Benefits and Compensation

Employer Compensation Costs Provide Insights for Salary Negotiations

So, you’ve found the perfect candidate and offered him or her the job. But instead of accepting the position, he or she counteroffers with a salary that’s higher than what you offered. Is this rate fair? Or is the candidate just trying to milk it for what it’s worth? When’s the last time you looked at compensation rates in your industry? If you can’t answer any of these questions, fear not! The U.S. Bureau of Labor Statistics (BLS) has got you covered!

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According to newly released data from the BLS, private employer costs for employee compensation among the four regions of the country ranged from $30.68 per hour in the South to $41.48 in the Northeast. In the other two regions, hourly employer costs for employee compensation stood at $31.03 in the Midwest and $37.08 in the West.
Broken down by specific regions, employers in the East South Central region (Alabama, Kentucky, Mississippi, and Tennessee) reported total compensation costs at $26.14 per hour, and in New England (Maine, Vermont, New Hampshire, Massachusetts, Connecticut, and Rhode Island), employers are reporting average costs to be around $41.98 per hour.

Total Costs, Including Benefits

In the Northeast, hourly total compensation costs comprised the following:

  • Wages and salaries ($27.58) made up 66.5%.
  • Total benefits ($13.89) accounted for the remaining 33.5%, among benefit costs, which include:
    • Life, health, and short- and long-term disability averaged $3.37 per hour worked, or 8.1% of all compensation costs—the highest share for Northeast employers.
    • Costs for paid leave, which includes vacation, holiday, sick, and personal leave, averaged $3.14 per hour worked, accounting for 7.6% of total compensation costs.
    • Legally required benefits, which include Social Security, Medicare, unemployment insurance (both state and federal), and workers’ compensation, averaged $3.10 per hour and represented 7.5% of total compensation costs.

In the West, hourly wages and salaries averaged $26.16 and accounted for 70.5% of all compensation costs. Total benefits averaged $10.93, or 29.5% of compensation costs. Legally required benefits averaged $2.99 per hour worked, the highest benefit cost, and accounted for 8.1% of total compensation costs in the West. Insurance benefits averaged $2.83 per hour and represented 7.6% of employer costs, while paid leave averaged $2.60 per hour, or 7.0% of total compensation costs.
The Midwest region recorded an hourly wage and salary average of $21.48, which represented 69.2% of all compensation costs. Total benefits averaged $9.55 and accounted for the remaining 30.8% of total compensation costs. The three highest categories for employer benefit costs included:

  • Insurance benefits ($2.75 per hour worked),
  • Legally required benefits ($2.47), and
  • Paid leave ($2.10).

These categories represented 8.9%, 8.0%, and 6.8%, respectively, of total employer compensation costs in the Midwest.
In the South, wages and salaries averaged $21.81 per hour and comprised 71.1% of total employer compensation costs, while benefits, at $8.86 per hour, accounted for the remaining 28.9%. Insurance benefits averaged $2.34 per hour worked, the highest benefit cost, closely followed by legally required benefits at $2.32 per hour; each category accounted for 7.6% of total compensation costs in the South. Paid leave was the third-highest benefit cost and averaged $2.10 per hour, accounting for 6.8% of employer compensation costs in the region.
Overall, compensation costs among private industry employers in the United States averaged $34.17 per hour worked in March 2018. Wages and salaries, at $23.76 per hour, accounted for 69.5% of these costs, while benefits, at $10.41, made up the remaining 30.5%. So now that you have a better understanding of the full compensation costs employers face around the region, how will you handle salary negotiations going forward?