SurePayroll Scorecard Show Salaries Up for January

Online payroll processing company SurePayroll announced today that while hiring remains flat in the small-business economy, small-business paychecks are rising. SurePayroll President Michael Alter offered his Small Business Scorecard for the first month of 2006, saying that numbers over the last two months have shown that, on average, small businesses are appropriately staffed to handle their current volume of business. “There are no major negative trends inducing small businesses to let employees go,” Alter says. “At the same time, they remain cautious about the future and are not willing to invest in new employees until they see some concrete evidence that revenue will increase.”

SALARIES ON THE RISE. With staffing at good levels, Alter reports that it was salaries that saw an up-tick in January. The SurePayroll Pay Index came in at 966 for the month, up 18 points (2 percent) from December. The average small business salary across the nation, according to the company’s survey of small business owners is $29,697.

“This is a strong rebound in small-business salaries, taking us to levels we haven’t seen since October 2004,” Alter says. “The turnaround started in June 2005 but gained strong momentum in August 2005. We’ve now had five straight months of rising salaries.”

Alter says finding qualified employees is a challenge for many small business owners and that they’re “upping the ante” with higher salaries in order to attract and retain good people. “In effect, they’re competing with larger companies for talent,” he says. “There appears to be strength in economic recovery for larger companies, but the small-business economy’s recovery is lagging behind.”

The net effect of higher wage costs for small business owners may be inflationary pressure on pricing, Alter suggests. “With their input costs rising, small business owners may have only two choices: accept lower profitability levels or increase their prices,” he says. “A third option of increasing productivity exists, but many small businesses are already running in a highly productive mode, doing more with less.”

This is true for the green industry, as reported in the 2005 Lawn & Landscape State of the Industry Report in October. “This year, the actions of green industry contractors reflect those of many business people in other industries – when costs rise yet the workload continues to grow, profits require streamlining systems and trying to do more with less,” the report says. “This pattern is evident when looking at a contractor’s average revenue per employee, which increased nearly $5,000 with fewer employees (16.6 vs. 17 workers) in previous years. While the difference in the number of employees may seem small, that’s $357.27 more revenue generated per employee ($2,891.39 vs. $2,534.12), which can add up to a lot based on a contractor’s business size.” (Read more from the 2005 State of the Industry report by clicking here.)

INDEPENDENT CONTRACTORS. As of the end of January, the SurePayroll Contractor Index stands at 3.28 percent. “That means that for every 100 workers engaged by small business, 3.28 are 1099 independent contractors and 96.72 are W2 employees,” Alter explains. “It's been hovering close to that range consistently for quite a while now. Flatness in our contractor index can be read as an indicator of economic strength. When small-business owners are more cautious about the economy, we tend to see increased use of independent contractors.”

REGIONAL PERFORMANCE. On a regional basis, SurePayroll reports that small business size is down year over year in both the South and Midwest, but is growing in the West and Northeast. Salaries, meanwhile, are up in all four regions. Individually, SurePayroll tracks employment and salary information for all 50 states, though 21 states (listed at right) have been designated as “benchmark states” for nationwide trends.

“Year to date, salaries are up in 20 of our 21 benchmark states, with Florida being the only state where salaries shrank in January,” Alter says, noting that firms increased in size in 11 of 21 benchmark states.