Small businesses hang tight to staffs

A new report shows that employees of smaller companies might be having an easier time hanging on to their jobs during the recession.

The SurePayroll Small Business Scorecard revealed that operations with fewer than 100 employees have worked hard to hang onto their staffs, even as unemployment has burgeoned nationwide and across Nevada.

Staff counts among small businesses in Nevada dropped 0.7 percent from Jan. 1 to March 31, settling at 4.78 workers per company, the report said. It's a smaller decline in staffing than Michael Alter, president of Glenview, Ill.-based paycheck-servicing company SurePayroll, said he expected to see, given massive job loss in Nevada. The Silver State's unemployment rate hit 10.1 percent in February, compared with a national rate of 8.6 percent.

But even as small businesses across Nevada shrank slightly, the average size of the paychecks they issued in the first quarter rose 1.8 percent, to a statewide average of about $34,300.

Nationally, small businesses expanded their work forces by 0.8 percent, while their paychecks dropped 1.8 percent. SurePayroll sifted through data from 25,000 companies nationwide to get the results.

Douglas Jones, branch and regional manager of Marathon Staffing Group in Las Vegas, said he's spotted the slightly smaller staffs and bigger paychecks SurePayroll indicated in Nevada.

"We're seeing a small decline (in staffs) among small businesses, not dramatic declines like we're seeing with larger employers," Jones said. "There seems to be a willingness to retain employees and weather the downturn. It's sort of a loyalty thing."

Take Marathon itself as an example. The number of temporary workers the company placed in 2008 was roughly half the number it placed in 2007. Despite the big decline in business, Marathon hasn't relinquished any of its five employees.

It's easier for small companies to hang onto their workers, Jones said. Big companies typically must answer to stockholders and strict budgets, while owners of smaller concerns can make judgment calls to retain workers even if it'll hurt financially. Plus, jobs at smaller operations often carry steep learning curves: One employee might perform several tasks, as opposed to the specialized job functions that exist at most larger businesses. And it takes time to train a worker to wear a lot of hats, Jones noted.

Though Marathon's small-business clients cut staffs slightly, they handed out bigger paychecks, not because employees collected raises, but because fewer workers now handle business. It's overtime that's improving workers' bottom lines, Jones said.

Excella Communications, a local phone-service provider, bucked the hiring trend SurePayroll observed, and it also improved paychecks.

Excella Chief Executive Officer Jack Pestaner attributed the increases to a change in the company's business strategy. A year ago, the phone company's new owners saw a growing number of households dropping land lines for cell phones. They moved aggressively into the small- and medium-sized business arena to buffer against any declines in residential business, and they added extra functions including computer integration, information technology and voice-over-Internet-protocol phone service.

To accommodate the new business, Excella added eight salespeople, two technicians and a finance professional, taking the company's labor force to 47 workers. Paychecks rose as the company's work force transformed from a largely customer service-oriented staff to a highly skilled technical group. On top of the fatter paychecks, Excella added insurance coverage for most of its employees. The change in strategy has paid dividends, as recession-racked businesses have shown more interest in shopping around to save cash on essentials such as utilities.

"We've done really well on the business side," Pestaner said. "It's been one of our big sources for adding jobs."

SurePayroll's survey also found a substantial spike in optimism among small-business owners nationwide.

Less than half -- 48 percent -- of small-business owners the company surveyed said they felt good about the economy in February. The share of owners expressing positive sentiments jumped to 71 percent in March.

Alter said entrepreneurs who reported improved outlooks did so based on trends within their companies.

"They're seeing results in their business. They're seeing cash flows and revenues that are making them optimistic," Alter said. "A lot of what I hear is that it was as if the world stopped in January and February, like everything fell off a cliff. In March, they've seen things start to rebound, stabilize and come back."

SurePayroll doesn't segment its optimism data state by state, but Alter noted that the percentage of upbeat owners in Las Vegas should trend below the national average, because the economy here took an especially hard hit from the slumping housing market. It could take the rest of 2009 for improved feelings to emerge here, he added.

But Pestaner and Jones, at least, said they feel good about the future.

A housing market that's retreated to median prices from 2002 should promote strong growth once the economy rebounds, Pestaner said.

"There aren't many big cities in the country where people can live on a $50,000-a-year salary and buy a house," he said. "They certainly won't be able to do that in California, the Northwest or the Northeast. That's going to be really attractive to businesses who want to be able to get good employees to come here and live."

At Marathon, a slight uptick in business became a bright spot in a company conference call earlier this week. Branch managers from the seven states in which Marathon operates all reported modest pickups in clients and businesses from February to March.

For Jones, it's a potential harbinger of broader economic improvement. Staffing agencies generally experience recovery sooner than other types of businesses, because companies looking to staff up amid harder times avoid the risk of hiring full-timers as sales begin to improve and go instead with temporary help.

"From our end, we're feeling a strong optimism for the beginnings of a positive turn," Jones said. "It's a feeling from the business-client side that there is something there. They tell us they're not ready to say things are good, but they're covering work. They're optimistic, but very guarded."

Contact reporter Jennifer Robison at jrobison@reviewjournal.com or 702-380-4512.