunky systems of the past that aren’t integrated, seamless, mobile, and smart. As an example, best-in-class applications like Zenefits are designed for the entire organization, and not just HR. And they need to be as easy to buy and implement as they are to use. These products need to allow SMBs to evaluate, trial, demo, buy, and implement with minimal support so that they aid the overall employee experience, from the first interaction. Advanced technology that requires even less training and tech-savvy from its users, like microservices, chatbots, and Artificial Intelligence make the entire HR experience more seamless.

What should SMBs be wary of?

The regulatory and compliance requirements on SMBs continue to be extremely challenging, and it will be critical to find and deploy sophisticated yet affordable solutions to stay aware and ahead of increasing complexity. New labor laws, changing employee designations, and new tax law changes all make for dozens of new regulations in the coming year that businesses must stay abreast of if they want to avoid the cost and difficulties of being out of compliance.