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Small businesses are hiring more workers for less pay, according to September payroll data released by SurePayroll, a Chicago-based online payroll provider.

SurePayroll's Hiring Index, a measure of the average size of small businesses, rose to 10,252, a 2.5% increase for the year. However, as employment trends upward, average pay is trending down. SureParyroll's Pay Index, a measure of the average paycheck for small businesses, decreased to 967, a 3.3% drop for the year.

Both indices are calculated using data complied from SurePayroll's database of over 13,000 customers. A trailing 12-month average is used to account for seasonal changes. A small business is defined as having 1 to 100 employees. Each index is compared to baselines--10,000 and 1,000 respectively--established on January 1, 2004.

Part of the depressed pay figures can be linked to competitive and economic pressures experienced by employers. "Our customers are facing tremendous pricing pressure for their goods and services, " said Michael Alter, president of SurePayroll. "If they raise their prices, they would lose business. The only option they have to grow their business is to hire workers at lower pay. They also are prevented from paying more because the price of supplies, like oil, is going up."

Although it is too early to tell whether or not the trend of salary deflation will continue, Alter does believe the future could prove difficult for many workers. "Looking at the data (for pay)," said Alter, "this is just an ugly situation. Workers are hurting. They are getting paid less yet face rising prices for things, like healthcare, housing, and energy."

Copyright © 2004. Inc. Magazine.