Cost of Benefits Top Concern Among Midsized Employers

November 1, 2013 ( – The cost of health coverage and other employee benefits is the top concern of midsized business owners and executives, a study by the ADP Research Institute found.

According to “Top Concerns and Challenges of Midsized Business Leaders in 2013,” these employers were also concerned about the Patient Protection and Affordable Care Act (or ACA), as well as the level and volume of government regulations.

Nearly two-thirds (70%) of midsized employers said for 2013, the cost of health coverage and benefits has been their biggest challenge, made even more complex by employer requirements associated with the ACA regulations. Two-thirds of these employers said the cost of providing employer-sponsored medical health insurance to employees is a barrier to achieving business goals.

Regulations for the ACA rated second among employers’ concerns (59%). The study revealed there is a disconnect between employers’ perceived ability to comply with the regulations and having a thorough understanding of the regulations and its implications on their organizations.

Seventy percent of midsized employers said they believe their firms will be in complete compliance with the ACA, while 66% of human resource decisionmakers are not as confident they understand the regulations. In addition, nine of 10 employers are not confident their employees understand the impact of the ACA on their benefits and benefit choices. The study also noted there has been a double-digit increase year over year of the ACA as a ranked concern, specifically a 16% increase from 2012.

Midsized employers cited their third most pressing business concern as the level and volume of government regulations (54%), with issues related to compliance and the management of employee records often being more of a burden to companies of their size. While many respondents (83%) are confident they are compliant with payroll tax laws and regulations, nearly one-third of respondents reported unintended expenses as a result of noncompliance in the past 12 months, pointing to a potential “compliance overconfidence” among executives.

Of those fined or penalized, midsized firms reported an average of six fines or penalties per year. Organizations processing payroll in-house were found to receive almost twice as many fines or penalties as those that outsource processing to a third-party firm.

“As we assess this year’s top concerns among midsized business owners, it is clear that health care is at the forefront. Whether it is the cost of benefits, understanding the ACA or having mechanisms in place to ensure compliance, business owners continue to struggle with human capital management challenges,” said Regina Lee, Division President, ADP, based in Roseland, New Jersey. “The ACA has added greater complexity to the health care issue, making it critical that business owners understand and effectively manage human capital needs.”

When it comes to digitalization and globalization, the study found a large percentage of midsized employers are putting themselves at risk of costly security breaches, natural disasters and noncompliance. More than half (57%) said they still rely on paper-based records for storing and managing employee records, and nearly six in 10 have felt a financial impact from inaccurate data. In addition, 20% of these employers said their company has been impacted by some kind of natural disaster in the past two years. And with 13% of midsized businesses having operations outside of the United States, the study found the risk faced regarding the security and accessibility of their employee records is increasingly critical to business operations.

The study also found a gap between perception and reality as employers struggled to anticipate economic performance. In 2012, only 15% of employers expressed confidence in 2013’s economic outlook. When surveyed this year about last year’s performance, 61% judged that the economy had improved in the previous 12 months.

While their overall outlook on the economy remains weak, the study found respondents may be better adapting to economic realities that in the past have impacted their ability to meet business objectives. Compared to 2012, there were significant declines in the number of respondents who expressed concern about economic issues including fuel costs, cash flow, supplies and credit availability.

The study examined the concerns, perceptions, challenges and plans of more than 1,000 business owners and executives at U.S. midsized companies, which were categorized as those with between 50 and 999 employees.

More information about the study can be found here.