Jennifer Robison
Las Vegas Review Journal
May 4, 2005

Small businesses lose employees to bigger companies

Pam Washington, who runs A-1 Janitorial Services, has boosted pay in an attempt to keep workers from leaving for bigger companies.

As president and chief executive officer of A-1 Janitorial Services, Pam Washington is used to the droning of vacuums as her employees clean local office buildings and hotel-casinos.

But that great sucking sound Washington is hearing this spring isn't coming from a Hoover.

When it opened late last month, Wynn Las Vegas inhaled 9,500 local service workers. Now, Washington said, she can't find enough staff for a seasonal job scheduled to begin later this month.

"My biggest obstacle is that I'm not sure I can locate employees," said Washington, who wants to add 25 temporary workers to her permanent roster of 35 to clean hotel rooms in Primm this summer. "In the last four months, I've had more difficulty than I've had in the 12 years I've been here locating good, interested, qualified people. I'm not sure I can accommodate my customers. It's like people are standing in line to buy my widgets, and I just can't make the widgets."

Data from a national payroll company suggest other local companies face the same struggle.

SurePayroll of Skokie, Ill., released numbers Tuesday that company executives said show small businesses across Nevada limping along in the face of competition from giant corporations.

According to the SurePayroll Small Business Scorecard, the average number of employees among small businesses in Nevada dropped 1.2 percent in the first four months of the year, from 4.68 in December to 4.62 in April.

In addition, the average small business paycheck declined 2.4 percent in the first four months of this year, from $25,873 in December to $25,257 last month.

Nationally, SurePayroll said the average number of employees per small business rose 0.2 percent, from 5.86 to 5.87, while the average paycheck dropped 1.8 percent, from $29,261 to $28,737.

SurePayroll's information comes from the company's analysis of more than 15,000 payroll clients nationwide. The study defines small businesses as those with 100 or fewer workers.

The numbers are unusual for a state than has an overall job base expanding by 6 percent to 7 percent a year, according to statistics from the Nevada Department of Employment, Training and Rehabilitation.

"It appears you have two economies in Nevada — a large-business economy and a small-business economy," SurePayroll President Michael Alter said of the discrepancy in growth rates. "If you think about the factors driving growth in Nevada, they revolve around the leisure and entertainment sectors, and those industries are dominated by big companies. There's a strong demand for casino workers, service workers and entertainers.

"Small-business owners are competing for workers in an environment where their costs have gone up significantly in the last year. The cost of working capital has almost doubled in the last year with the rise in interest rates. At the same time, the costs of raw materials are at all-time highs."

Employment statistics from the Department of Employment, Training and Rehabilitation also show flat growth for businesses with fewer than 100 workers.

Among small businesses covered by the state's employment insurance, average head counts statewide rose from 8.36 employees in the third quarter of 2003 to 8.37 staffers in the same quarter of 2004.

Clark County recorded a slight decline, from an average of nine workers per company in the third quarter of 2003 to 8.9 employees per business in the same quarter of 2004.

Anecdotally, the news is not as stark as SurePayroll's numbers suggest.

Because she's competing with megaresorts for staff, Washington has increased compensation. Three years ago, she started employees at $7 per hour; today, hourly wages at A-1 begin at $8.50. Washington said many workers make $10 per hour, and she's boosted bonuses to boot.

"I'm paying more, yet my profit margin is increasing because I'm more careful about overhead," Washington said.

Bob Linden, owner of the Las Vegas franchise of on-site document destroyer Shred-It, also said his company is expanding.

Linden, who has 14 employees, said Shred-It is growing about 30 percent a year, and is increasing compensation 3 percent to 5 percent annually.

"Hiring is always a challenge," Linden said. "We're basically in the security business, so we need people who have clean backgrounds. It's not any harder for us to find people, but the challenge is always finding the best people.

"The economy in Southern Nevada continues to be strong and is growing at a healthy pace, so there's lots of opportunity."

Cornelius Eason, president of Priority Staffing USA in Las Vegas, said all his small-business clients "are in growth mode."

"It's an ongoing challenge to find experienced, skilled employees, and that challenge has increased in the last 90 days because of the hiring some of the larger companies are doing," he said. "But I think we benefit from the continuing influx of people into the valley. Within that group are skilled people, and small businesses have the opportunity to hire those people."

Numbers from the Nevada Small Business Development Center, a University of Nevada, Las Vegas-affiliated agency that provides entrepreneurial counseling and training to about 1,100 small companies a year, also belie SurePayroll's statistics.

Michael Graham, the center's deputy state director, said the group's clients created 194 jobs in 2004, compared with 84 jobs in 2003 — an increase of 131 percent. This year's numbers look even better: Center customers added 56 jobs in the first quarter of 2005, compared with 13 jobs in the same quarter a year ago.

In addition, capital formation — money obtained to launch or expand a business — rose 168 percent in 2004 to $5.6 million, compared with $2.1 million in 2003. This year's first quarter saw capital formation of $1.1 million, compared with $508,000 in the same quarter a year ago.

"Among the businesses we work with, we have not seen any kind of downturn," Graham said.

He cited Southern Nevada's burgeoning visitor volume, which rose from 36 million in 2003 to more than 40 million in 2004, as a primary factor in the flush times the center's customers are experiencing.

"A lot of dollars are being pumped into the economy," Graham said. "It's felt throughout the community. Plus, we seem to maintain population growth of more than 5,000 people a month, and that benefits retailers and the service sector. So far, we're seeing the upside."

Copyright © 2005. Las Vegas Review Journal.