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Small Businesses Basing Pay More On Performance


NEW YORK (AP) â¿¿ Raises are no longer a sure thing at Warner Communications â¿¿ staffers at the public relations firm who were virtually assured of an annual salary bump before the recession have to work a lot harder to get an increase.

"Everyone needs to make a difference. It was always said, but never enforced until right now," says Carin Warner, owner of the company based in Manchester-by-the-Sea, Mass.

Yearly pay raises that workers at small businesses used to count on have become a casualty of the weak economy. They're increasingly based on performance â¿¿ not just an employee's performance, but the entire company's. Raises at many businesses are also smaller than they were before the recession began five years ago. And some employers are using rewards other than annual raises to compensate workers.

Warner expects all of her 15 employees â¿¿ even the newest ones â¿¿ to bring in new business in addition to doing an exemplary job taking care of current clients. Raises are also based on the company's revenue and profit.

"You have to look at an individual and at the overall agency's success. It's a mathematical formula that we must do," Warner says.

Warner is part of a growing trend of small businesses abandoning the idea that they must give their workers raises every year.

"The days of the traditional merit increases and cost of living increases seem, at least for now, to be behind us," says Carrie Cherveny, vice president of employment practices for AlphaStaff, a Fort Lauderdale, Fla.-based company that provides companies with human resources services such as payroll, benefits administration and hiring assistance. "What we are seeing is compensation tied to corporate performance â¿¿ you'll get a raise or bonus if we do well."

Whether they'll do well is the big question for many small business owners. Jobs and incomes are growing, but not fast enough to make them more confident that a healthy economy will give their sales a boost. The most recent monthly jobs report showed that U.S. employers hired 155,000 people in December, less than the 175,000 or more that would get economists excited.

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