What Affects The Cost Of Your Employee Benefits Program
Its difficult to determine what your benefits program could cost without sitting down with an expert and discussing your unique needs. However, in general terms, the cost of your health and employee benefits program will depend on two prominent factors the size of your business and the breadth of your plan.
Firstly, the size of your business and how many employees will be receiving benefits will be the most important component determining how much youll have to pay for your plan. The second biggest factor will be the quality of the plan. The more coverage and benefits a plan has, the more youll have to pay per employee.
Now that we have the broad strokes covered, lets dig deeper into what an employee benefits plan may cost by breaking down how much businesses pay on average and how much specific coverages can cost.
Top Benefits And What They Cost
Providing employee benefits is crucial for both attracting and retaining top talent, especially given the labor shortage that many companies are grappling with. Solid benefits can help increase productivity, and keep your employees happy. So what types of benefits are people looking for, and how much do they cost? We cover some of the most in-demand benefits below.
Human Capital Investment Management
Hiring a workforce is akin to building a stable investment portfolio, but with human capital. The goal of investing in human capital is to maximize return on investment in the most efficient manner and shortest period of time. Talent that can generate greater and quicker ROI naturally commands a higher premium in the jobs marketplace. Therefore, its prudent to plan ahead and be prepared with a mid to high-range number for each open position based on the real cost of hiring employees to alleviate sticker shock and loss of talent to competitors.
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Optional Employee Benefits That You Should Consider
These are the kind of employee benefits that can separate your company from other companies within your industry. You can keep in-house talent happy and healthy by promoting a better lifestyle through the benefits you offer.
Such benefits include unlimited vacation time, gym memberships, complimentary lunches, health incentive programs, 401k plans, retirement plans, pension plans, extended maternity leave, flexible work schedules, and many more.
Some of these optional benefits aren’t as costly as they seem. In fact, they offer a tremendous value to your business in exchange for a small expense.
What’s important to remember is that you don’t need to provide all of these optional benefits to retain good employees. All they ask is that you look out for all of their needs and help out where you can.
The thought and effort you’re putting into your employee benefit options will not go unnoticed by your workers.
In fact, they’ll likely admire your thoughtfulness and continued focus on finding ways to improve the benefits that you offer. Thats a way to keep them happy!
Average Cost Of Employer
According to researchpublished by the Kaiser Family Foundation in 2019, the average cost ofemployer-sponsored health insurance for annual premiums was $7,188 forsingle coverage and $20,576 for family coverage. The reportalso found that the average annual deductible amount for single coverage was $1,655 forcovered workers.
Overall, despite growth in premiums over time, the average cost of employer-sponsored health insurance has remained relatively stable in the health insurance market.
Employer-sponsored coverage is health insurance offeredthrough your job. Also known as employer-provided health insurance, this mayinclude coverage for current workers, as well as retirees. Typically, youremployer may offer a choice of group health plans to eligible workers and coverspart of the premium cost. Employer-provided health insurance remains the mostcommon type of health coverage in the U.S., according to the KaiserFamily Foundation.
The Average Cost Of Employee Benefits Plans In Canada
Because Canadian health and dental plans vary, its difficult to know an average cost. According to , the average annual premium works out to about 15% of payroll for a smaller businesses or up to 30% of payroll for large companies.
However, there are benefits plans that cater to small businesses allowing them to offer a plan for as low as 1 to 5 % of payroll.
If youre setting up an employee benefits plan, and a retirement savings plan at the same time, you may also be able to bundle both benefits to save money.
Note: the percentages quoted here dont include the mandatory benefits that all Canadian business must provide:
- Vacation and statutory holidays
- Maternity and parental leave
- Canada Pension Plan/Quebec Pension Plan contributions
- Canada Employment Insurance
Average Cost Of Employee Benefits
Through December 2017 the average cost of employee benefits for employers per employee was $35.87 per hour. Of that amount, compensation accounted for an average of $24.49 , with benefits accounting for the remaining $11.38 .
In other words, employers spend an average of $11.38 per hour per employee on benefits.
From there, the BLS provides more detailed information about exactly what these benefits are, including insurance paid time off, retirement and other legally required benefits .
How Much Is The Cheapest Small Business Health Insurance
If you are a small business owner, you need to weigh the importance of taking care of your employees against the cost of health insurance. Finding the cheapest small business health insurance that meets the needs of your staff is a critical first step.
