Big firms still offer employees better pay, benefit deals than smallest firms

One area in which the conventional wisdom about small business holds is in benefits.

Workers at smaller firms earn less in wages, get fewer paid days off and receive less generous health insurance benefits than their counterparts at large companies.

The compensation gap is huge between businesses that employ between one and 49 workers, and companies that employ 500 or more workers, according to recent data compiled by the federal Bureau of Labor Statistics.

Last year, workers at those smaller businesses earned an average of $22.80 an hour in pay and benefits, compared to $41.69 an hour at big companies.

Workers at businesses employing between one and 49 workers earned an average of $17.05 an hour last year, compared to $27.36 an hour for workers at businesses employing at least 500 people.

But the bigger the small business, the higher the compensation level.

Workers at companies employing between 50 and 99 workers took home an average of $26.38 in total compensation, while those working at companies with between 100 and 499 workers earned $29.02 in pay and benefits.

BLS doesn’t break the firm-size data down by state or region. But its annual employee compensation survey shows that all workers in the East North Central region of the country, which includes Michigan, earned an average of $27.66 in pay and benefits last year.

That was higher than any region of the country except the Northeast, where workers earned an average of $32.85 an hour in total compensation last year.

Workers at larger companies received richer benefit packages than small-business employees, according to BLS data.

The cost of benefits for businesses employing more than 500 was $14.32 an hour last year. Those benefits included vacation pay, health insurance and required benefits such as Social Security and Medicare.

Employers with at least 500 workers paid out an average $3.66 per employee for health insurance, compared to an average $1.39 per worker for companies that employed between one and 49 workers.

That’s mainly a result of fewer small businesses offering health insurance, experts say.

“There’s a huge wage and benefit disadvantage in working at small companies,” said Don Grimes, a University of Michigan economist.

Data on employee turnover at small businesses is spotty. But experts acknowledge turnover is a problem for small business because of relatively lower compensation levels.

A 2008 study by former Small Business Administration chief economist Chad Moutray found small companies offering benefits have a 26.2 percent lower probability of losing an employee in a given year.

Moutray said small businesses will continue to face stiff competition for talent from better-paying large companies.

Many companies, large and small, have been reporting a shortage of skilled workers. The problem could become even worse as millions of baby boomers retire over the next few years.

“Labor shortages suggest firms may engage in bidding wars for skilled workers, and small businesses are sometimes at a disadvantage in these,” Moutray said.

Career counselors say people entering the work force and those transitioning to new careers understand that there have been more job openings at smaller companies in recent years.

But many workers still prefer the security of a larger company, said Nick Synko, principal partner of Synko Associates, a career counseling and outplacement firm in Ann Arbor.

“So many people are creatures of habit,” he said. “In the early weeks of a job search, people usually are looking for the same type of position that they’ve always had.”

But Synko said he’s also noticed that making an impact in the workplace is becoming more important to job seekers, regardless of the size of company.

“It’s about where might I find more job satisfaction and happiness, and where might I be making a difference,” he said.

Rick Haglund has had a distinguished career covering Michigan business, economics and government at newspapers throughout the state. Most recently, at Booth Newspapers he wrote a statewide business column and was one of only three such columnists in Michigan. He also covered the auto industry and Michigan’s economy extensively.