Small-business hourly earnings grew 2.78% year over year in September, staying below 3% for more than two years, while weekly hours worked rose for a seventh straight month, according to the Paychex Small Business Employment Watch released September 29. Put together, the data points to owners getting more work out of existing staff rather than adding people, a pattern with real consequences for overtime and payroll budgets.
The short answer
Paychex’s September Small Business Jobs Index rose 0.02 points to 99.15, near its 2026 average of 99.19. Hourly earnings grew 2.78% year over year, weekly earnings 3.07% and weekly hours 0.21%. Weekly pay is growing faster than hourly pay because hours are rising, not because rates are.
What happened
The Paychex release reported:
| Measure | September 2026 | Note |
|---|---|---|
| Small Business Jobs Index | 99.15 | +0.02 points; 2026 average 99.19 |
| Hourly earnings growth (y/y) | 2.78% | Below 3% for more than two years |
| One-month annualized hourly earnings | 2.41% | Lowest since October 2020 (2.40%) |
| Weekly earnings growth | 3.07% | Ninth consecutive month of growth |
| Weekly hours worked | +0.21% | Seventh consecutive month of growth |
| Top region / state / metro | Midwest 99.62 / Arizona 100.59 / Phoenix 101.31 | Arizona above 100 for five straight months |
Source: Paychex Small Business Employment Watch, September 2026.
Education and health services led sectors with a 99.79 index reading. Paychex President and CEO John Gibson said, per the company’s release, that “the small business labor market continues to demonstrate remarkable stability.”
Why it matters
The gap between 2.78% hourly growth and 3.07% weekly growth is the story. That difference is hours: employees are working more time at slowly rising rates. It is a cheap way to grow output when hiring is hard to justify, and the same week’s national numbers explain why owners are cautious. We covered those in our September jobs report piece, where payroll growth was 29,000 and prior months were revised down.
But hours are not free. Every added hour for a non-exempt employee past 40 in a week triggers overtime, and Washington owners face a wage floor rising to $17.73 in January on top of that, as we noted in our look at the 2027 minimum wage and overtime threshold.
What this means for small business owners
- Find where the extra hours are going. Run a payroll report by employee and pay period for the last six months. If weekly hours are creeping up, check who is near or over 40.
- Price a hire against the overtime you are paying. Compare 1.5× the hourly rate on regular overtime hours with the loaded cost of a part-time or full-time hire. The answer often changes once overtime becomes routine.
- Do not assume a pay-raise freeze is safe. Paychex says growth under 3% has made labor-cost pressure “more manageable,” but a team stretched on extra hours is a retention risk. Watch overtime and turnover together.
- Use an index as a benchmark, not a budget. Paychex is a measure of its small-business clients. Compare your own year-over-year hourly rate change with 2.78% to see if you are above or below the market.
- Keep timekeeping clean. More hours means more wage-and-hour exposure. Make sure breaks, rounding and off-the-clock work are recorded correctly.
“With hourly earnings growth remaining below three percent for more than two years, labor cost pressures have become more manageable.” — John Gibson, President and CEO, Paychex, September 29, 2026 release
Frequently asked questions
What is the Paychex Small Business Jobs Index for September 2026?
99.15, up 0.02 points from August and close to the 2026 year-to-date average of 99.19.
How fast are small-business wages growing?
Hourly earnings rose 2.78% year over year in September, and have been under 3% for more than two years, according to Paychex.
Why is weekly pay growing faster than hourly pay?
Weekly earnings grew 3.07% against 2.78% for hourly earnings because weekly hours worked rose 0.21%, the seventh consecutive monthly increase.
Which state and metro lead the index?
Arizona (100.59) leads states and Phoenix (101.31) leads metros. The Midwest is the top region at 99.62.
What does Paychex measure?
It tracks employment and earnings among small businesses in Paychex’s own payroll data, so it reflects that client base rather than the whole economy.
The bottom line
Stable is not the same as safe. If your payroll growth is coming from hours rather than hires, the cost shows up in overtime and burnout before it shows up in headcount. Check both this month.
Last updated: October 3, 2026. Data from the Paychex Small Business Employment Watch for September 2026, released September 29, 2026. General information, not financial advice.
