The Government Shutdown has Lasting Effects on the Bottom Line for Many U.S. Companies
Although the federal government shutdown is behind us, many companies are still feeling its impact by way of a decrease in expected earnings for the year. This may have been foreseeable for some companies, but other businesses are reeling from the somewhat unexpected financial loss.
It certainly does not come as a surprise that the government shutdown has had ramifications on companies with federal contracts. It was also expected that the real estate market would take a hit as a result of the inability to process FHA mortgages, and that the tourism business would likely suffer as federally-owned attractions nationwide were closed.
What some perhaps failed to consider, however, was the possible effect of the shutdown on consumer-driven companies, such as retailers and airliners. Both EBay and Wal-Mart experienced decreased sales during the shutdown. These companies attributed their loss of business to a decrease in consumer confidence. It was thought that consumers may be hesitant to spend money on non-essential items in the wake of the shutdown.
Airlines also experienced a decrease in sales during the shutdown. Southwest Airlines estimated that the shutdown cost its company approximately $20 million in revenue. US Airways also took a hit, reporting that airline bookings fell approximately 8% in late September and early October, likely as a result of the fact that federal employees were no longer traveling for business.
The hope is that most of these companies will be able to bounce back from this relatively brief decrease in business. Such a comeback may be able to boost consumer confidence to the extent that sales and revenue will come close to the companies’ original projected profits. One would hope that such a recovery would limit the extent of the overall economic ramifications of the shutdown.
Employers Feeling the Heat from Affordable Care Act
Although the implementation of the large employer mandate under the new Affordable Care Act has been delayed until 2015, many companies are already taking steps to ensure that their business is not hit with stiff fines and penalties for failing to comply with the Act.
The large employer mandate requires that big businesses, defined as those with fifty or more full-time employees, provide health insurance for their employees. The Act requires that this coverage meet certain minimum standards. These heightened standards will likely increase the already high premiums paid by the employers for these insurance plans. The penalty for failing to comply with these standards can result in fines of up to $40,000.
This impending financial burden has caused many companies to act now to avoid facing punitive actions from the government later. Some employers have transferred full-time employees to part-time positions in order to avoid having the minimum number of full-time employees to fall under the ambit of the Act. Other companies have even resorted to laying employees off.
This trend may have catastrophic results not only for individual employees who may lose their jobs or full-time positions, but for the employer as well. It stands to reason that these companies, by getting rid of valued employees, may no longer have the manpower to remain competitive in their field. This could result in additional financial losses and may even cause some businesses to close their doors.
This is all very speculative at this time; we won’t know with any kind of certainty the impact that that Act will have on these types of businesses until the large business mandate takes effect. By delaying the enforcement of this provision of the Act, some businesses may be able to plan for the added financial responsibility. If they do not, however, the consequences could be disastrous.
Advantages of Employer-Provided Day Care
As more and more employers are realizing that finding convenient child care is an issue for many of their employees, many companies have begun to offer on-site daycare services. These services provide many advantages not only to employees, but to employers as well.
For employees, one huge advantage of on-site day care is the ability to check on their children during coffee or lunch breaks to make sure they are being properly cared for. This can ease a worker’s mind with respect to worrying about their children so they are able to concentrate more on their jobs. On-site daycare can also be a huge timesaver and source of convenience for parents who may otherwise have to travel long distances before and after work to bring their children to daycare.
Providing on-site daycare is often in the best interest of the employer as well. In a work force where many people struggle to find a balance between work and home, such a perk is a huge advantage in both recruiting and job retention where employees may otherwise be unable or unwilling to work outside the home. On-site day care is also deemed to be excellent for employee morale, as employees who are able to interact with their children during the work day are more positive and happy with their employers. This can often result in increased productivity from employees.
Although it may not be feasible for all employers to provide on-site daycare, it is hard to argue with the obvious benefits to both businesses and their employees who are able to provide this service.
Prepared by Katie L. Renda