Business Payroll Growth Tracker: Compensation Trends by Industry (2018-2022)

What if you could see that California’s professional services sector has $188.9 billion in annual payroll for 1.43 million employees—averaging $131,900 per employee—while Wyoming has $904,000 for 12,439 employees—averaging $72,700 per employee? This Business Payroll Growth Tracker reveals compensation trends by industry—and how you can position yourself in markets with strong wage growth.

The data shows dramatic differences: professional services (NAICS 54) payroll per employee ranges from $131,900 in California to $72,700 in Wyoming—revealing clear compensation trend patterns. This isn’t just about geography—it’s about understanding payroll growth, compensation trends, and wage patterns that directly impact your competitive strategy and talent acquisition.

Note: Full trend analysis (2018-2022) requires multi-year CBP data. This analysis uses 2022 data to indicate current compensation levels and growth potential, acknowledging that full trend analysis would require historical data.

Track payroll growth to see compensation trends by industry over time. T

This analysis examines County Business Patterns (CBP) data from the U.S. Census Bureau to track payroll growth—compensation trends by industry over time, revealing where payroll is growing fastest and which industries show strong compensation trends. You’ll discover which states have the highest payroll per employee, how compensation trends vary by industry, and where opportunities exist for businesses in high-compensation markets.

What You’ll Discover:

• State rankings by payroll per employee (compensation level indicators)
• Industry-specific compensation trends revealing payroll growth patterns
• Location-specific compensation indicators impacting talent attraction
• Payroll growth analysis by industry and location
• Compensation trend indicators for strategic business decisions

Why This Matters: Understanding payroll growth helps you identify markets with strong compensation trends, assess competitive wage levels, and make strategic location decisions. Markets with high payroll per employee offer competitive wages that attract talent and support business growth.

Note: Full trend analysis (2018-2022) requires multi-year CBP data. This analysis uses 2022 data to indicate current compensation levels and growth potential, acknowledging that full trend analysis would require historical data.

Compensation Levels Vary Dramatically by Location

The Numbers: Professional services payroll per employee ranges from $144,600 in Massachusetts to $72,700 in Wyoming—a 2.0x difference. This means Massachusetts has 2.0x higher compensation than Wyoming, indicating very strong compensation trends in Massachusetts.

So What? Different locations show dramatically different compensation levels, indicating vastly different compensation trends and competitive wage levels. Understanding these patterns helps you identify where compensation is strongest and where competitive wages exist.

How to Use This: If you’re in professional services, markets with very high compensation ($120,000+ per employee) like Massachusetts ($144,600) and California ($131,900) indicate very strong compensation trends. Target these markets for access to competitive wages and talent attraction.

Payroll Growth Indicates Market Strength

The Numbers: States like Massachusetts ($144,600 per employee), California ($131,900), and New York ($120,800) have the highest professional services compensation, indicating strong compensation trends and competitive wages.

So What? Payroll growth indicates market strength. Markets with high payroll per employee typically have strong economies, competitive wages, and talent attraction. These markets offer competitive advantages for businesses requiring skilled talent.

How to Use This: Target markets where your industry has high compensation ($120,000+ per employee) for access to competitive wages. These markets offer talent attraction, competitive advantages, and strong economies that lower-compensation markets may not provide.

Location Strategy Must Account for Compensation Trends

The Numbers: The difference between the highest-compensation state (Massachusetts, $144,600 per employee) and lowest-compensation states (Wyoming, $72,700) is 2.0x, meaning dramatically different compensation trends and competitive wage levels.

So What? Compensation trends directly impact your competitive position. Markets with high compensation offer competitive wages that attract talent and support business growth. Your location choice should prioritize markets with high compensation for your industry.

How to Use This: For businesses requiring skilled talent, target markets with high compensation ($120,000+ per employee) for your industry. These markets offer competitive wages, talent attraction, and competitive advantages.

Red Flags

• Very Low Compensation (<$70,000 per employee): May indicate limited compensation trends and lack of competitive wages
• Compensation-Cost Mismatch: Markets with high compensation but also very high cost of living may create affordability challenges
• Declining Compensation: Markets where compensation is decreasing may signal economic decline

Green Lights

• Very High Compensation ($120,000+ per employee): Indicates strong compensation trends with competitive wages that attract talent
• High Compensation with Growing Payroll: Markets with high compensation and growing payroll signal expanding compensation trends
• Consistent High Compensation: Markets with consistently high compensation offer stable competitive wages
• Diverse High-Compensation Industries: Markets with high compensation across multiple industries offer stability and multiple competitive advantages

How to Use This Data

Follow this step-by-step process to identify payroll growth and make data-driven compensation decisions:

Step 1: Identify High-Compensation Markets for Your Industry

Compare payroll per employee across states for your industry (NAICS code):

• State-level: Get broad compensation level identification
• Industry-specific: Use NAICS-filtered data for your specific industry
• Compensation Ranking: Rank states by payroll per employee to identify highest-compensation markets

Action: Create a spreadsheet with all 50 states. List payroll per employee for your industry in each. Rank by compensation level to identify highest-compensation markets.

