Small Business Feeling the Squeeze of the Poor Economy

Wed, 11 Feb 2009 15:03:00 GMT

The current recession has many owners of small businesses reeling. Even prior to the recession, small business owners found it difficult to pay for the annual rise in health insurance premiums for their employees. The soaring premiums leave many businesses with difficult decisions.

The New York Times posted a recent article about small businesses facing the financial crisis and looking for ways to save money. One option that is explored by some is cutting, or at least cutting down, health benefits for employees. Options for saving money on health insurance for employees are unsavory: providing personal stipends much lower than what the employer formerly paid for health care; providing health benefits with much higher deductibles; having employees share in the cost of benefits at a much higher percentage than before; or cutting benefits altogether.

When considering options to save on providing health insurance to employees, businesses need to be careful of the risks these options pose. This is particularly true when considering replacing employees. A small business owner in Tennessee found himself “considering replacing older, more experienced workers who leave with younger ones who would be cheaper to insure.” While this particular business owner was merely considering replacing employees who choose to leave on their own accord, firms need to be careful if they decide to let any employees go without just cause. Firing an employee without just cause could potentially lead to that employee making an employment practices liability (EPL) claim against the company. The Age Discrimination in Employment Act (ADEA) prohibits discrimination against employees over 40 years of age. As people have become increasingly litigious, claims are increasingly brought against firms whose reduction in workforce seems directed at older employees.

Schinnerer's RM Blog - health tag

Small Business Feeling the Squeeze of the Poor Economy