Small business employees clocked more hours in August

Employees are working more hours per week at small businesses but are only seeing modest pay gains, according to a new report.

The Paychex Small Business Employment Watch, released Tuesday, indicated that weekly hours worked growth, at 0.07%, at employers with fewer than 50 employees, remained positive for the sixth month in a row in August — a stretch not seen since October 2020 — as employers continued to rely on their existing workers to meet demand. Hourly earnings growth (2.89%) ticked up slightly in August but remained below 3% for the 24th month in a row, while one-month annualized growth was at or above 3.00% for the fifth consecutive month.

"We're continuing to see wages starting to tick up a little bit," said Frank Fiorille, vice president of risk management, compliance and data analytics at Paychex. "Nothing dramatic, but for quite some time it's been below 3%. They are still trying to squeeze more work out of the existing workforce and having to pay them a little bit more, but hours worked continues to be really good. That can only go on so long until they need to start adding two or three new people, so hopefully we're going to see that very shortly." 

The national jobs index (99.13) moderated 0.10 percentage points in August but remained in line with its 2026 year-to-date average (99.20). "A little bit of a dip from last month, but not much, still within that range that we've been seeing for quite some time," said Fiorille.

The Midwest led the way among regions for employment growth with a 99.48 jobs index, while the West region reported a notable 0.41 percentage-point gain. Phoenix (100.81) led the largest U.S. metropolitan areas on job growth in August, marking the seventh time it ranked in first place in the past year.

Education and health services, which has ranked among the top two sectors for job growth every month since February 2023, regained its No. 1 ranking with a 99.88 jobs index in August.

Fiorille advises accountants with small business clients to take advantage of the various provisions of the One Big Beautiful Bill Act such as bonus depreciation and deductions for charitable giving, while employees should revisit their withholding on the Form W-4 to take advantage of the new deductions in the OBBBA that may apply to them.