The Real Cost Of Compliance

For small business owners, the complexities of both local and federal regulations continue to grow, and so do the costs of staying compliant.

Have you thought about how much time, energy, and money you’ve spent understanding and implementing regulations?

Odds are, it’s quite a bit.

The 2017 NSBA Small Business Regulations Survey questioned many small business owners, and its findings demonstrated the toll that regulations are taking on businesses. Below we’ve highlighted some key facts on the cost of complying with regulations. 

Time Spent Dealing With Regulations

44 percent of small firms said that they spend 40 or more hours each year on federal regulations, and one in three spend more than 80 hours each year.

When it comes to state and local regulations, 30 percent spend 40 or more hours each year. Think about your own organization and the regulations that you have to deal with. Would you say that you spend around this much time each year? Any way you spin it, that is a full week of your time spent dealing with compliance, instead of focusing on your core business.

Money Spent on Regulations

On top of spending hours upon hours every year on regulations, small businesses are also realizing it’s not cheap to stay compliant in all areas. On average, small-business owners spend $12,000 in regulations every year.

Additionally, almost 50 percent of small businesses spend more than $5,000 every year in direct costs and an additional $5,000 in indirect costs for federal regulations.

For state and local regulations, more than 50 percent spend more than $1,000 in direct costs and an additional $1,000 in indirect costs.

That’s a lot of money, considering these aren’t one-time costs. How much does your organization have to pay every year? You could probably think of a few ways to spend that money growing your business instead.

Most Burdensome Regulations

What are all of the regulations that your organization has to deal with? This can vary by business industry, but there are several that affect almost every organization.

According to the survey, the top three regulatory areas that business owners consider “very burdensome” are:

  1. Affordable Care Act (43 percent).
  2. The Federal Tax Code (38 percent).
  3. Overtime Rules (27 percent).

Are any of these regulations on your list? One of the main reasons that these are the top three is because they’re constantly changing. The Affordable Care Act (ACA) is currently being repealed and replaced, tax codes are always being removed and reworked, and the overtime rules are currently on hold for the foreseeable future. It’s no wonder that small-business owners think these regulations are “very burdensome.”

The Owner Handles it all

In your organization, who handles the regulations ensures compliance? Most likely, it’s the small-business owner.

In fact, the survey revealed that the #1 regulatory expert is the small-business owner. It goes on to say that 14 percent of small-business owners spend more than 20 hours each month on federal regulations, and 25 percent of owners spend more than 10 hours each month. EACH MONTH. That’s a lot of time used to figure out all the applicable regulations.

Cutting Costs

So, now that you know the heavy burden of regulations and compliance, what can be done to lighten the load? One popular option is to have it outsourced and managed by a third-party organization, that way it’s out of the hands of the small-business owner. Usually, this is cheaper than hiring a full-time employee whose sole job would be to deal with all of the regulations.

Another way to cut costs and get peace of mind is finding a reliable online resource, such as, to help you stay up to date on all of your applicable regulations. Hiring a lawyer to decipher all of the incoming regulations and telling you what to do is another beneficial way to help you figure out how to stay compliant.

No matter what your organization decides to do, it’s important to realize the huge costs of compliance and regulations, and the impact they may be having on your organization right now.

How does your organization currently handle regulations? 

James Campbell

James Campbell is a District Sales Manager for Oasis, a Paychex® Company. By removing administrative obstacles, he allows growing companies to focus on what they do best. With the use of tailored technology and HR solutions, his clients operate their businesses more efficiently and cost effectively.


April 14, 2017

Posted by

James Campbell