Entrepreneur Mark Cuban famously calls small business owners the ‘backbone of the US economy,’ a declaration that’s hard to dispute. In fact, 86% of US adults favorably view how these innovators drive economic growth. It’s no wonder, considering SMBs make up nearly half of total private-sector employment (46%) — that’s roughly six million jobs. Think of small businesses as the batteries (cue the Energizer bunny) that keep the economy going, and going, and going.
The point is that with such a vital role, who better to turn to for insights on what the year ahead has in store? This doesn’t mean that business ownership is a walk in the park. Often, it means keeping up with a bevy of back-office tasks, thinking on your feet, and taking on the highs and lows that each day brings.
With this in mind, OnPay surveyed over 1,000 “entrepreneurial pathfinders” to see what they are thinking about hiring, the advent of artificial intelligence, benefits they offer — and the ones they aspire to put in the hands of their employees. We also discovered how they are feeling about what’s on the horizon.
Survey methodology
OnPay’s market survey came together during the fourth quarter of 2024. We engaged businesses across various industries, age demographics, employee count, and business age to get input from various companies. Topics ran the gamut from:
- Artificial intelligence
- Benefits administration and human resources
- Federal and state compliance
- Running payroll
- Time tracking
To get below the surface, we did more than ask a few “yes-or-no” questions. Topics ranged from how owners handle human resource tasks to real-world applications like incorporating artificial intelligence into their company operations and even the reasons behind offering health insurance. So whether you’re just starting out or you’ve been in business for years, you’ll walk away with practical ideas you can use in your own company.
Who are these movers and shakers?
Most of these employers run lean operations, which typically means that a “can-do” attitude comes with the territory.
- Over half (56%) have 1 to 5 employees on the payroll
- 30% have one employee (themselves)
- 26% have two to five employees
- Nearly 88% have 1 to 20 employees
With teams on the smaller side, it’s safe to say that most of these “doers” have zero qualms about rolling up their sleeves.
Age range
It was important to engage a variety of age groups to get a perspective that all employers could relate to.
- About 17% are between the ages of 22 through 34
- Four out of five SMB owners are 35 or older
- Over 60% of SMBs are in the 35 to 54 age range
How long have they been running a business?
In addition to different age demographics, we made sure to include business owners at almost every stage — from those starting out in the last six months to those with over a decade of experience.
- A handful had just opened their doors, and 5% shared that they had been in business less than a year
- Over 50% had more than five years of experience making their mark on the economy
- More than one-third of businesses have operated for over 10 years, with the remaining businesses split fairly evenly (around 20% each) among those operating for 1-3 years, 3-5 years, and 5-10 years
Who do small businesses hire?
In some cases, running a business means having the wherewithal to know when to let others lend a hand. For many, that means deciding when to farm out projects to independent contractors, when to hire full-time employees, or when to stick with a mix of both.
Nearly half of the companies that answered our survey questions have W-2 employees on the payroll, while almost 42% hire 1099 contractors. Just over 1% employer international workers.
Remote recruitment rundown
Overwhelmingly, most of the personnel that employers bring on board are close to home, as less than 13% of companies have staffers in multiple states.
But it does not mean that sourcing talent from out-of-state hasn’t crossed their minds. Most of the people we polled are open to the possibility of hiring remote workers if the opportunity arises.
Which sectors do small businesses specialize in?
There are no surprises here — most of the top-mentioned industries are those that consumers would recognize. Even the business types outside the top five, like real estate, farming, agriculture, or banking, are familiar to most consumers.
Top five industries:
- Construction
- Retail
- Professional services
- Restaurants/hospitality/tourism
- Healthcare
High-level sentiment and observations
What is on the minds of these movers and shakers as the new year begins? Many are thinking about the costs associated with running their business. A little over 65% would like to see inflation inch down, while 56% have worrisome overhead expenditures. This data mirrors macroeconomic trends due to increased inflation and the general cost of goods.
One question that gave our participants pause over the next 12 months revealed that a little over 65% view business growth and expansion as a concern. Interestingly, this metric also aligns with SMBs’ goals for 2025. In other words, while business expansion and revenue generation present challenges, they are also key objectives these dynamos strive to achieve. We’ll dive deeper into the goals these small business mavens aim to make a reality later in this article.