Step 2: Assess Compensation Trend Benefits

High compensation indicates strong compensation trends with competitive wages:

• Competitive Wages: Access to competitive wages that attract talent
• Talent Attraction: Competitive advantages from high compensation levels
• Market Strength: Strong economies with high demand for professional services

Action: For each high-compensation market, assess compensation benefits. Identify markets with competitive wages, talent attraction, and competitive advantages.

Step 3: Evaluate Compensation vs. Cost of Living

Balance compensation benefits with cost of living:

• High Compensation, High Cost: May offer competitive wages but also high living costs
• High Compensation, Moderate Cost: Offers best balance of competitive wages and affordability
• Moderate Compensation, Low Cost: May offer some competitive wages with lower costs

Action: For each high-compensation market, evaluate compensation vs. cost of living. Choose markets that offer competitive wages with manageable costs.

Step 4: Choose Your Compensation Location

Select markets with high compensation that match your business needs.

Action: Create a decision matrix scoring each location on: compensation level (40%), talent attraction (30%), and cost of living (30%). Choose the location with highest score.

Step 5: Make Your Location Decision

Combine compensation analysis with other factors (business climate, market size) to choose your location.

Action: Create a final decision matrix scoring each location on: compensation level (30%), talent attraction (30%), business climate (20%), and costs (20%).

Common Use Cases

Scenario 1: Seeking Competitive Wages → Focus on markets with very high compensation ($120,000+ per employee). These markets offer strong compensation trends with competitive wages that attract talent.

Scenario 2: Balanced Compensation and Costs → Target markets with high compensation ($90,000-$120,000 per employee) and moderate cost of living. These markets offer competitive wages with manageable costs.

Scenario 3: Cost-Efficient Strategy → Consider markets with moderate compensation ($70,000-$90,000 per employee) and lower cost of living. These markets may offer some competitive wages with lower costs.

Scenario 4: Risk-Averse Strategy → Focus on markets with moderate-to-high compensation ($90,000-$120,000 per employee) that offer proven competitive wages with stable costs.

Questions to Ask Yourself

• How important are competitive wages vs. cost of living for my business?
• Do I need very high compensation ($120,000+ per employee) or is moderate compensation ($70,000-$90,000) sufficient?
• What compensation benefits do I need—talent attraction, competitive wages, or market strength?
• Am I entering a validated high-compensation market or an emerging one?

Action Items Checklist

• Identify high-compensation markets for your industry by ranking states by payroll per employee
• Assess compensation trend benefits (competitive wages, talent attraction) in high-compensation markets
• Evaluate compensation vs. cost of living for each candidate market
• Research compensation dynamics and talent access in high-compensation markets
• Compare compensation benefits with business climate and costs
• Create a decision matrix scoring each location on compensation, talent attraction, and costs
• Consult with Business Initiative for payroll growth analysis and location strategy guidance

Industry-Specific Recommendations

Professional Services (NAICS 54): Target markets with very high compensation ($120,000+ per employee) like Massachusetts ($144,600), California ($131,900), and New York ($120,800). Professional services benefit from high compensation levels that attract talent.

Technology Services (NAICS 51): Focus on markets with high compensation in tech hubs. Technology businesses benefit from high compensation levels with tech talent attraction.

Financial Services (NAICS 52): Look for markets with high compensation in financial centers. Financial services benefit from high compensation levels with financial talent attraction.

Health Care (NAICS 62): Prioritize markets with moderate-to-high compensation for health care. Health care businesses benefit from competitive wages that attract health care talent.

Manufacturing (NAICS 31-33): Consider markets with moderate compensation for manufacturing. Manufacturing businesses may benefit from moderate compensation with lower costs.

Common Mistakes to Avoid

Mistake 1: Using Only Payroll per Employee Without Cost of Living Analysis Payroll per employee shows compensation but doesn’t reveal affordability. Always combine payroll per employee with cost of living data to assess real purchasing power.

Mistake 2: Ignoring Cost of Living in High-Compensation Markets High compensation may indicate competitive wages but also high cost of living. Don’t ignore cost of living—it impacts real purchasing power and business viability.

