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Small Businesses Basing Pay More On Performance

The raises at Christine Perkett's public relations firm are about 2 percent lower than they were before the recession. She had stopped giving increases to workers at Boston-based Perkett PR in early 2009 and also laid off half her staff of 30. The company had suffered along with other public relations firms; clients' marketing budgets were one of the first expenses cut when the recession hit.

Perkett started giving raises again a year and a-half ago. But increases are smaller than in the past, and Perkett is also giving out fewer bonuses. Employees have to work harder to get a bonus. Before the recession they were rewarded for bringing in clients. Now they also have to show they're working hard to keep them.

"They're more performance based than 'thank you for doing your job" based,'" she says.

Perkett is also giving non-cash rewards like extra vacation days. She also has staffers vote each month for the company's most valuable player. The winner gets a small gift card.

"They're tiny things, but they're a thank you and an incentive," she says.

Companies that provide payroll services say the average pay levels at small businesses show how cautious owners still are about raises.

According to an analysis done by the payroll company Paychex, the average monthly paycheck at small businesses in November was 1 percent larger than it was a year earlier. In April 2011, by contrast, the average paycheck was up 3 percent from April 2010. Paychex bases its numbers on pay at more than 500,000 companies.

Raises were likely higher in early 2011 because companies were compensating employees for pay that was frozen or cut during the recession, says Frank Fiorelle, the senior director of risk management at Paychex. The slowing trend now may be reflecting the weaker economy, he says.

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