Taking care of tasks
A business owner’s day typically involves squeezing each moment to complete meaningful tasks. So, it wasn’t too eye-opening to find that over half feel they are playing “catch-up” and could use more time to tackle their to-do lists.
Moving on, a third of participants find that customer retention is keeping them on their toes. Regarding the pace of technology, small business owners are feeling winded. Over 33% find it a bit of a puzzle to stay up to date (further into the report, we go down the rabbit hole about how they feel about the topic of artificial intelligence). However, when it comes to the category of compliance, over 35% feel comfortable keeping up with requirements where they do business.
Team dynamics
A Glassdoor study found that over half of employees would pick a positive work culture in lieu of a higher salary. It seems that many job seekers are keeping their eyes peeled for an employer that can deliver on this promise. Let’s see how our employers feel they are doing on this front.
We found that survey respondents are doing a good job of fostering a company culture that works for everyone. Only 16% shared that their recruiting talent keeps them up at night. Another sign that work culture means more than having a foosball table in the break room is that as the year progresses, only 18% of employers we talked to are concerned about employee retention.
Before we move on to what these “bootstrapping bosses” hope to achieve as the months go by, it was interesting to see that only 21% are considering steps to borrow capital this year. Even with questions swirling about the price of goods and concerns around inflation, most are betting on themselves to make things happen. It’s another sign that even though many are being cautious, there is optimism that good things are around the corner.
What do small businesses want to accomplish this year?
Despite the economy’s ebb and flow, it’s not dampening long-term goals. In fact, it is safe to say that most who participated in our survey started the year by hitting the ground running.
As the year goes on, over 90% have made increasing revenue a target. Though we touched on some of the concerns these go-getters have a little earlier in the article, there are clues that employers are optimistic about the future. Before the year ends, nearly 60% want to offer their employees health benefits, while almost half of those who took OnPay’s survey want to increase hiring this year.
Of those who feel they need more time in the day, 80% are prioritizing getting their arms around operations before the end of the year. Speaking of which, we asked what they would put on their wish list of items to hand to someone else.
What tasks do small businesses want to delegate?
The top task to delegate is bookkeeping, as nearly 30% say it would be helpful to put someone else in charge.
In second place? Running payroll. And though it’s often exciting to bring on talented people as a company grows, the paperwork that comes with it can be cumbersome. To get more time on the calendar, over a quarter of participants would prefer to hand over the reins of onboarding and training new hires.
How do small businesses feel about artificial intelligence?
Considering that the Small Business Association has dedicated an entire section of its website to how small business owners can use AI to streamline operations, it may provide a clue into what adoption may be like in the coming years.
But what did OnPay’s survey uncover? Roughly 86% of SMBs have a neutral or positive sentiment. But is that the whole story when gauging the small business appetite for AI?
While some remain indifferent, as the year unfolds more than half of the “envelope-pushing proprietors” we polled are actively considering how to make the most of AI. This data point syncs with other studies showing that more small businesses are adopting AI. But how are they going to use it?
Marketing is the top-of-mind use case (51%), with reporting and analytics a close second (50%). Rounding out the top three is a nod to the bottom line, as these “doers” see AI as an opportunity to balance budgets.
We’d be remiss not to address what many might call the AI elephant in the room: will this technology affect the number of people that small businesses keep on staff? Though trepidation exists around machine learning, people in the talent pool don’t see it as a threat. Some studies show that 4 out of 5 workers think taking advantage of tools will make them even more productive and attractive to employers.
This number lines up with our findings. Over 70% of the small businesses that participated in our survey have zero plans to reduce headcount despite the availability of tools such as Claude, Perplexity, and ChatGPT.
The takeaway? Quality people still move an organization forward. One more piece of data to highlight is that these small business self-starters do see the advent of AI helping with administrative tasks. Specifically, over 33% recognize the potential to cut down on some of the action items that come with growing a business and building a team. Speaking of back-office duties, let’s look at how owner-operators tackle the HR responsibilities that round out their already-packed task lists.
