Hiring Down, Salaries Up

Small businesses rely on creative strategies while adjusting to 2006 trends

For the small-business economy, last year ended on a mixed note with hiring down and salaries up, according to two scorecard indexes issued by SurePayroll, a Glenview, Illinois-based firm that offers payroll services to small businesses. As a result, small-business owners are using creative ways to stay productive without being threatened by higher salary costs.

By analyzing the payroll data, hiring practices, and salary information from more than 18,000 small businesses, the SurePayroll Hiring Index reports small-business hiring decreased slightly (by 0.2%) in 2006, while the SurePayroll Pay Index shows salaries ended up 7.4% last year. However, SurePayroll President Michael Alter projects a modest increase in small-business hiring for 2007.

The SurePayroll Pay Index for the end of December 2006 was 1,018, with the average small-business salary across the nation standing at an annualized rate of $31,292. Alter says rising salaries and labor scarcity will become growing issues for small-business owners, who must increasingly bid for talent against larger companies with deeper pockets.

“Small-business owners are experiencing costs that are significantly higher than they were a year or a year and a half ago,” explains Alter. “When you hire new employees, oftentimes they want health insurance. And health insurance costs have increased significantly in the last three or four years. That’s why you are seeing a lot of pressure and stagnant growth.”

As a result, small businesses are doing more outsourcing in certain noncore areas instead of hiring full-time employees. “Small-business owners are using contract workers or outsourcing certain jobs that aren’t critical to them,” says Alter. “[They outsource] jobs that are not worth justifying a full-time employee, like accounting. The owner is doing it or using an accountant or bookkeeper on an hourly basis and outsourcing the payroll.”

Karen Hinds, president of Workplace Success Group, a business consulting firm in Waterbury, Connecticut, agrees that small-business owners need to be creative when finding good workers while keeping labor costs down. “We seek independent contractors,” says Hinds, who saves money by not having to pay benefits for them. “Then, when we find a good person, we pay them nicely to come in and just work for us.”

Additionally, Hinds uses college interns to “get basic tasks done for very little or no cost.” You can easily set up internships by contacting the business department at your local college, says Hinds. And, if an intern proves to be a good worker, you can offer him or her a job after graduation.

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