A survey conducted by Glenview, Ill.-based online payroll company
SurePayroll found 71 percent of small business respondents indicated
they are optimistic about the midmarket economy. Of those who say they
are optimistic, 47 percent cited their own cash flows and revenues as
their primary reason for being positive.
Twelve percent cited the small business stimulus program as their
primary reason for being optimistic. Six percent attributed their
growing optimism to the recent performance of the stock market. The
remaining optimists cited a variety of other reasons, ranging from long
waits at local restaurants to strong faith to a belief that the typical
economic cycle is running its course.
In the first quarter of 2009, SurePayroll’s hiring index, which is
calculated from the payments made by more than 25,000 small businesses
that use the company’s payroll service, was up 0.8 percent. On an
annualized basis, that puts hiring on track to increase 3.4 percent for
calendar year 2009.
That good news was tempered by the company’s results from the pay
index, which found in the prior month, salaries dropped 0.81 percent.
That's two consecutive months of salary cuts. In fact, company CEO
Michael Alter says one has to go back to December 2004 to find salary
declines that exceeded the February 2009 and March 2009 drops. The
average small business annual paycheck in the United States is now
$31,039. In March 2008, it was $32,579.
However, for business owners, it's a buyers market, Alter says, because
employees can be hired for less money, and that drops right to the
bottom line for the business. “Businesses that are doing well enough to
hire are enjoying higher profits, assuming they are not having to lower
their prices to stimulate demand,” Alter says.
Alter says the ongoing trend of small businesses relying on fewer full
time employees and more on independent contractors continued in March.
SurePayroll Contractor Index. As of the end of March 2009, the
contractor index stood at 3.88 percent, which means for every 100
workers engaged by small businesses in February, nearly four are 1099
independent contractors and 96 are W-2 employees. Alter notes not only
is this is up from 3.82 percent in the prior month; it's also a record
high for the contractor index.
“In other words, more than ever before, small business owners are
opting to engage an independent contractor rather than hire an
employee,” says Alter. “In a down economy, this is exactly what we
expect to happen; would-be employees don't have much bargaining power
in this market, so they cannot demand full-time positions. Instead,
they agree to work as independent contractors.”
Alter says that's great for employers because the owners pay less in
payroll taxes and are not obligated to pay benefits. “However, it puts
the contractors in a difficult position, especially if they are new to
contracting and end up being surprised by the self-employment taxes
they will have to pay,” he says.
The survey, SurePayroll’s Small Business Scorecard, is taken monthly to
evaluate the state of small businesses across the United States. It was
completed on March 30 and consisted of 234 respondents randomly
selected from the 25,000 small businesses SurePayroll uses to calculate
their economic indices.
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