Small business wage growth kept slowing through the end of 2025. And according to the latest Paychex Small Business Employment Watch this reinforced a trend that shaped most of the year.

Hourly earnings growth dropped to 2.71% in December, marking the 17th consecutive month below 3%. Job growth also remained subdued, with the Small Business Index averaging 99.67 for the year, signaling little overall movement in hiring a mong employers with fewer than 50 employees. 

According to Accounting Today, the weekly hours worked varied slightly. Growth ended the year up 0.25%, reaching its highest level since May 2021, after fluctuating through much of the fall.

Frank Fiorille, vice president of risk management, compliance, and data analytics at Paychex, described the environment as “low fire, low hire,” noting that businesses are largely holding steady rather than expanding or cutting back aggressively. He added that recent increases in hours worked “could be a precursor to potentially more hiring down the road as small and medium-sized businesses are trying to get as much out of workers as possible.”

Regionally, the Midwest led small business employment growth throughout 2025, while education and health services continued to outperform other sectors, posting positive job growth every month of the year.

Fiorille also urged accountants to help clients navigate new tax provisions affecting small businesses, including expanded expense deductions and updated rules around tips and overtime, as federal guidance continues to evolve.