Who handles human resources?
Bringing on new hires can be exciting — for some entrepreneurs, it’s even a sign that they’re taking a big step forward in their business growth. But building a team also comes with an avalanche of administration. For instance, employers need to:
- Have new employees complete W-4s on their start date, so that tax withholding goes off without a hitch
- Enroll eligible employees in benefits programs like health insurance or retirement plans
- Set up payroll to ensure that employees are paid accurately and on time
- Make sure I-9 forms are filled out when employees join your team
- Share new hire reporting to the state
Whew! So, who is handling all this stuff? Nearly two-thirds of small businesses handle human resources themselves. An interesting development from this year’s survey is that just over 65% of business owners take on HR tasks without help, compared to 55% in 2024. Additionally, 23% sought help with human resources from a colleague, while the number in 2024 was 29%.
As we noted earlier, some think AI could improve administrative tasks, so this number may not be that earth-shattering.
HR heavy lifting
Small businesses are leveraging HR software most heavily for employee onboarding (63%), followed by background checks (55%), and employee certification and training (51%).
Source: OnPay 2025 small business outlook
Paying people
Of the responsibilities that employers have, payday is the one most of their employees have top-of-mind. So, how do business owners make sure this task goes off without a hitch?
SMBs use various methods to ensure that wages get from point A to point B. Nearly 54% of employers use payroll software to pay staffers (an increase from last year when the number was 49%). Others ask their accountant to handle this critical task (almost 18%), a dip from 2024 when it hovered around the 23% mark.
Interestingly, 18% are using spreadsheets to keep track of the numbers — precisely the same response as in 2024. And before you ask, no, we did not have an option to see if anyone uses pen and paper! That said, those tiny business trailblazers looking to take their number crunching in a different direction may be wondering how to start shopping for a software platform.
Savvy software shopping
With so much information at our fingertips these days, we asked our participants to “pull back the curtain” on how they pick the payroll solution that best suits their business. A lot of them used real-world insights — in many cases, starting their search by picking the brain of a small business peer.
For example, over 70% sought the first-hand experience of those in their network. That said, they also looked for feedback outside their circle of trust. More than 60% headed to review sites such as G2 and Capterra to hear from their small business peers about which platforms they choose.
It was interesting to see that online social communities like Quora and Reddit are gaining traction as trusted sources for decision-making. Over 55% are combing through the comments on these platforms for first-person insights into how businesses pay their people. This likely has to do with search engine giant Google giving more digital real estate to opinions and first-person expertise in their results this past year.
When it comes to who is calling the shots on which solution to purchase, a majority of our survey participants are involved when it’s time to make a decision.
- Employer makes this decision on their own: 66.84%
- Employer makes this decision with another colleague: 28.38%
- Another colleague made the decision: 2.39%
In addition to how they pay employees, we also had questions about the different tools that pioneering proprietors have in their tech stack.
What other types of software businesses use to manage their team and operations?
Much of the technology revolves around keeping business operations on track, from ensuring that customers know how much they owe, to tracking employee hours.
Hand writing or manually generating individual invoices is likely to be last on the list when it comes to efficiency. Seeing invoicing software (47%) top this list seems like a no-brainer. Nipping at its heels is accounting software, which makes sense even though many who took our survey (over 40%) want to delegate bookkeeping.
What features do you use within your time tracking software?
As the saying goes, there’s only so much time in a day (and earlier in the article, we shared that many SMBs are trying to use each minute more efficiently). To dig a little deeper, we asked companies what features in their time tracking software they use most to keep operations running smoothly.
The clear chart-topper for time clock software usage is scheduling hours at 65%. Following that, nearly 35% of survey respondents use their time tracking tools primarily for reporting. While needs vary by company, reporting features typically help ensure payroll accuracy by tracking individual employee hours, total team hours worked, and identifying any potential overtime that needs to be accounted for.
Identity verification ranks third at 33.2%, serving two important purposes. First, it prevents “buddy punching” – when one employee clocks in for another who isn’t present – from becoming wide spread. Second, with an increasing number of online fraudsters trying to circumvent company networks, it provides an additional layer of protection against phishing attempts and network breaches.
