Founder Data ReportA Job at a Small Company Pays 74 Cents on the Big-Company Dollar. In Washington State It Is 60 Cents.
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Average annual payroll per employee, every private employer in the country, split at 500 people. The gap holds in every state and in the District of Columbia — and it is mostly a story about what the large employers pay, not about what the small ones do.
Across every private employer in the country, firms with fewer than 500 employees paid an average of $55,663 per employee in 2022 and firms with 500 or more paid $74,832. That is 74.4 cents on the dollar and a gap of $19,169 per employee per year. It is not a national average hiding exceptions: large firms pay more in every state and in the District of Columbia, and in 17 of the 19 major industry sectors, covering 88.1% of private-sector employment. What varies is how wide it is — from 87.7 cents on the dollar in Nevada down to 59.7 cents in Washington — and it varies with what the large employers pay, not with what the small ones do. Retail is the one large exception, and it runs the other way.
- Average annual payroll per employee, 2022: $55,663 at firms under 500, $74,832 at firms of 500 or more.
- That is 74.4 cents on the dollar — a $19,169 gap per employee per year.
- Large firms pay more in every state and in the District of Columbia. There are no exceptions.
- Narrowest gap: Nevada, where small-firm pay is 87.7% of large-firm pay. Widest: Washington at 59.7%, where small firms pay the 8th-highest wages in the country.
- Holds in 17 of 19 sectors and 88.1% of employment. Retail reverses it, and that is about hours.
What the averages actually are
The Census Bureau publishes annual payroll and employment for every size band of employer, so the average is a division, not a survey estimate. Firms with fewer than 500 employees paid $55,663 per employee across the year. Firms with 500 or more paid $74,832. The number to hold on to is the difference: $19,169 a year, per head, before you count benefits, which this series does not measure. That is the number sitting between your offer and the offer from the company down the road with a recruiting budget.
Track runs $0 to $120,000. Colour rule for this article: orange is the small-firm figure, slate the 500-plus figure. Annual payroll divided by employment — a headcount average, not an hourly rate, and not a measure of total compensation. The under-20 band is a subset of the under-500 band, not a separate group: it pays $49,496, 66.1% of the large-firm figure.
Source: U.S. Census Bureau, Statistics of U.S. Businesses 2022, national file us_state_naics_detailedsizes_2022.txt, employer firms by state and enterprise employment size, retrieved from the Census static dataset release and re-verified on September 15, 2026.
The gap is a big-company story, not a small-company one
The obvious explanation for a wide gap is that the small firms in that state pay badly. The data says the opposite. Across the 51 jurisdictions, the gap correlates -0.58 with what large firms pay and only -0.16 with what small firms pay — more than three times the association. Washington is the cleanest illustration. Its small employers pay $60,341, the eighth-highest in the country, and it still has the widest gap in the country, because its large employers pay $100,999. Nevada has the narrowest gap in the country with small-firm pay of $51,408, which ranks 26th.
Both bars on each row run on the same 0 to $110,000 scale, so the widths are comparable down the chart as well as across each row. Orange is the small-firm figure, slate the 500-plus figure. The four widest-gap states are shown first, then the two narrowest. Small-firm pay is within $16,000 across all six; large-firm pay in Washington is 72% higher than in Nevada.
Source: U.S. Census Bureau, Statistics of U.S. Businesses 2022, national file us_state_naics_detailedsizes_2022.txt, employer firms by state and enterprise employment size, retrieved from the Census static dataset release and re-verified on September 15, 2026.
Washington’s small firms pay the eighth-highest wages in the country, and Washington has the widest pay gap in the country. The gap is not about them.
Every state is on the same side of the line
There is no state where the average small-firm job pays as much as the average large-firm job. The narrowest gaps are in Nevada (87.7%), Tennessee (85.3%) and Maryland (84.7%); the widest are in Washington (59.7%), New York (63.7%) and California (64.0%). In dollar terms the range is wider still: $7,193 a year in Nevada against $40,658 in Washington, a factor of 5.7. The states at the narrow end are not the states with the best-paid small firms — they are the states without a concentration of very high-paying large employers.
