Salary Surge

Entrepreneurs kept hiring fewer people and paying existing employees more during the first quarter of 2006. The SurePayroll Small Business Scorecard, compiled by Skokie, Illinois, payroll service SurePayroll Inc., showed that the dual trends maintained the directions they have taken since midway through last year.

A strong, 2.7 percent nationwide salary increase for the quarter suggests to SurePayroll president Michael Alter that a talent war is underway among entrepreneurs. "People are trying to find the best employees or trying to trade up, and it's getting harder and harder," Alter says.

March's national average salary of $29,918 was up 3.3 percent from a year earlier, but Alter doubts the upswing is over. "We're not even close to 2004 levels," he notes. In January 2004, the wage index was at 1,000 and now rests at 973. "We have another 2.7 percent [to go] before we're back to where we were."

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The current 10,453 hiring index, on the other hand, is barely higher than it was a year ago at 10,444, thanks to a seven-month slide that set the index back approximately 0.1 percent. "We peaked in August of last year at 10,494, and we've been dropping ever since," Alter says.

The hiring and salary numbers, along with the slow but steady increase in the use of contract employees, suggest to Alter that small employers would like to expand hiring, but are reluctant to expose themselves to potential layoff costs. "People are continuing to try to adapt to an uncertain economic environment," he says.