According to research published by the Kaiser Family Foundation in 2021, the average cost of employer-sponsored health insurance for annual premiums was $7,739 for single coverage and $22,221 for family coverage. The report also found that the average annual deductible amount for single coverage was $1,669 for covered workers.
Employer-sponsored coverage is health insurance offered through your job. Also known as employer-provided health insurance, this may include coverage for current workers, as well as retirees. Typically, your employer may offer a choice of group health plans to eligible workers and cover part of the premium cost. Around 155 million Americans rely on employer-sponsored health insurance., according to the Kaiser Family Foundation.
Shop Around With An Insurance Agent Or Broker
With so many different options, understanding and ultimately choosing the right health insurance plan can be confusing, Stahl said. The key is to work with an agent who is unbiased and can show you all the options.
These options may include group health-sharing plans, traditional group plans, ACA marketplace plans or even level-funded plans, which provide rebates at the end of the year if employees have made few health insurance claims.
Health Benefit Costs Per Employee
Health benefit costs depend on a few different factors. The type of plan you choose to offer, the health plan carrier or administrator, the provider network, and the size of your group can all impact the rates. If you currently offer group benefits, you can get an estimated cost for health benefits for new employees, you can look at the cost of providing benefits to other employees in your company through your current provider.
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. Lets 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.
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First Do Employers Have To Offer Health Insurance
It may surprise you to know that we get asked this question all the time. Health insurance is a big expense. The good news is that you may not have to offer it.
The requirements for offering health insurance differ based on your size.
- Small Employers: If you have less than 50 full-time equivalent employees, youre not required to offer health insurance.
- Large Employers: If you have 50 or more employees, you technically dont have to provide health insurance however, if you dont, the Affordable Care Act requires you to pay a tax penalty. In 2020, the penalty amount is $2,750 for each full-time employee if you fail to offer coverage to 95% of full-time workers and their dependents and any worker receives coverage from an ACA marketplace.
There may be other situations that may require you to offer health insurance. For example, if an employees employment contract or union agreement guarantees it.
However, even if youre not required to provide health coverage, you may want to offer it on a voluntary basis for a number of reasons:
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What Factors Impact The Cost Of Health Insurance
While the costs we just described are averages, there are many factors that go into calculating your companys actual premium costs. The 9 biggest components of your premium are:
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How Much Does Group Health Insurance Cost For Employees
From the insurance plan your company chooses to your employees health conditions, many factors affect how much employees pay for health insurance.
Again looking at KFFs report, in 2021, group health insurance participation cost employees $5,969 annually, roughly 27% of the premium, for family coverage and $1,299, about 17%, for an individual. Employee costs are typically taken through a payroll deduction.
Premium costs with a group health insurance plan typically increase every year. In fact, employers expect the average total cost of healthcare to increase by 4.7% in 2022. To minimize or reduce fluctuation in premium amounts, and to control the cost of benefits from year to year, you can change contribution strategies or plan features.
How Much Does Health Insurance Cost If You Are Self Employed
A recent study by eHealth found that for the first half of the 2021 Open Enrollment Period, these were the average national monthly costs for ACA-compliant plans: Average monthly premiums for individual coverage: $484. Average monthly premiums for families: $1,230. Average annual deductibles for individuals: $4,394.
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The Cost Of Group Critical Illness Cover
What Is It?
Group Critical Illness Insurance pays a lump sum if a worker suffers a critical illness. This lump sum is either a multiple of their earnings or a fixed amount of your choice.
The most common claims on Group Critical Illness Cover are for cancer, heart attacks and strokes.
In most cases, Group Critical Illness Insurance premiums are a tax-deductible business expense for employers.
What Affects the Cost of Group Critical Illness Insurance?
As with all employee insurance benefits, Group Critical Illness Insurance premiums depend on both personal factors about your staff and the level of cover you offer.
The following points impact the cost of premiums:
- BenefitEmployers typically offer workers a payout of between one and five times earnings. The higher the payout, the higher your premiums.
- Employees agesThe older your workforce, the more likely they are to suffer a critical illness, meaning a greater monthly cost.
- CoverageCore cover protects against around 12 critical conditions. You can extend your policy with additional cover for a further 20-25 or so conditions. The more conditions your policy covers, the higher your premiums.
