Owners and employees alike know that small businesses present distinct advantages and disadvantages as compared with their larger counterparts. Many would argue that what small businesses might lack in things like career-ladder opportunity and perks, they more than make up for in autonomy, atmosphere and morale.
Now comes yet another entry on the plus side of the small-business ledger, as reported on Inc.com. According to data collected and analyzed by PayScale, employees in small businesses may be paid better than those in larger companies. In fact, PayScale’s quarterly analysis of full-time salary trends suggests that wage growth in small businesses is beating the ‘big boys’ hands down.
Can that be? Apparently it can.
On the company’s blog, PayScale’s lead economist explains:
While the headlines oftentimes go to the large-sized companies, The PayScale Index for the second consecutive quarter showed wage growth for small companies outpacing medium and large companies,” she said. “Wages in Q4 2012 grew by 2.2 percent for small companies compared to only 1 percent for medium companies and 0.9 percent for large companies. …small companies [experienced] almost 5 percent year-over-year wage growth, compared to only 2.7 percent for medium companies and 3.3 percent for large companies.”
Impressive. So why the strong showing in small business wages?
A PayScale chart shows a sharp decline during the worst of the recession but also a sharp increase in the last three quarters of last year. This may suggest that small businesses (defined here as those with up to 99 employees), although hit hard by the downturn, may also be flexible and agile enough to be bouncing back more quickly now.
Meanwhile, openforum.com portrays more of a good news-bad news scenario with respect to small business pay increases. This article cites an Aon Hewitt study that shows that although average annual pay raises hit an all-time low of 1.8 percent in 2009, since that time, pay has been slowly inching upward. Last year, increases for exempt employees hit 2.8 percent and are predicted to reach 3 percent this year.
Good news, right? And long overdue. Not entirely: It’s likely that pre-recession levels—said to be 4 percent or more—may be gone forever. Many expect smaller rates of increase to be a ‘new normal,’ held in check, in part, by intensifying global competition.
The openforum.com article also cites December’s Sure Payroll Small Business Scorecard, that found that small business paychecks are down 1.2 percent nationwide. Sure Payroll tracks hiring and salary data for more than 35,000 of the smallest businesses (average number of employees: eight).
The Sure Payroll data indicates that only the Southern U.S. shows positive movement, with hiring and paychecks both up year-after-year. Small business hiring declined most year-after-year in the West, while the worst decline in salary growth (year-after-year) is in the Northeast.
Aon Hewitt did apparently find a single ray of hope for small business owners and their employees: A growing trend in performance-based pay (as in bonuses), as opposed to straight salary increases. More and more businesses are going in this direction, because these ‘variable pay’ scenarios give employers a way to tie pay to results and employees, something to work toward and a sense of control over some portion of their financial destiny.
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