Overcoming Small Business Labor Shortage in 2022 with These Tips


Overcoming Small Business Labor Shortage in 2022 with These Tips

Table of Contents

For the past two years, everything, probably including the kitchen sink, has been thrown at small businesses. From a global pandemic, to supply chain disruptions, to stay-at-home orders, to masking and now to The Great Resignation.

All of these changes and disruptions have rippled through businesses of all sizes and all industries. While you can’t fix or predict supply chain shortages, there just might be something you can do to limit potential labor shortages and retain employees. 

New call-to-action

What Is Causing the Labor Shortage in the U.S.?

While there isn’t one nameable cause to the U.S. labor shortage, there are some theories behind the astounding numbers. In December 2021, 4.3 million workers quit their jobs, which closed out a record-setting year of 47.4 million people voluntarily leaving their job, according to the U.S. Bureau of Labor Statistic's "Job Opening and Labor Turnover (JOLT)" report. 

This trend of record-breaking numbers of people leaving their jobs in 2021 has been named The Great Resignation. Theories abound as to why employees are leaving their current positions, but one throughline of these conversations is that workers are seeking more human-centric jobs, where they have the flexibility to work from where they want, when they want and to have the ability to complete care tasks when needed and live full lives that involve more than just their job.

How Is the Great Resignation Affecting Small Businesses?

The trend of employees leaving their jobs to seek better ones isn’t only affecting corporate employers, it’s also impacting small businesses. The Great Resignation is seeing employees leave their current position and causing employers to struggle to fill those open positions. In a 2021 Incfile survey, we found that 55 percent of small business owners were struggling to fill open positions.

And this was just one of the many struggles faced by small business owners in the last year. 

small business pandemic-induced labor shortage

While The Great Resignation sounds simple on the surface, there’s more lurking underneath. We know from the JOLT report that 47.4 million people left their jobs in 2021. But, where did they go?

Some of those people are leaving the workforce entirely and taking an early retirement or becoming an unpaid caregiver. Others are looking for a new, better job. And still, others are starting their own businesses where they’ll have more control over their work.

While 2021 saw a record-high number of people leaving their jobs, it also saw a record number of new businesses created. According to the Census Bureau’s Business Formation statistics, just under 5 million business formation applications were submitted between January and November of 2021. That’s a 55 percent increase over the same period in 2019.

This increase of interest in starting a business shows that workers are interested in something better and different than the status quo. The pandemic has caused a cultural shift, a longing for something new and better than the old way of doing things. And, encouragingly, the Census Bureau has stated that many of these businesses will be “high-propensity,” meaning they’re likely to create jobs. 

As a short-term fix to The Great Resignation and losing employees, many small business owners are moving business operations in-house, limiting marketing spend, taking on more responsibilities and hiring temporary employees or independent contractors

small business labor shortage mitigation

While these mitigation techniques are a great short-term fix to the labor shortage, they’re not a long-term solution. 

How Small Businesses Can Overcome a Labor Shortage

When most people first think of employee retention, they immediately jump to salary and promotions. While those don’t hurt, there’s so much more you can do to retain and hire great employees and overcome this labor shortage. Here are some business practices for addressing the labor shortage.

Create a People-First Workplace Culture

The number one thing you can do to help retain employees and overcome this labor shortage is to create a people-first workplace culture. Your employees are the most important resource in your business; they should be treated as such.

Creating a people-first workplace means making policies and buying tools that position your employees as your top priority. 

Make Space for Work and Life

Your employees have a life outside of work. When the work culture demands employees are in work mode at all times, it leaves little space for anything else and creates an environment where burnout is rife.

As the employer and business owner, it’s your job to create a workplace with boundaries that leave space for employees to have a life outside of work.

Make Flexibility a Cornerstone of Your Culture

One of the theories behind The Great Resignation is that employees are leaving their current jobs in search of more flexibility. Workers want to be able to work from home and have flexibility in their workday to be able to handle personal tasks such as caregiving and errands. When you provide employees with flexibility, you support them in living a fulfilled, happy life.

Integrate Inclusion into Your Culture

Creating a culture of inclusion means that your workplace is somewhere that anyone can feel safe and comfortable. To create an inclusive environment, you can:

  • Create an inclusive language guide to use for internal and external communications.
  • Make hiring policies to encourage inclusion.
  • Include diversity training and programming.

Provide a Competitive Salary

Another common theory as to why workers are leaving their current job is to search for higher wages and salaries. A study by LinkedIn found that companies that provide a fair wage have a 56 percent lower attrition rate among employees. Paying your employees a fair wage means that they will be able to afford to live in the city in which they work and to live comfortably. You’ll also want to make sure that the salary you’re offering is competitive with other employers, if not higher (and remember to think about payroll taxes).

Or, Make Up for It in Benefits

As a small business, you may not have the cash flow to pay your employees the salary that you would like. If this is the case, you may be able to compensate them in other ways. Providing your employees with benefits and perks can help with retention.

Benefits might include:

  • Health insurance
  • Local discounts
  • Food, snacks and beverages in the workplace
  • Ability to work from home
  • Flexible hours
  • Retirement matching
  • PTO and vacation days
  • Financial planning resources

When it comes to employee benefits, the only limit is your creativity. You can offer your employees any benefit you can think of that might help your business with retention. 

Create Growth, Training and Development Opportunities

A major focus for employees is growth. As employees move through their careers, they want to continue to learn new things, grow and receive promotions. Providing your employees with ways to grow, train and develop new skills can make them happier at work.

Celebrate and Recognize Employees Year-Round

When the holidays come around, many employers give their employees a small gift or bonus. But, why wait until the holidays? Your employees deserve to be celebrated year-round. Find ways that you can recognize your employees, such as sending out regular emails filled with kudos or sharing successes at the start of staff meetings. Celebrations don’t have to cost money; some of the best ones are free.

When you create a work culture that puts your employees first, you create an environment where people want to work. By retaining employees and showing new ones the wonderful work environment you’ve created, you can overcome the labor shortage of 2022.

While business has been hard the last few years, you’re not doing it alone. At Incfile, we’re here to support you and your business needs through our helpful blog resources. Subscribe to find out every time we post.

New call-to-action

Paper List

Like What You're Reading?

Get fresh monthly tips to start & grow your LLC.

Related Articles

  • 2023 Tax Deduction Cheat Sheet (Plus Key Tax Workarounds)
  • 10 Best Business Checking Accounts for LLCs
  • 20 Businesses You Can Start with $1,000
  • 15 Cheapest States to Form an LLC in the U.S.
  • NAICS Codes: What They Are + How to Find Yours
  • How to Create and File an LLC for Free: A Step-by-Step Guide
  • Applying for Funding for Your Business? Here's Why Incfile's Fresh Start Grant Is What You Need
  • 5 Virtual Address Services for Your Small Business
  • Can a Minor Own a Business?
  • What Is a DBA? How Do They Benefit My Small Business?
  • Need a Physical Address for Your Business?
  • Choosing an Amazon Seller Business Type: LLC vs. Sole Proprietorship
  • How to Pay Yourself From an LLC
  • So You Moved? Follow This Guide to Moving Your LLC to Another State
  • 30 Profitable Food Truck Ideas for the Bootstrapped Entrepreneur
  • How Do You Obtain Free Business Address for Your LLC?
  • Can You Have Multiple Businesses Under One LLC? What Are the Rules?
  • A Giant List of Self-Employment Ideas
  • Are Non-U.S. Residents Allowed to Own a Corporation or LLC?
  • 15 Items You Can Easily Flip for $100-$5,000 in Profit a Month