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Compensation is crucial for attracting and retaining top talent. But small businesses in certain states may need to reevaluate their compensation structure if they want to stay competitive.

A recent study conducted by the consultancy firm Venture Smarter identified the four states with the lowest salaries for employees of small businesses: Mississippi, West Virginia, Nebraska, and Idaho.

The company used U.S. Census Bureau data to calculate the average salary for employees in small businesses of varying sizes. For the smallest businesses (businesses with fewer than five employees), West Virginia showed the most significant wage disparities. In that state, the average salary is just over $37,000, nearly 34 percent below the national average of approximately $46,800.

Mississippi followed, with small businesses in that state paying the second-lowest average wage at $39,900 (28 percent lower than the nationwide average). Meanwhile, Nebraska's average wage stands at $42,700, representing a 24 percent difference from the national average.

In small businesses with five to nine employees as well as those with 10 to 19 employees, Mississippi, West Virginia, and Idaho consistently had the lowest wages.

But what do living expenses look like in these states? According to the personal finance site GOBankingRates, which recently created a state-by-state cost-of-living index, Mississippi is the cheapest place to live in the U.S., with an annual cost of living of $56,889. West Virginia's annual cost of living was estimated at $60,235, and Nebraska's cost of livng came in at $61,507. These figures highlight a significant gap between employee salaries and cost of living in each of these states.

In a statement, a spokesperson from Venture Smarter emphasized that despite variations in cost of living, employers have a responsibility to pay fair wages. "This information sheds light on the diverse financial landscapes within the country, and it is certainly interesting to establish the states that offer the least lucrative opportunities for small business workers. Recognizing and understanding these highlighted wage disparities among small businesses is crucial for businesses and workers alike."

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