Big Bonus

Entrepreneur, March, 2002 by Chris Sandlund

Firms with fewer than 20 employees spent $6,975 per employee complying with federal regulations in 2000. That's 56 percent more than the amount spent by companies with 500 employees or more, says a new report by the SBA's Office of Advocacy.

"This cost differential is not brought on by any inefficiency in the ways they operate," says Thomas Hopkins, dean of Rochester Institute of Technology's College of Business in Rochester, New York, and co-author of the report. "It's just the hard facts of economies of scale."

The biggest differences come with environmental regulation and tax compliance. Outsourcing payroll can lower the cost of tax compliance, says Hopkins, but it doesn't buy you the efficiencies corporations get with in-house financial systems.

Rather than work around the regulations, Hopkins suggests lobbying Congress through trade associations or the SBA's Office of Advocacy. Says Hopkins. "Make sure the word gets through to the decision-makers in Congress and at the [regulatory] agencies that the problem is a real one," he says.

With 56 percent more cash spent per employee at stake, it's worth a letter.

Business writer CHRIS SANDLUND (csandlund@entrepreneur.com) writes out of Cold Spring, New York