Affinity for accounting professionals
Beyond tools of the trade, we also wanted to learn more about how often small businesses rely on accountants for outside help. In previous years, we have found that while not all choose to work with accounting professionals, when they do, they are typically the confidants SMBs put the most trust in for business decisions.
Nearly 43% are working with an accounting pro — that’s up almost 13% from when we first asked this same question in 2019. SMBs are increasingly looking to professional number crunchers for help. But are they happy with the results?
It appears so. A whopping 90-plus percent are either “satisfied” or “very satisfied” with their client-consultant relationship. To understand how this level of satisfaction is being achieved, it made sense to get a breakdown of the breadth of services being offered by these accounting pros.
What services does your accountant currently provide for you?
Earlier in this report, we shared that running payroll is one of the top three tasks SMBs want to delegate. Seeing it appear as the top project (56%) that accountants take on was hardly a surprise.
| What types of services does your accountant provide your business? |
| Running payroll: 56% |
Employee benefits administration: 25% |
| Tax planning and compliance: 56% |
Business planning and strategic advice: 22% |
| Tax credit assistance: 50% |
Business analytics and reporting: 19% |
| Accounts payable/receivable: 49% |
HR Support: 16% |
| Financial planning: 33% |
Compensation analysis: 12% |
| Business formation and state registrations: 28% |
Labor law compliance: 11% |
| Cash flow consulting: 26% |
Industry forecasting: 7% |
Earlier in this report, we shared that running payroll is one of the top three tasks SMBs want off their to-do list. Seeing it appear as the top project (56%) that accountants take on was hardly a surprise. Coming in at a close second is tax planning and compliance (55%).
This list shows that many small business standouts expect more from the accounting professionals they work with than just help with the math.
Did you know?
According to our survey data, over 75% of small businesses rate their level of communication with their accountant as either good or excellent.
Source: OnPay 2025 small business outlook
Benefits and perks
When seeking an employer, in most cases, top-performing employees want more than a competitive salary. Company owners are cognizant of this fact. Those we surveyed seem to understand the importance of employee benefits in attracting and retaining people who could make a difference in their company’s goals. If the proof is in the pudding, what are employers offering in the way of employee perks?
Our research found that 56% of businesses count health insurance coverage among the benefits they offer their employees. Thirty-seven percent give job seekers perks to sink their teeth into, as dental insurance comes second. Rounding out the top three at 32% is vision coverage.
Our data suggests that health insurance is the perk that puts the cherry on top of employer benefits programs. But why is this the case? What are the drivers that make healthcare the main attraction for business owners? We delved a little deeper to find out.
Employers realize that the most important asset is the people they bring on board. Over 35% cite employee well-being as the main reason for adopting a policy. And with nearly 28% recognizing the impact a health policy can have to attracting job seekers (and encouraging those already on the team to stick around), it’s safe to say that coverage means more to a business than dollars and cents. It contributes to the overall health of an organization.
Though we found no shortage of benefits employers use to attract job seekers, they are still thinking about what else they can offer to put their company above the competition.
Outside of health insurance, almost a quarter would like to make life insurance a future offering, while 23% have their sights set on making access to retirement savings — such as a 401(k) — part of the program. Offering access to a retirement savings program makes good business sense and may keep top talent from looking at other job opportunities. It’s increasingly becoming a compliance-related checklist item as more states pass legislation mandating that employers offer their employees a way to sock away savings for retirement.
Also on the “wish list” of benefits employers are interested in offering are disability insurance (18%), employer assistance programs (EAPs) (16%), and educational assistance (15%), among many others.
On that note, let’s see how these “doers” stay compliant where they do business and in the eyes of Uncle Sam.
Compliance confidence
From a growing number of states that require paid and family medical leave to making sure that you are getting Form W-3’s together to report combined employee income to the Internal Revenue Service (IRS) and the Social Security Administration, keeping up with federal and state rules can feel like a full-time job.
How confident are you that you can stay compliant with changing federal and state regulations?