The table below offers example Group Critical Illness Insurance premiums for companies of various sizes with slightly different policy options.
£42.23 per month
If you would like to compare quotes from all the leading UK group critical illness providers dont hesitate to enquire below.
How To Budget For Employee Benefits
Budgeting for your employee benefits costs is tricky. In full transparency, theres no one right answer or magic number to help you make these decisions as a business leader.
But heres what we can tell you about budgeting for your employee benefits. Try following these four steps to help determine how youre spending your dollars.
- Examine your core values and the values or guiding principles of the organization. First and foremost, start with reflection. If youre a business leader, you know that your core values are guideposts for every decision you make. Take a minute to figure out whats most important to your business and your people. What core values can you use to guide how you evaluate your priorities? What do your HR leaders have to say about this, too?
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Examples Of Employee Benefits
There are plenty of types of employee benefits, not just health benefits. Some benefits are required. For example, companies have to pay the employer portion of social security and Medicare taxes. The important thing is to make sure theres accuracy and seamlessness for employees. Other benefits feel special and can make a meaningful difference in an employees life.
While some benefits are less common depending on the organization or industry, here are 21 types of employee benefits.
- Health insurance and healthcare
- Educational incentives or tuition reimbursement programs
- Flexible work arrangements and remote work infrastructure
The Average Cost Of Employee Benefits In The United States
The cost of your employee benefits program will depend mainly on two factors: the size of your organization and the expansiveness of your benefit offerings. The number of eligible employees at your company and the quality of each benefit program cause a large amount of variability in determining the total cost of benefits. In this section, well break down the costs of popular benefits offerings.
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How Much Does Health Insurance Cost For Employees
According to HR consultancy Willis Towers Watsons Best Practices in Health Care Survey, as reported by SHRM, the average annual premium cost for an employee in 2021 for employer-sponsored health coverage was $3,331, up from $3,269 in 2020. Another survey from Mercer projected premiums will increase by 4.4% in 2022. However, the data indicates many employers arent raising their employees share of the cost its expected workers will continue to contribute 22% of their health plan premiums cost, unchanged from 2021.
At the same time, some employers are looking to decrease their employees healthcare expenses by covering treatments or expanding what they offer. These services could be considered fringe benefits:
- Health and wellness promotions within the workplace
- Access to centers of excellence
- Working spouses surcharges
Bottom Line: Even as insurance premiums rise, costs wont necessarily increase for employees in 2022 if employers take on more of the financial burden and cover more services.
The Benefits Of Benefits
Attract and retain employees Today, most employees expect, and value, benefits. In fact, according to Sanofi Canada – Opens in a new window, 86% of plan members agree their health benefits plan is an important factor when deciding on a job offer. Thats why a benefits plan helps smaller employers compete with larger ones.
Healthier employees Benefits help keep your employees healthier by making health care costs easier to afford, which can lead to fewer sick days.
Morale boost Knowing you care about their well-being builds loyalty and appreciation.
Tax advantages The cost of many employee benefits can mean a tax deduction for the employer.
A foundation for success Offering employee benefits sets the stage for you to succeed and grow by attracting, hiring and keeping good employees. According to the Sanofi Canada – Opens in a new window, 71% said their health benefits plan is a strong incentive for them to stay with their employer.
The Cost Of Your Employees Benefits
Optimizing your employee benefits to attract and retain talent without breaking the bank is an essential function for any business. Knowing the average cost of these benefits can help you balance lower costs while still providing the benefits that will boost employee retention and keep key employees with you for longer in their careers.
Recruiting And Hiring Costs
Expenses associated with hiring include the salaries of your recruitment team, marketing expenses, and payments made for background checks.
To source a new employee with benefits, the company will incur a cost up to 40% of an employees base salary. If youre recruiting with an internal team, youll also need to consider the cost of advertising your vacancy. These can vary significantly depending on where you choose to market the role.
Once you have a talent pool, your team will start to screen and interview individuals. While screening candidates, a background check may cost between $10 and $500, depending on how extensive you want the inspection to be. The more in-depth checks will cover:
- Employment history
- Criminal history
As mentioned, it may cost a company around $4,000 to find and hire a new employee. The cost increases proportionately with the duration of the search, job role, and salary range.
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