Owners Must Face New Workplace Concerns

Providing affordable health insurance benefits, creating a drug-free workplace and coping with proposed workers’ compensation reforms top the list of frustrations that will face small business owners in 1989, according to small business advisers and advocates.

Small business owners may think they’re too busy running their companies to worry much about drugs, insurance and taxes. But the experts say that new legislation and changing economics will force them to confront these concerns this year.

An estimated 20% increase in health insurance costs has sent many small business owners searching for ways to provide adequate coverage for their employees, according to Lou Custrini, spokesman for the Merchants & Manufacturers Assn. in Los Angeles. The organization represents about 3,500 California employers with an average of 200 employees each.

Custrini said many small employers who can’t find more affordable insurance plans are requiring that employees pay a larger share of the costs.


He said the association’s members are also concerned about recently defeated, but far from dead, national and state legislation that could require small companies to provide unpaid parental, adoption and maternity leaves, as well as leaves for employees to care for sick family members.

Many small businesses, in fact, provide some of these benefits, he said, but members oppose the government requiring them. Legislation dealing with mandated leaves was defeated at both the state and federal levels last year but is back on several elected officials’ agendas in 1989.

Another major issue is an outgrowth of the Reagan Administration’s war on illegal drugs. Beginning in March, new federal regulations require that any company holding a federal government contract provide a “drug-free workplace,” according to Susan Walthall, spokeswoman for the Small Business Administration’s advocacy office.

The law is complex, but it includes requirements that companies issue policies prohibiting drug use on the job and provide rehabilitation programs for employees who request help with their drug problems. The measure also includes penalties that may be levied against a company if its employees are convicted of drug offenses, Walthall said.

Another new federal law may be of interest to women who own small businesses, Walthall said. Beginning in June, the federal government will provide $10 million in matching grants for organizations providing technical assistance and management training for women who own businesses. She said the details are being worked out. (The Small Business Administration’s advocacy office tracks legislation and offers a toll-free number to answer questions about federal issues: 1-800-368-5855.)

In Sacramento, Martyn Hopper, executive director of the National Federation of Independent Business, said he is monitoring moves to revamp the state’s $7-billion workers’ compensation insurance system. Negotiations between representatives of organized labor, employers, insurance companies, trial attorneys and physicians broke down last summer but are expected to resume sometime this year.

“California employers pay some of the highest benefits costs in the nation, yet the workers receive some of the lowest payments,” Hopper said.

He said the five divergent groups are trying to work out a “politically acceptable” solution to the high administrative costs and what he considers the excessive amounts paid to doctors and lawyers involved in the system.

The NFIB, which represents thousands of small business owners across the country and hires lobbyists in Sacramento and Washington, is seeking a law in California that would allow pension funds to lend money to small businesses. Hopper said similar laws exist in 22 states. If NFIB’s efforts are successful, about $2 million in pension funds could be released for small business expansion loans, he said.

Small business owners may also want to consider a few ways to reduce their 1989 taxes. Ronald Silver, director of Arthur Young’s entrepreneurial services division in Century City, suggests talking with your accountant about a few areas of interest.

Silver said small, closely held companies who meet all the requirements have until March 15 to change their tax status to Subchapter S. If they qualify, he said, it means they would be taxed at a lower rate as a proprietorship rather than as a corporation.

“You have to file one form with the state and one with the federal government,” Silver said. “If you are a profitable company, there can be significant savings.” He said one company that switched saved $6 million in taxes.

Silver also suggests that small business owners faced with rising benefit costs consider offering employees what is known as a “cafeteria” plan of different benefits to choose from. These individually tailored plans are often more cost-effective. They can also boost employee morale by giving the employee freedom to chose the benefits he or she needs most, he said.

Now is also the best time to set up new methods to separate travel and entertainment expenses, Silver said. He reminds small business owners that while travel and lodging expenses are 100% deductible, meals and entertainment expenses are only 80% deductible. He said many small businesses lose money by not keeping track of expenses properly because “they just haven’t thought about it.”

Business Plan Seminar

“Developing a Business Plan” is the subject of a three-hour seminar scheduled next Tuesday, at the Los Angeles Area Chamber of Commerce. Ben Pelter, former president of a national printing and publishing company, will lead the discussion from 9:30 a.m. to 12:30 p.m. The fee is $10. For information call: 213-894-3016.

Entrepreneurs to Meet

The Stanford Entrepreneurial Forum and Peat Marwick Main & Co. are hosting a small business program next Thursday. This “venture forum” is designed to bring together entrepreneurs to discuss common problems, and Thursday’s program will include a presentation by Cybermation Inc., a firm that makes computer-driven sound editing systems for feature films. The event begins at 5:30 p.m. at Peat Marwick’s offices, 27th floor, CitiCorp Plaza, 727 S. Figueroa St. in downtown Los Angeles. There is a $10 fee. For reservations, call: 213-955-8840.