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Small Businesses Basing Pay More On Performance

Managers at Ontraport, a company that makes marketing software for businesses, are willing to give big raises â¿¿ 10 percent or more â¿¿ but they're not guaranteed.

"We don't have a process in place where we just give automatic raises to everyone every year," says Landon Ray, CEO of the company based in Santa Barbara, Calif.

The company did well and kept growing during the recession. But Ray says it still needs to be careful. The biggest raises at Ontraport are intended to attract and keep top talent in the competitive high-tech industry, Ray says. Employees whose work is disappointing will find themselves left out when raises are given at mid-year.

Raises at Mercury Labs depend on how well the St. Louis-based video production and marketing company does. Salaries were frozen for more than a year from 2008-09, and owner Angie Lawing isn't sure about raises for this year because revenue slid 25 percent in 2012.

But Lawing has given her employees a chance to win a bonus by finding new business leads. One staffer got a $3,000 bonus for a lead that turned into a $30,000 contract. Lawing created the bonuses during the 2008 salary freeze.

"It's a response to some employees who were very disappointed at not having the ability to have an official raise," Lawing says. "We asked ourselves, 'how do we keep them and give them other incentives?'"

Workers at Tasty Catering get a raise only if the Glenview, Ill., corporate caterer reaches its quarterly profit goals.

"This has become a team thing," CEO Tom Walter says. "It's not a discretionary thing were people cuddle up to the boss to see if they can get a raise."

Tasty Catering gave no raises in the second half of 2012 because the company missed its goals for both the third and fourth quarters. Employees got the news at quarterly meetings held to discuss the company's revenue and profits. On Monday, staffers heard that 2013 looks like it will be a difficult year for the business. Raises and some perks like paid gym memberships are on hold, Walter says.

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