How Much Do Small Businesses Pay Their Employees? It Varies Significantly By State — Here's the Full Ranking. Working for a small business can pay a lot more — or less — depending on where you live.

Running a small business is never easy, especially during inflationary periods. In 2023, when the average rate of inflation was 4.1%, 35% of small businesses reported reducing staff as a result of increasing costs, according to a survey of 1,000 small business owners conducted by OnePoll on behalf of Melio.

At the beginning of 2024, 22 states and 38 counties and cities raised their minimum wages, impacting 10 million workers across the country, per the American Institute for Economic Research — and the many small businesses who have them on their payroll.

Related: Here's What Millions of Small Businesses Have in Common, According to a New Survey

Where do small business owners have to pay their employees the most? The small business lending company OnDeck decided to find out more about this by analyzing U.S. Census Bureau data for businesses with fewer than 500 employees.

According to the research, Massachusetts, California and New York are the top three states where small business owners can expect to pay their employees the most, averaging annual salaries of $72,151, $67,237 and $66,924, respectively.

On the other end of the spectrum, small business owners pay their employees the lowest average annual salary in Mississippi — $39,310, according to the data.

Related: A Survey Asked Small Business Owners What They Really Care About in the 2024 Election — The Results Were Surprising

Check out the infographic below to see the full ranking compiled from OnDeck's research:

^{Image Credit: Courtesy of OnDeck}