Benefits and Compensation

Do Your Employees Know the Actual Cost of their Total Compensation Package?

Most employees think of compensation primarily in salary terms, but how aware are they of the total cost of their compensation package? And are employers properly communicating the value of benefits?

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To find the average cost of providing benefits like health insurance, sick leave, vacation days, and social security to private industry employees, we analyzed data from the Bureau of Labor Statistics. The results showed that on average, for every hour employees work, employers spend $10.41 on total benefits, including $2.73 on insurance plans, $2.40 on paid leave, and $2.65 on legally required benefits. This amounts to about 29% of an employee’s total compensation package.

The net amount we see on our paycheck stub is only a fraction of what employers are spending on each worker. In fact, benefits can add up to $21,726 annually. With wages and salaries added, that cost could jump up to $71,334 for every employee. Like most things, the costs of benefits have increased over time. Health insurance has gone up by 28% since 2004, while the cost of vacation time has increased 161.8%. To put everything in perspective, that means an overall increase of 368% over 14 years.

However, not all industries are the same. The average costs of benefits for employees in the retail industry is $5.57 per hour and since 2004, the hourly cost has only increased by 3.9%. Similarly, the hospitality and food services industries only spend $3.70 per hour in benefits, the least of any industry in this study. Finance and insurance industries have seen the most significant increase since 2004 at 17%. Providing benefits for utility workers can cost an average of $39,028, the most of any sector we analyzed.

It’s interesting to note that the healthcare and higher education industries have seen a similar percent change since 2004. Healthcare has seen an increase of 14.6% and higher education costs of benefits have gone up by 14.4%. Although, the average annual costs of benefits for higher education employers is $34,250, while the average cost of benefits for each worker in healthcare is $21,364.

The costs of benefits for employers can vary greatly by the company size. It’s probably no surprise that larger companies spend more for each worker, especially since larger companies are legally required to provide additional benefits, such as health insurance and medical leave. On average, companies with 500 or more employees spend on average $17.13 per hour for every employee on benefits alone, far more than small businesses at $7.50 per worker.

Employers should consider educating their employees on the costs and value of every benefit that makes up their total compensation package. And if you’re an employee, don’t forget that your compensation includes more than just your take-home pay.


Bureau of Labor Statics’ Employer Costs for Employee Compensation (ECEC) report

According to the BLS, data were collected from a sample of about 27,200 occupational observations selected from a sample of about 6,600 private industry establishments.

Our full report can be viewed here.

Corie Colliton is the Project Manager for Bay Alarm Medical who analyzed BLS data using the National Compensation Survey’s 2018 Employer Costs for Employee Compensation (ECEC) report to get a better idea of how much companies are investing in their employees