A recent report from the Employer Costs for Employee Compensation (ECEC) collected data from 27,200 occupations and 6,600 private industries about the total cost of benefits compensation.
The data revealed that employers are spending more on benefits, with an increase of 368 percent over 14 years. When employees receive their paychecks, they mostly focus on their take home pay amount. But what other benefits are they simply not aware of?
Breaking down the costs – what’s the dollar amount?
In the private sector, employers are spending 69.7 percent on wages and salaries with benefits accounting for around 29 percent of total compensation including legally required benefits like Social Security and Medicare. With these two percentages in mind, let’s dive deeper into the actual dollar amount employers are paying for benefits. Adding up insurance plans, paid leave, retirement and savings, supplemental pay, and all the legally required benefits, the total cost is $21,726 annually. With the addition of wages, that number goes up to over $71,000 annually.
In addition, if sick leave is an offering, employers can spend up to $616 a year per employee and adding up all the other time off perks like vacation, holidays, and personal days, that’s around $5,000 annually.
Benefits costs are rising – but not at the same rate across industries
It may be no surprise to note, that benefits costs are increasing steadily over the years. The cost of health insurance has increased by 28 percent — and in 2017 alone, U.S. health care costs topped out at $3.5 trillion dollars which equates to $10,739 per person. In comparison, the health care cost in 1960 was $27.2 billion, or only $146 per person. These increases stem from a combination of rising chronic illnesses like diabetes and heart disease, drug costs, high administrative costs, and hospital branding to name a few.
Costs are up, although it’s interesting to note, that rates may increase more according to your location and industry. For example, in the finance and insurance sector, benefits have increased by 17 percent, while the retail sector only increased by 3.9 percent between 2004 and 2018.
Where you live matters – costs increase according to location
If you are located on the east or west coast your benefits costs are higher – but with an influx of Fortune 500 companies in Arizona, their percentage increase in costs of benefits rose 90 percent since 2004. Florida has the lowest costs to provide benefits which could attract more start-ups to their shores.
There are a few key takeaways to think about when analyzing your benefits costs:
- Do your employees use them?
- Do your employees know about them?
- Are you absorbing all the cost of benefits on your own?
- Are you tracking the data of your employees enrollment in your benefits options?
Benefits that improve overall employee well-being, like benefits that increase financial security, are on the rise. Employers must understand their workforce and analyze which benefits would be best to fit their employees’ changing lifestyles. Plus, employers need to take the time to communicate the total costs of benefits to their employees in order to illustrate their investment for higher employee loyalty, engagement and hiring rates.
Want to learn more about our total rewards services?