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.

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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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