Do Big Companies Pay More Than Small?

On the hunt for a better paying job? Don’t overlook one of the most important factors that determine what you’ll earn: The size of an employer’s work force.

A new document from the U.S. Census Bureau, “Statistics of U.S. Businesses Employment and Payroll Summary: 2012,” shows just how much company size affects employees’ pay.

In the research, the government found that 51.6% of private sector workers are employed by large enterprises with 500 employees or more and 48.4% work for smaller ones.

The average pay per employee for very small business with 20 employees or less was $36,912, according to the research. For small firms with 20 to 99 employees, it was $40,417. At medium-sized firms it was $44,916. And at large companies it was $52,554. Pay for senior level employees would likely be significantly higher.

The pay swings vary by industry. In professional, scientific and technical services, big-company employees average $85,290, compared to $66,679 at companies under 500 employees. In finance and insurance, the average big-company paycheck is $93,041 vs. $74,902.

Those differences are not tremendous. But they can have a real impact on your lifestyle and ability to save over time, especially when you consider how your base pay will affect your raises over time.

Let’s say you get the average raise projected by Mercer, the global talent consultancy, for each of those years: 3%. If you start out at a very small firm at the average pay of $36,912, you will be making $49,606.64 in a decade. Take a job at a small business at a base pay of $40,417, and you will be making $54,317.07 in 10 years. Accept the average pay at a midsize firm and you’ll move from $44,916 to $60,363.35. Start at a big company and you’ll see your pay jump from $52,554 to $70,628.18.

Does this mean choosing the biggest firm is always the best decision?

For many people, the ability to work for a great boss alongside amazing people on meaningful projects would trump a little extra pay. And sometimes, a small or midsize firm may beat a larger competitor on this front.

It’s also important to consider what you have to do to earn the bigger paychecks at a larger firm. Will the hours and demands be similar to a smaller firm—or a lot longer and extended by constant travel? If a smaller firm promises regular hours, you might be able to take on other sources of work, like consulting projects, to make up for the difference in income—with less stress than a corporate gig. Salary is an important consideration, given the cost of living today, but not the only one.