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Cost of Providing Health Care Big Concern, Small-Business Survey Finds

Union Bank of California released its annual small-business survey March 2 and, for the fifth year in a row, workers’ compensation insurance costs raised the most ire among the 2,000 small businesses polled.

Union Bank Market President Joseph Benoit, who represents San Diego, Riverside and Imperial counties, said that although workers’ comp is still a primary concern , according to 39 percent of survey participants in San Diego County , it has subsided from previous years.

Now, he said, competition with larger business has gained ground as a concern, along with a tight labor market closely tied to increasing health care costs.

“Some businesses are picking up more health care costs in order to retain their quality employees,” said Benoit. Still, the survey showed that less than half (48 percent) of local businesses offer health care as an incentive.

For some, including Daniel Gausepohl, owner of Fallbrook-based security company T.R.Y. Enterprises Inc., health care costs are a trade-off.

“We have to keep our wages competitive and part of doing that includes eliminating health care,” said Gausepohl, who currently employs eight security guards, many of whom have second jobs offering health care.

“If we offered health care, very few would take it. Some, because we wouldn’t pay the full amount, and others because they already have a plan,” he added.

T.R.Y. has also hit the wall of competition. In 2001, Gausepohl had to pull the company’s expanded operations out of Temecula at a point when the company had 44 guards after having to compete with larger guard companies.

“That’s always going to be the case in a free-market system,” he said, adding that competition is a secondary concern to workers’ compensation and navigating the shallow talent pool.

“It’s being able to get workers that want to work,” he said. “Not that we need high-skilled workers or anything , we can teach them , but just getting people because we have a difficult job to do and sometimes it’s too difficult for people to put up with.”

The state’s 2006 unemployment rate confirms that pickings are slim. It’s at its lowest point since 1976 at 4.8 percent.

Benoit said that many employee positions are being absorbed by technological advancement.

“It’s almost implied because we’re such a tech-driven region,” he said.

The Union Bank survey showed that only 29 percent of the county’s small businesses anticipate increasing staff levels , a 9 percent decrease from 2006.


An Adviser’s Take

John Bjeldanes, a consultant for the San Diego chapter of the small-business resource center SCORE, said that part of the talent void is related to educational shifts.

“People in their 40s and 50s are looking to get into a business and they’re looking for young people with the same education they had,” said Bjeldanes. “It’s forever a complaint that they have to hire young people that are in no way prepared to be in the work force.”

As for businesses that claim they are hamstrung by workers’ compensation, Bjeldanes isn’t buying it.

“Businesses get in trouble when they don’t have good plans,” he said. “Workers’ comp. should be (planned for), not something you get into and complain about later.”


A Make-Or-Break Situation

Bjeldanes said, however, he is sympathetic about health care concerns. “It’s not a marginal irritation” and it can determine whether or not a company stays in business.

In response to the tight labor market, many businesses are increasing benefits packages to entice workers, the Union Bank survey stated. Bjeldanes said that this strategy often separates truly small businesses from midsize businesses.

“There are really small businesses with six or even seven employees and very often there’s no discussion of health care,” he said. “If you have 15 to 100 employees, the benefits package is critical.”

While not mentioned in Union Bank’s survey, Bjeldanes pointed out the difficulty small businesses have in accommodating employees who are dealing with the high cost of living and real estate locally.

“When people say they can’t find employees, they’re really saying they can’t find employees at the price they’re willing to pay,” said Bjeldanes, adding that San Diego’s large influx of immigrants supply some of the work at the lower rates.

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