Over 80% of responses show that SMBs are ahead of the game with local and federal regulations.
Less than 2% feel that they are having trouble keeping their head above water. If you are an employer in this boat, read on as we asked those keeping up with all the rules about the essential resources they count on.
Almost 60% go straight to the source in the state where they do business, keeping tabs on local government websites. And in second place—a tie? To keep pace with Uncle Sam, nearly half use the resources that federal agencies make available, as well as different search engines such as Google and DuckDuckGo.
Another interesting data point? Many enterprising entrepreneurs are getting the information they need from online communities where business owners congregate. Previously, OnPay found that around 8% headed to social media for compliance-related crowdsourcing. In our latest study, that figure almost doubled, ending up just a fraction below 16%.
To take this a step further, in our findings last year only 2% counted on first-person advice on forums such as Quora and Reddit. In OnPay’s latest survey? This jumped to over 11%. It seems first-person experience is emerging as another method to make sure all ducks are in their proverbial row.
Which requirements do businesses feel comfortable keeping up with?
For many of the rules employers need to monitor, you could say they are cool, calm, and compliant.
With the flurry of ballot measures moving forward in recent years, we found that many employers (80%) keep minimum wage top of mind. For example, in Michigan, the minimum wage went up on January 1, 2025 and is scheduled to go up again on February 21, 2025. Alaska’s minimum wage increased on January 1 of this year and then joins a growing number of jurisdictions that have mandatory minimum wage increases in July.
Along with these wage changes, most employers know that they need to post labor law posters where employees can see them.
Almost three-quarters are keeping pace with legislation around paid family and medical leave. In recent years Colorado has put laws on the books, while states like Minnesota have programs in the works. There are also some interesting numbers around liability in the workplace — namely, workers’ compensation.
What about workers’ compensation?
Also known as workman’s comp, this coverage is a legal must-have except in Texas and South Dakota. (Even there, it is still highly recommended for most businesses to have coverage.) Why does this coverage get so much attention? These policies protect employees and employers plus provide powerful peace of mind. For instance, if a worker becomes ill or is injured while on the job, it can supplement a person’s income if they need time away from work. On the other hand, it can help employers insulate themselves from liability and ensure that if an incident occurs, their staffers are taken care of.
Surely this must mean that small business workers’ comp insurance is standard at every company, right? Let’s move on to the data.
Almost a third of the business owners we polled are going without a workers’ comp policy.
Why are some companies letting workers’ comp fall by the wayside?
This may relate to one of the topics we touched on earlier: over half of the business owners we surveyed feel that they need more time in the day to complete all the items on their checklist. Setting up a policy does take a little bit of legwork, but in recent years has become less cumbersome. Even though nearly 85% of employers know workers’ comp is almost universally a requirement across states, they may not be aware that there is a simpler way to implement a policy.
In the past with a traditional policy, employers would have to pay upfront sums to brokers, manually communicating every employee change. It required estimating your workforce for the entire year and you would usually pay a large lump sum upfront. At year’s end, you could get a surprise bill, or a small refund based on whether your team grew or shrank.
Policies such as pay-as-you-go workers’ comp can sync premiums to each pay run, automatically adjusting as new hires join or when workers leave. This automates premiums so that cash flow isn’t unnecessarily affected. It also saves “back and forth” communications with your broker on employee counts, and provides more predictable and transparent insurance costs.
Toward the beginning of this article we shared that over 80% of businesses have made it a goal this year to increase operational efficiencies. So, there’s a good chance that at least a chunk of the 30-plus percent of employers without workers’ comp will consider it when they see available options such as pay-as-you-go.
Small businesses shoulder the economy
It’s no stretch to say that small business owners are the economy’s unsung heroes. More often than not when roadblocks rear their heads, these dynamos don’t back down. Instead, they put bold plans into action, set ambitious goals, find ways to help their teams grow, and aim for the stars. Even when their task lists are overflowing, business owners are natural optimists, often seeing the glass as half-full. Through all the slings and arrows, they remain steadfast in caring for their teams, knowing that a bit of planning today can lead to greater rewards tomorrow.
