How Much Do Employers Spend on Benefits?

how much do employers spend on benefits
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This blog was updated on December 8th, 2021

Offering competitive benefits is essential in a tight labor market. However, going overboard is sure to put a dent in your profit margin. The objective is to provide competitive and affordable benefits. This can be achieved by gleaning, or bench-marking, how much other employers are paying for benefits. How Much Do Employers Spend on Benefits?

Average cost of employee benefits

We took at a look at a report released on September 16th, 2021. According to that report, private industry, employers paid an average of $36.64 per hour per employee. Of that amount, $26.85 (70.6%) went toward wages and salaries, and $10.76 (29.4%) accounted for benefits.

  • Insurance = 7.6% of wages; health insurance accounted for 7.2 or $2.63 per hour worked. 
  • Paid leave = 7.4% of wages or $2.70 per hour worked.
  • Defined contribution plans (such as 401k) = 2.3% of wages.
  • Defined benefit plans (such as a pension) = 1.1% of wages, down from the previous years.
  • Supplemental pay (such as non-production bonuses) = 3.4% of wages.
  • Legally required benefits (such as workers’ compensation) = 7.6% of wages or $2.77 per hour worked.

Average cost of benefits administration

Administration is an intrinsic component of employee benefits, and it costs money.
A 2018 survey by Ernst & Young lists the average labor and non-labor costs for the following employee benefits tasks:

  1. On-boarding.
  2. Benefits enrollment.
  3. Training.
  4. Expense management.
  5. Time management.
  6. Separation/termination.

A few conclusions from the survey:

  • To obtain or provide plan documents and summaries for employees, employers spend an average of $12.07 in labor costs and $1.72 in non-labor costs — such as for printing, copying and postage.
  • To review or approve PTO requests, the average labor cost is $11.27. This task has no average non-labor cost.
  • To process benefit issues — such as COBRA and retirement — at termination, the average labor cost is $11.36, and the average non-labor cost is $.0.32.

The report asserts that adopting full-service human capital management technology is key to reducing labor and non-labor benefits administration costs.

Employee benefits as a strategic tool

This third aspect of employee benefits benchmarking is about understanding how employers are leveraging benefits to recruit and retain talent.
For example, how many employers offer the same benefits as you do? How do these benefits impact recruitment, retention and overall company performance? Which benefits are most popular in your industry? How are employers granularly allocating benefits costs?

In response to the last question, the Society for Human Resource Management’s 2018 Employee Benefits survey concludes that 83% of organizations share health care costs with their employees, while 16% pay the full amount. In addition, 18% of companies “charge a higher premium for health care coverage of employees who smoke.”

Benefits during a pandemic

The world has changed drastically since we first released this blog in January of 2020. In the United States at the time of this update the unemployed are currently getting additional benefits from the Federal Government. The additional $600 a week to help with the unprecedented unemployment from COVID-19 is set to run out of 7/31/2020. Our question to business owners is simple, how do you plan on standing out when people start looking for work again? If you’re not already offering benefits now is the time to start. Benefits have been proven to help retain employees longer, increase morale, and get higher quality potential hires. A lot of business have had a difficult time appealing to new hires, who potentially can earn more at home. Offering benefits can help appeal to new talent more quickly.

Ready to offer your employee benefits?

We can help. We offer the same benefits of the larger companies at a competitive price. Help retain and attract employees by offering them benefits today. Get a quote or call 772-466-0440.

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About Atlantic Payroll Partners

At Atlantic Payroll Partners we believe we are the best, local payroll provider to help you grow your business. Even more than that. We’re a professional employment organization that offers an incredible suite of solutions for your business. In addition to offering payroll services we offer, full-service HR, workers’ compensation, accounting, and health care benefits. Our solution suite is back by over 100 years of combined experience in the PEO space.

We’re proud to say that we’ve helped businesses reduce employee turnover, increase revenue, make more money, and lighten their daily load by working with us. Our clients can offer their employees’ health care benefits and access to the same 401k plans that the Fortune 500 companies use without breaking the bank.

We welcome you to continue exploring our website, to learn more about Atlantic Payroll Partners and how we can help improve your business. We do our job, so that you can focus on yours.