Data Show Small Firms Hiring Contractors at Lower Salaries
Small businesses are hiring, but are paying lower salaries, according to new data from payroll firm SurePayroll.
The company's February data show that hiring increased by 0.3 percent over January. Year to date, hiring is up 0.6 percent.
However, the data also show that most of the new hires are contractors -- for every 100 workers engaged by small businesses in January, 3.82 are 1099 independent contractors and 96.18 are W-2 employees. This is up from 3.78 percent in the prior month, and it's the highest level SurePayroll has seen its "Contractor Index" since it started publishing economic data.
Small businesses are hiring contractors in lieu of salaried employees because the nation's economic future is uncertain, and it's easier to terminate a contractor than to terminate an employee, said SurePayroll President Michael Alter. Contractors also cost small businesses less because they don't receive benefits, and employers are not required to withhold employer payroll taxes for contractors.
The data also show that the Midwest, Northeast and South experienced hiring growth in February. The West experienced a hiring contraction. Monthly hiring gains for these regions were 0.6 percent, 0.7 percent, 0.5 percent and -0.2 percent, respectively. The Northeast led the country in small business growth for February and January.
The numbers are based on actual payroll data for about 25,000 small businesses and SurePayroll defines a small firm as having 100 or fewer workers.
By Sharon McLoone |
March 6, 2009; 8:05 AM ET
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