The hourly rate received by an employee does not represent the full extent of the compensation he receives. Benefits costs -- such as health insurance, retirement, disability insurance, employee assistance plans and employer contributions to Social Security, for example -- also need to be factored in along with the flat rate to give a true picture of the hourly cost of the employee to the organization. For ease of computation, most large companies average the benefits amount -- known as the "benefits load" or "payroll load" -- according to job class and reflect the amount as a percentage of salary.
Identify the benefits to which the employee -- or job class -- is entitled. For example, some employees may qualify for a higher level of life insurance, a greater contribution toward medical benefits or an increased retirement contribution by the employer.
Calculate the annual cost of each separate benefit. Don't forget to include mandatory contributions made by the employer, such as Social Security.
Add the costs of the benefits together to get a combined, total annual benefit amount.
Divide the annual benefits rate into the employee's annual salary to get the benefits multiplier. If an employee is earning an annual salary of $100,000 and receiving benefits that amount to $30,000 annually, the calculation would be as follows: 30/100 = 0.30. The benefits multiplier is therefore 0.30, or 30 percent of the hourly rate.
Multiply the hourly rate by the benefits multiplier to convert the benefits percentage of the hourly rate to a dollar figure. If an employee earns $10 per hour, and has a benefits rate of 30 percent, the calculation would be as follows: 10 x 0.30 = 3, so the total amount paid to the employee in benefits per hour would be $3.
If you prefer not to compute the benefits load manually each year, software is available to perform the task for you.
If you are using general numbers, the specific amount per employee could vary significantly depending on factors such as age, gender and length of service, for example.
- If you prefer not to compute the benefits load manually each year, software is available to perform the task for you.
- If you are using general numbers, the specific amount per employee could vary significantly depending on factors such as age, gender and length of service, for example.
For more than a decade, Tia Benjamin has been writing organizational policies, procedures and management training programs. A C-level executive, she has more than 15 years experience in human resources and management. Benjamin obtained a Bachelor of Science in social psychology from the University of Kent, England, as well as a Master of Business Administration from San Diego State University.