Raises tied to company record

Yearly pay raises that workers at small businesses used to count on have become a casualty of the weak economy. They are increasingly based on performance - not just an employee's performance, but the entire company's.

Raises at many businesses are also smaller than they were before the recession began five years ago. And some employers are using rewards other than annual raises to compensate workers.

"The days of the traditional merit increases and cost-of-living increases seem, at least for now, to be behind us," said Carrie Cherveny, vice president of employment practices for AlphaStaff, a Fort Lauderdale-based firm that provides human-resources services such as payroll, benefits administration, and hiring assistance.

"What we are seeing is compensation tied to corporate performance - 'You'll get a raise or bonus if we do well.' "

Whether they will do well is the big question for many small-business owners. Jobs and incomes are growing, but not fast enough to make them more confident that a healthy economy will give their sales a boost. The most recent jobs report showed that U.S. employers hired 155,000 people in December, less than the 175,000 that would get economists excited.

Managers at Ontraport, a company that makes marketing software for businesses, are willing to give big raises - 10 percent or more - but they're not guaranteed.

"We don't have a process in place where we just give automatic raises to everyone every year," said CEO Landon Ray. The Santa Barbara, Calif., company did well and kept growing during the recession, but Ray said it still needs to be careful.

The biggest raises at Ontraport are intended to attract and keep top talent in the competitive high-tech industry, Ray said. Employees whose work is disappointing will find themselves left out when raises are given at mid-year.

Workers at Tasty Catering get raises only if the Glenview, Ill., corporate caterer reaches its quarterly profit goals.

"This has become a team thing," CEO Tom Walter said. "It's not a discretionary thing where people cuddle up to the boss to see if they can get a raise."

Tasty Catering gave no raises in the second half of 2012 because the company missed its goals for both the third and fourth quarters. Last week, staffers learned that 2013 looks to be a difficult year. Raises are on hold, Walter said.

The raises at Christine Perkett's public-relations firm are about 2 percent lower than they were before the recession. She had stopped giving increases to workers at Boston-based Perkett PR in early 2009 and laid off half her staff of 30. Clients' marketing budgets were one of the first expenses cut when the recession hit.

Perkett resumed giving raises a year and a half ago. But increases are smaller than in the past, and she also gives out fewer bonuses. Before the recession, employees were rewarded for bringing in clients. Now, they also have to show they're working hard to keep them.

"They're more performance-based than 'Thank you for doing your job'-based,' she said.

Perkett is using such non-cash rewards as extra vacation days. She also has staffers vote each month for the company's most valuable player. The winner gets a small gift card.

"They're tiny things, but they're a thank you and an incentive," she said.