Every bar is a small-firm figure expressed against the large-firm figure in the same state, so every bar is orange under this article’s colour rule and the length is the comparison. Scale is 0-100%, and 100% would mean parity. The national figure is 74.4%. The 35 jurisdictions not shown fall between 73.1% and 83.0%.
Source: U.S. Census Bureau, Statistics of U.S. Businesses 2022, national file us_state_naics_detailedsizes_2022.txt, employer firms by state and enterprise employment size, retrieved from the Census static dataset release and re-verified on September 15, 2026.
Where it reverses, and why that is a question about hours
A pay gap between size bands can be an illusion produced by industry mix: if large firms happen to concentrate in well-paid industries, the gap says something about industries and nothing about size. So the same division was run inside each of the 19 major sectors. The premium holds in 17 of them, covering 88.1% of private-sector employment, which is as clean a control as this dataset allows. It fails in two. One is agriculture and forestry support, which employs 168,634 people and barely clears parity. The other is retail trade, which employs 15,922,438 and reverses hard: small retailers pay $44,207 per employee against $32,768 at large ones, 34.9% more. That gap is almost certainly not a wage rate. This series reports annual payroll divided by headcount, and a payroll spread across a larger part-time workforce produces a lower figure at exactly the same hourly rate. SUSB publishes no hours, so the two cannot be separated here — which is the honest limit of the whole measure, not just of the retail row.
The dashed centre line is parity — small-firm pay equal to large-firm pay. Slate bars run left: large firms pay more, which is 17 of the 19 sectors. Orange bars run right: small firms pay more, which is retail trade and agriculture support only. Each bar is labelled with its distance from parity in percentage points, and its length is that distance scaled 1.4x so the narrow sectors stay readable. Ordered from the largest large-firm premium at the top to the largest small-firm premium at the bottom.
Source: U.S. Census Bureau, Statistics of U.S. Businesses 2022, national file us_state_naics_detailedsizes_2022.txt, employer firms by state and enterprise employment size, retrieved from the Census static dataset release and re-verified on September 15, 2026.
None of this tells you what to put in an offer. It tells you the shape of the market you are making the offer into. In a state like Nevada the large employer down the road is paying about $7,000 a year more than you are; in Washington it is $40,000, and no amount of culture closes that on its own. Knowing which of those two markets you are in is the difference between competing on pay and knowing you cannot.
Frequently Asked Questions
Do small businesses pay less than large ones?
On average, yes. Across all U.S. private employers in 2022, firms with fewer than 500 employees paid $55,663 per employee against $74,832 at firms of 500 or more — 74.4 cents on the dollar. Large firms paid more in all 50 states and the District of Columbia, and in 17 of the 19 major industry sectors, which together account for 88.1% of private-sector employment.
How big is the gap in dollars?
$19,169 per employee per year nationally. By state it runs from $7,193 in Nevada to $40,658 in Washington — a factor of 5.7 between the narrowest and widest.
Which states have the smallest and largest pay gaps?
Smallest: Nevada at 87.7% of large-firm pay, Tennessee at 85.3%, Maryland at 84.7%. Largest: Washington at 59.7%, New York at 63.7%, California at 64.0%. The gap tracks what large employers pay far more closely than what small employers pay — a correlation of -0.58 against -0.16.
Why does retail go the other way?
In retail trade, firms under 500 employees paid $44,207 per employee against $32,768 at firms of 500 or more — 34.9% more. The likely reason is hours rather than rates: this series divides annual payroll by headcount, so an employer whose payroll is spread across more part-time staff shows a lower figure at the same hourly wage. The Census Bureau does not publish hours in this dataset, so it cannot be separated here.
Does this include benefits?
No. The figure is annual payroll divided by employment. It excludes employer-paid health insurance, retirement contributions and other benefits, which are a larger share of total compensation at big employers than at small ones — so the gap in total compensation is wider than the gap shown here, not narrower.
Published by The Lonely Entrepreneur — the community and coaching platform for entrepreneurs who are building alone. lonelyentrepreneur.com
This article is for educational purposes and is not a substitute for professional financial or legal advice.