Employee compensation at small establishments lags behind that at larger businesses, Bureau of Labor Statistics (BLS) data (PDF) reveals. Not only do businesses spend less on wages and benefits at smaller concerns, but also expenditures on employee compensation have been growing more slowly at smaller establishments.
While not every establishment, or business unit operating at a single location as government statistical agencies defines them, represents an independent firm. The vast majority of establishments are single location businesses. Therefore, observers often use data on small establishments to track what is going on in the small business world.
Smaller Establishments Pay Lower Salaries
At private sector establishments with fewer than 50 workers, wage and salary costs per hour were $17.28 in June 2013; at establishments with 50 to 99 workers, they were $19.13; at concerns with 100 to 499 workers they were $20.56; and at establishments with 500 or more workers, they were $28.29.
Smaller Establishments Spend Less on Employee Benefits
The cost of employee benefits at private sector establishments with fewer than 50 workers was $5.81 per hour worked in June 2013, compared with $7.51 at establishments with 50 to 99 employees, $9.20 for establishments with 100 to 499 workers, and $14.86 for establishments with 500 or more people, BLS estimates show.
Larger Establishments Provide a Greater Share of Employee Compensation
At establishments with between 1 and 49 workers, benefits accounted for 25.2 percent of total compensation in June of this year. They amounted to 28.2 percent of total compensation at establishments with between 50 and 99 employees, 30.9 percent at locations with between 100 to 499 workers, and 34.4 percent at establishments with 500 or more workers.
Two key benefits - health insurance and retirement plans - account for a larger slice of employee compensation at bigger establishments than smaller ones. In June 2013, health care coverage took to:
- 6.2 percent of total compensation at establishments with fewer than 50 employees.
- 7.3 percent at locations with between 50 and 99 employees.
- 8.6 percent at concerns with between 100 and 499 employees.
- 8.9 percent at establishments with 500 or more employees.
This June, retirement plans accounted for:
- 2.2 percent of total compensation at establishments with fewer than 50 employees.
- 3.2 percent at establishments with between 50 and 99 employees.
- 4.0 percent at establishments with between 100 and 499 employees.
- 5.2 percent at establishments with 500 or more employees.
Employee Compensation has Been Growing More Slowly at Smaller Establishments
BLS figures show that total compensation increased only 1.8 percent between 1990 and 2013 at establishments with fewer than 100 workers, when measured in inflation-adjusted terms. At establishments with between 100 and 499 workers, and establishments with 500 or more workers, over the same period, real total compensation rose 19.7 and 19.8 percent, respectively.
Wage stagnation has been the norm at smaller establishments. Between 1990 and 2013, real wages increased only 0.9 percent at locations with fewer than 100 employees. At establishments with between 100 and 499 workers, they went up 14.1 percent, while at concerns with 500 or more employees, they rose 13.2 percent.
Retirement benefits have grown more slowly at smaller establishments. When measured in inflation-adjusted terms, the per employee cost of retirement savings grew only 1.3 percent between 1990 and 2013 at establishments with fewer than 100 people, versus 64.2 percent at locations with between 100 and 499 workers and 62.7 percent at concerns with 500 or more workers.
Spending on employee health coverage has grown more slowly at smaller establishments. Real spending on employee health coverage rose 58 percent at establishments with 500 or more workers between 1990 and 2013, and 68 percent at concerns with 100 to 499 employees. By contrast, spending on employee health coverage at establishments with fewer than 100 employees increased only 32 percent over the same period.
In short, smaller establishments pay less and provide lesser benefits than larger establishments. Moreover, this pay and benefit gap has widened in recent years. Our elected officials should take these facts into consideration when designing policies that affect small business employment.
Small Versus Big Photo via Shutterstock
