74% of American Employees Would Prefer to Work for a Smaller Business Over a Larger Business. So Why Don’t They?

Despite perceptions of better cultures, higher job satisfaction at smaller businesses, new UKG survey identifies misconceptions that small businesses must overcome

About three-quarters (74%) of employed Americans report that, if all things were equal (e.g., compensation, benefits, hours, etc.), they would rather work for a smaller business¹ than a larger business, according to a new study from the UKG Workforce Institute released during National Small Business Week. That said, 67% percent of employed Americans believe it is harder for smaller businesses to hire talent, which may be explained by the fact that nearly 4 out of 5 U.S. workers (78%) say larger businesses can offer higher wages.

“While the public may perceive that larger businesses can offer more to their employees, our study shows that smaller businesses have their own distinct advantages, especially with workplace culture,” said Dr. Jarik Conrad, vice president of human insights at UKG and executive director of the UKG Workforce Institute. “Because of their size, smaller businesses are in a position to provide employees with a family-like feel, and they can use that advantage to their benefit by focusing on creating a great place to work for all.”

As small businesses scale and begin growing their HR teams, getting the basics right is crucial to attracting and retaining talent, meeting and exceeding customer expectations, and increasing revenue. However, the UKG Workforce Institute study found there are perceptions that businesses with leaner teams must overcome, including:

• Only one-quarter (25%) of employed Americans think payroll accuracy is better at smaller businesses;
• Only 18% of employed Americans say that smaller businesses are better at payroll; and
• Just 20% of employed Americans report that smaller businesses are better at onboarding.

Areas Where Smaller Businesses are Succeeding

The UKG Workforce Institute study found that employed Americans believe that smaller businesses have several benefits over larger businesses, leading to 64% of employed Americans feeling that people would rather work for a smaller business. Specifically, the study revealed that:

• Thirty-eight percent of employed Americans think overall job satisfaction is better at smaller businesses, compared with just 17% who say it is better at larger ones;
• Nearly half of employed Americans (46%) believe that transparent and consistent communication from leaders is better at smaller businesses; and
• Thirty-six percent of employed Americans believe there is greater schedule flexibility at smaller businesses.

Additionally, 36% of employed Americans noted that the quality of managers is better at smaller businesses than larger ones — a crucial component in attracting and retaining talent, confirmed by recent UKG research that found 73% of employees say their manager’s support, encouragement, and/or leadership directly motivates them to go above and beyond in the workplace.

“The leading small businesses have realized that all-in-one HR and payroll solutions can level the playing field,” said Chris Kiklas, vice president of UKG Ready product management at UKG. “This ensures that they can create a foundation that provides great employee experiences while allowing them to grow and scale, so they can remain competitive with larger businesses. By capitalizing on the opportunities to address perception gaps, lean teams can set themselves up for success.”

As leaders at small businesses look to attract and retain talent, the UKG Workforce Institute study found that over half of employed Americans (56%) believe that people tend to start their job searches by applying to smaller businesses first, demonstrating that these workplaces have the first shot to be competitive in hiring and retaining the right talent. With automated and intuitive HR solutions, lean teams can grow and scale at their pace while continuing to do what they do best: providing the goods and services local communities want.

About UKG

At UKG, our purpose is people. We are on a mission to inspire every organization to become a great place to work through HCM technology built for all. More than 80,000 organizations across all sizes, industries, and geographies trust UKG HR, payroll, and workforce management cloud solutions to drive great workplace experiences and make better, more confident people and business decisions. With the world’s largest collection of people data, work data, and culture data combined with rich experience using artificial intelligence in the service of people, we connect culture insights with business outcomes to show what’s possible when organizations invest in their people. To learn more, visit ukg.com.

Methodology: This survey was conducted online within the United States by The Harris Poll on behalf of the UKG Workforce Institute from April 9-11, 2024, among 1,150 employed adults ages 18 and older. The sampling precision of Harris online polls is measured by using a Bayesian credible interval. For this study, the sample data is accurate to within +/- 3.5 percentage points using a 95% confidence level.

Footnote 1: “Smaller businesses” refers to businesses with fewer than 500 employees, and “larger businesses” refers to businesses with more than 500 employees.

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