Who Pays Better: Big Companies or Small Companies?

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Corporate paychecks vs. small businessComplaints over higher tax brackets aside, one rule holds true when it comes to your paycheck: Bigger is better.

Now, thanks to a recent report out of the Bureau of Labor Statistics (yes, that BLS), we now know exactly where to look to score the bigger paycheck: at a big company.

Last month, BLS published its latest quarterly report on trends and takeaways in the U.S. labor market, and buried on page 17 is a table that could help you strike paycheck gold in your next job hunt.

Crunching the numbers on "employer costs" at firms with payrolls of anywhere from one to 49, 50 to 99, 100 to 499, and 500 and up, BLS data conclusively show that you get more money for your man-hours when you work at a big company than at a smaller one.

In fact, the average hourly worker at a company with 500 or more employees earns nearly twice the total compensation of a counterpart employed at a firm with fewer than 50 workers. That's $42.39 per hour, to be precise, in wages, salaries, and benefits, as compared to just $22.96 for the wage slave at the smaller shop.

The Devil's in the Details

Granted, the discrepancy isn't quite as glaringly obvious on the surface.

For example, let's say two companies -- "Megacorp" and "Minorshop, LLC" -- place want ads for similar jobs. The base salary you're likely to see at Megacorp ($27.79 on average) will probably be more attractive than at Minorshop ($17.14). That's a difference of 62%. But what really tips the scales, and makes working for a big company so much more lucrative than working at a small shop, isn't the wages or salary, but the fringe benefits.

BLS data reveals a vast advantage in the bennies offered by large companies as compared to their smaller, more cash-strapped rivals.

Your average worker at a small firm with under 50 employees gets about $5.82 per hour of her total compensation in the form of non-wage benefits -- things like health insurance, flex pay, pensions, and 401(k) matches. This works out to roughly one-quarter of total compensation.

But the bigger the employer, the greater the proportion of side benefits making up total compensation. It's 28% at companies with 50 to 99 workers ($7.54 per hour), and 30% at companies with 100 to 499 workers ($8.88).

Meanwhile, companies with 500 workers and up get $14.60 per hour in benefits. That's a whopping 34% of their total compensation costs.

Nice Work ... If You Can Get It

Sound attractive? If you think so, you're not alone. The clear monetary advantage of landing a position with a large, private employer makes these plum corporate jobs almost as attractive to a job seeker as scoring a high-paying, low-stress government job -- and for the same reason.
But there's a downside to large-scale corporate generosity. And it stems from the same source.
With so much of their compensation plans linked to fringe benefits not tied to either the quality or quantity of work performed, large companies are precisely the ones you'd expect to be most hesitant to hire in tough economic times like these. And even when they do hire, they're more likely to take workers on a part-time or temporary basis -- employment statuses that, not coincidentally, tend to pay salary only, and do not confer the kinds of fringe benefits that job seekers covet.

A Bird in the Hand

In evidence of which, last week's jobs report noted that the 873,000 jobs created in September included 582,000 part-time positions. That's two out of every three jobs created -- each of them lacking the very benefits that job seekers are looking to secure from large employers.

With odds like these, maybe job seekers are actually better off lowering their sights and targeting smaller companies. With less generous benefits packages than those at the big employers, you've got a better chance of landing a full-time job there in the first place. After all, they don't call small business "the engine of the economy" for nothing.

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Rich Smith is a regular contributor to The Motley Fool.



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5 Comments

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saw686

diapers and politicians should be changed often ,both for the same reason

October 18 2012 at 10:39 AM Report abuse rate up rate down Reply
safritpassiton

If there was no Walmart who would hire those people ?

October 18 2012 at 1:40 AM Report abuse rate up rate down Reply
dodie1990

Wal-Mart with their part-time, minimum wage, no benefit no future jobs has killed the middle class. The trade off for the Chinese trash they sell is that your small businesses are destroyed by Wal-Mart and also many companies that made consumer goods are gone because Wal-Mart won't buy American. Many better paying jobs and small businesses are gone because of Wal-Mart. And fprget about any union protection for seniority, working conditions and benefits.

October 17 2012 at 9:47 PM Report abuse rate up rate down Reply
usmaels1

You obviously don't know much about Walmart. Sure...they don't pay the ''best'' wages in town..but they do pay above minimum wage. On top of that, they give their employees a 10% discount on many items. If you add in their not so bad benefits they pay...and how flexible thay can be with hours...etc..etc....Walmart is not near as bad as a job as many people try to make it out to be. They really aren't. My son works for them, and they have been a blessing to him...just like they are to many many people in this country. I think you will find that Walmart employees are not big complainers about theri job there. Most know the alternate choices they are faced with are definitly bad by anyone's definition. Thank God we have Walmart and the price standard they set that lots of other companies try to meet...but can't. Just think how high prices would be on most everday items families need if Walmart was not around. many companies would love to raise their prices, but don't becasue Walmart would run them out of business even more easily than they threaten to anyway.

October 17 2012 at 6:48 PM Report abuse rate up rate down Reply
Taina

Back WalMart out of the figures and the difference is greater.

October 17 2012 at 2:52 PM Report abuse +1 rate up rate down Reply
mike edwards

money is not the the most important thing its making yourself part of reason business is sucessful and try to have a backup nomatter how good the company is doing people working for bethlehem and republic steel never thought they would close benefits like 18 weeks vaction full medical then came the closings i wporked for a small car dealership as a mechanic it went out of bussiness so being a fairly good mechanic just went to another dealership formed my own ira acount that im useing 44 years later now people working at ford motor co faired better life is full of choices believe or not the car dealerships owned buy millionares emplyed me not sonebody on public assistance to me thank god for the millionares that own small bussinessesso lets not tax them to death or there wont be any one willing to hire the next generation

October 17 2012 at 12:38 PM Report abuse rate up rate down Reply
Dennis

I HOPE THE GOV DID NOT SPEND TO MUCH OF OUT TAX DOLLARS TO COME UP WITH THIS YOU ALWAYS MAKE MORE MONEY AT THE LARGER COMPANYS THEY HAVE MORE TO SPEND FOR TOP QUALITY PEOPLE I WOULD HAVE TOLD THEM THIS FOR FREE.

October 17 2012 at 11:55 AM Report abuse +1 rate up rate down Reply