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Small Businesses Basing Pay More On Performance

Pay is down at the smallest companies, says Michael Alter, CEO of SurePayroll, another payroll processor. The company has 40,000 clients with an average of seven employees each, and the average paycheck was down 1.4 percent in 2012.

SurePayroll found in a survey of its clients that 61 percent were holding off on raises or yearend bonuses until they knew the outcome of negotiations in Congress on the fiscal cliff, the combination of tax increases and budget cuts scheduled to go into effect Jan. 1. But while most of SurePayroll's clients weren't hurt by the tax increases that Congress approved, they're still being cautious, Alter says.

"They are acting in a similar fashion to 2012," he says. "They expect low to moderate growth in their businesses, which they hope to be able to cover with productivity gains rather than needing to hire extra staff or having to pay a lot more to existing staff."

VoIP Supply had been giving bigger raises than it did during the recession â¿¿ in 2012, employees got increases between 4 percent and 6 percent, up from 2 percent to 4 percent. But the tax increase Congress passed for individuals earning at least $400,000 and households earning at least $450,000 may hurt raises at the Buffalo, N.Y., company, which sells telecommunications equipment.

CEO Ben Sayers expects the higher taxes to leave less money to put into the business. He'll still give employees cost of living and merit raises, but he doesn't know yet how much the tax increase will affect them.

"The bucket's going to be smaller than it would have been," he says.

Copyright 2011 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
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