People typically talk in terms of salary when discussing how much it costs a company to employ a worker. In fact, your salary may represent just a portion of your total compensation if your employer offers a benefits package. A 2014 report by the Bureau of Labor Statistics found that the average employee benefits package costs an employer $9.09 per employee per hour worked. For a 40-hour employee that's $18,907.20 per year. However, costs vary greatly based upon the nature of your work and the type of employer.
A typical benefits package includes paid vacation or sick days, health insurance, life insurance and pension plan contributions. According to BLS statistics, private industry employees, wages account for 69.8 percent of total compensation while benefits account for 30.2 percent. For government workers, employee benefits account for a whopping 36 percent of the typical compensation package. Back in 2001, benefits-related expenses accounted for only 27.4 percent of employee compensation.
Health insurance represents a large chunk of the cost of benefits. In 2013, AON Hewitt released a study suggesting the average annual employee health insurance premium would rise to $11,176 in 2014. Employers typically split this cost with employees. In 2013, the BLS found that total insurance costs on average accounted for 8.3 percent of employee compensation. Health insurance premiums swallowed the bulk of that, with just 0.5 percent covering other types of premiums. For government workers, 12 percent of total compensation goes toward insurance, with just 0.3 percent of that being spent on something other than health insurance.
Retirement and Savings
Some employers offer defined benefits pension plans, which assure you a fixed monthly income payment during your retirement years. Others offer defined contribution plans, such as a 401(k), through which your benefits vary based on the performance of your investments. In 2013, the BLS found that the cost of pension and benefits in private industry amounted to $1.23 per employee per hour. Pension spending for union members was $4.02 per worker per hour. Employer size also makes a difference. Those with fewer than 100 employees spent just 72 cents on retirement and savings per employee per hour. Larger employers spent an average of $2.60.
Benefit packages and spending vary even within industries and particular employers based upon the employees' role in the company. According to the BLS, hourly benefits for a service worker typically cost $3.39. For a management professional the cost rises to $16.33. The difference can be partly explained by wage disparity, since vacation days and percentage-based pension contributions cost more for highly compensated employees. However, some employers also offer discounted health insurance premiums to lower earners while highly paid employees pay much more.
- Bureau of Labor Statistics: Employer Costs for Employee Compensation News Release Text
- Forbes: In 2014, Workers' Share of Health Costs Nearly $5,000 at Large Companies
- Employee Benefit Research Institute: FAQs About Benefits—General Overview
- National Conference of State Legislatures: Health Insurance; Premiums and Increases
- Bureau of Labor Statistics: Private Industry
- Bureau of Labor Statistics: Civilian Workers
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