Mistake 3: Not Considering Industry-Specific Compensation Overall compensation doesn’t reflect your industry’s specific compensation patterns. Always use NAICS-filtered data for your specific industry to assess compensation levels.

Mistake 4: Overlooking Multi-Year Trends Single-year data shows current levels but doesn’t reveal trends. Don’t overlook multi-year trends—they indicate whether compensation is growing or declining.

Mistake 5: Not Validating with Market Research Compensation data shows levels but doesn’t reveal talent availability, competition, or market dynamics. Always validate with market research and local analysis.

Optimization Strategies

For Maximum Compensation Benefits: Target markets with very high compensation ($120,000+ per employee) that offer strong compensation trends with competitive wages that attract talent.

For Balanced Approach: Focus on markets with high compensation ($90,000-$120,000 per employee) and moderate cost of living that offer competitive wages with manageable costs.

For Cost-Efficient Strategy: Consider markets with moderate compensation ($70,000-$90,000 per employee) and lower cost of living that may offer some competitive wages with lower costs.

For Risk-Averse Strategy: Prioritize markets with moderate-to-high compensation ($90,000-$120,000 per employee) that offer proven competitive wages with stable costs.

Timing Considerations

Best Time to Enter High-Compensation Markets: When you have resources ready and competitive positioning complete. High-compensation markets reward businesses that can leverage competitive wages and talent attraction.

Best Time to Enter Emerging Compensation Markets: When compensation is growing, indicating expanding compensation trends. Emerging compensation markets offer competitive wages with less competition but require careful market validation.

When to Reassess: Review compensation data annually when new CBP releases become available. Market positions change, and what was high-compensation 2-3 years ago may not be today.

Resource Recommendations

For Compensation Analysis:

• Census Bureau County Business Patterns (official CBP data source)
• NAICS code lookup tools (identify your industry classification)
• Cost of living calculators (assess real purchasing power)
• State economic development websites (local compensation insights)

For Location Support:

• Business Initiative location strategy services
• Local chamber of commerce (county-level compensation information)
• State Secretary of State websites (business registration requirements)

For Compensation Research:

• Combine CBP payroll and employment data to assess compensation levels
• Research local compensation dynamics and talent access
• Consult with Business Initiative for personalized payroll growth analysis and location guidance

FAQs - Frequently Asked Questions About Business Payroll Growth Tracker: Compensation

In Summary

Our comprehensive exploration of payroll growth tracking (2022) has revealed critical insights into compensation trends, competitive wages, and location opportunities that can inform strategic business decisions.

Key Findings:

• Compensation levels vary dramatically by location—professional services payroll per employee ranges from $144,600 in Massachusetts to $72,700 in Wyoming (2.0x difference)
• Payroll growth indicates market strength—markets with high payroll per employee ($120,000+) indicate strong compensation trends with competitive wages that attract talent
• Location strategy must account for compensation trends—choosing markets with high compensation provides access to competitive wages and talent attraction
• High-compensation markets offer competitive advantages—markets with very high compensation ($120,000+ per employee) offer strong compensation trends with competitive wages
• Balanced approach often offers best opportunity—markets with high compensation ($90,000-$120,000 per employee) and moderate cost of living offer competitive wages with manageable costs

What This Means for Your Business: Understanding payroll growth helps you identify markets with strong compensation trends, assess competitive wage levels, and make strategic location decisions. Markets with high payroll per employee offer competitive wages that attract talent and support business growth. The best approach balances compensation level (competitive wages) with cost of living and business climate.

Practical Applications:

• Location Strategy: Use compensation data to identify markets where your industry has high compensation ($120,000+ per employee) for access to competitive wages
• Market Analysis: Compare compensation levels across locations to understand compensation trends and competitive wage levels
• Competitive Positioning: Target markets with high compensation for access to competitive wages, talent attraction, and competitive advantages
• Strategic Planning: Prioritize markets with very high compensation ($120,000+ per employee) for maximum competitive wage benefits and talent attraction

Next Steps:

1. Identify high-compensation markets for your industry by ranking states by payroll per employee
2. Assess compensation trend benefits (competitive wages, talent attraction) in high-compensation markets
3. Evaluate compensation vs. cost of living for each candidate market
4. Compare compensation benefits with business climate and costs
5. Consult with Business Initiative for payroll growth analysis and location strategy guidance

Business Initiative offers expert services to help you leverage this information:

• Explore Profit Margin
• Explore Break Even Analysis
• Explore Break Even

For personalized advice, schedule a consultation with Business Initiative or reach out through our contact form.

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