How Much Do Benefits Cost?
Employers need to offer benefits to attract the best employees and retain them, and perhaps the most difficult decision is deciding on which benefits to offer. The cost of employee benefits needs to make financial sense for the business but also provide adequate coverage for employees. So how much do benefits cost?
According to the Bureau of Labor Statistics, in 2018, benefits made up 32% of employer costs. While the average cost of employee benefits sounds significant, the value of providing benefits from a business competitiveness standpoint cannot be underestimated. Let’s examine how much are benefits were worth in 2021 and how to maximize your costs.
How Much Do Benefits Cost an Employer?
The first step to creating a benefits package is determining the average cost of benefits. There are slight differences between civilian, private industry, and state/local government workers. (All the numbers that follow have been extracted from the annual Bureau of Labor Statistics report.)
Insurance
Insurance makes up 8.8% of an employee’s total compensation. It includes everything from employer health plans to life insurance. For civilian workers, this is 8%, but for state and local government workers, the average is as high as 11.4%.
Social Security and Medicare
Social security, Medicare, unemployment insurance, and workers’ compensation coverage are benefits that are legally required to be provided by employers. These comprise 7.7% of a worker’s total compensation and are non-negotiable.
Paid Leave
The average American takes between 17 and 18 paid vacation days per year, along with ten paid public holidays. Paid leave also includes sick time and personal leave. Paid leave makes up 7% of the average benefits package.
Retirement/Savings
This benefits category includes both benefits plans and contribution plans. The latter is much more popular within the private sector. It makes up 4.5% of an employee’s compensation package, on average.
Supplemental Pay
At 2.5%, supplemental pay makes up a relatively small portion of the cost of employee benefits. It includes both overtime and any bonuses to be paid. This is one of the few areas where private industries far outpace the government sector.
Benefits Breakdown Per Industry
The average benefits package is just that, an average. So, how much do benefits cost across industries? Different industries will often emphasize various types of benefits. There are large variations between industries when it comes to where they invest the cost of employee benefits. Let’s compare and contrast some of the differences in how much benefits cost to employers across industries, according to the same annual Bureau of Labor Statistics Report.
Civilian Workers
Civilian workers receive an average compensation of $26.85 per hour. But how much do benefits cost their employers? All their benefits combined equal $12.06 per hour. Combined with their salaries, the total compensation of a civilian worker in the U.S. is $38.91 per hour.
Private Industry Workers
The private industry sees a slightly lower average salary of $25.89. Their benefits are also likely to be less valuable, at $10.76 per hour. This brings the total compensation figure to $36.64, which is slightly lower than a civilian worker.
State/Local Government Workers
State/local government workers are the outliers when it comes to their salaries and the size of their average benefits package. Average salaries rest at $33.09 hourly, whereas their benefits packages are $20.50 per hour. Taken together, this leaves the average cost of benefits per employee, plus salary, at $53.59 per hour.
Maximizing Your Employee Benefit Costs
Ask not how much do benefits cost, but how much are benefits worth? Additional coverage for retirement, health, and supplemental pay is designed to retain employees, improve their health, and boost morale. Here’s how to provide excellent employee benefits for the most bang for your buck.
Offer Personalized Packages
Not every employee has the same needs. Offering personalized packages increases administration costs but is better for employees. Approximately 73% of employees said personalized benefits packages would increase their loyalty.
Survey Your Workforce
Find out what your employees want from their benefits packages. Other than what’s legally mandated, you have full flexibility regarding which benefits you invest company funds into. Send out a survey and ask your team directly what they value in a benefits package. Don’t assume you know what they want — let them tell you.
Invest in Healthcare
Healthcare costs have been a major topic of discussion in recent years. With the COVID-19 pandemic expected to send costs soaring yet again, Americans are worried about their ability to access affordable healthcare. This is perhaps the most highly prized benefit of all, and investing more into a great healthcare plan is an easy way to attract and retain top talent.
Other Tips for Maximizing Your Costs
- Go digital and minimize paperwork.
- Limit mistakes. Simple mistakes can lead to significant financial penalties.
- Don’t forget to consider administrative costs.
- Prepare for healthcare premium increases.
- Take into account fluctuating employee needs.
Collaborative Care For Every Employee
Benefits are not a cost but an investment in your workforce. Show your team how much you value them and focus on the full spectrum of their health and wellness needs. Make it easy for employees to manage their physical and mental health through one continuous Care Team. Learn more about how Eden Health supports the health needs of your employees and request a free demo today.
