The Cost Of Offering Employees Health Insurance
The cost of providing health insurance to your employees depends on factors such as:
- Insurance carrier
- Network of providers in the plan
- Your contribution amount
In 2020, the average annual premiums for employer-sponsored coverage were $21,342 for family coverage and $7,470 for individual coverage. After taking into consideration the costs that workers pay, the average cost of group health insurance becomes about $15,754 for an employer to cover a family and $6,227 for an employer to cover one employee.
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Retirement And Employee Stock Purchase Plan
Employers will typically match their employees contributions to their retirement fund up to a certain point. The most common percentage employees will put towards their retirement is 2-6% of their salary.
Additionally, if you sponsor and manage your employees retirement plans, theyll be able to get considerably better returns and save more in tax-free or tax-advantaged accounts.
However, retirement plans arent the only way to take care of your employees future. Many employers, especially startups, will offer their employees an option to purchase a certain amount of stocks at very reduced prices .
If your company is successful and manages to go public, this could allow employees to make a very nice profit once they end up selling their stocks.
Average Cost Of Employee Benefits In 2022
May 9, 2022 by Brandon Downs
Although salary will always be an essential consideration for jobseekers, employee benefits are becoming increasingly important for both attracting and retaining talented workers. Offering a well-rounded program demonstrates to employees that the company they work for is invested in their job satisfaction, health and well-being. Businesses that want to stand out need to offer an attractive employee benefits program that goes beyond basic health insurance and embraces some of the lifestyle-related benefits that have become important to modern workers.
A good benefits program can get expensive quickly making it advisable to work with an experienced benefits consulting company. They can determine the best approach to helping employees improve their well-being, work-life balance and productivity in a way that is financially sustainable. Here is a look at the average cost to provide some of the most important employee benefits in 2022.
Contents
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How Can You Offer Benefits On A Budget
Showing how to set a budget for employee benefits can be difficult, and certain basic legal protections such as insurance needs to be factored in, but there is also an element of choice on what you offer people. If you have set a budget and it isnt particularly high, you can still potentially provide some great benefits.
Offering employee benefits can give you a chance to get creative. If you are on a budget, and you need to create an attractive package, then you can think about other things you might be able to offer your employees. Do you offer a service or a product? Is this something you can offer your employees for free? For instance, if you run a gym, it just makes perfect sense to give free membership to all of your employees. If you run a grocery store, you can offer a staff discount.
Other creative benefits could include a profit share, this means that employees are incentivized to work hard, too. A certain percentage of your company profits could be distributed to employees. This does mean a cost incurred, but only if the business is doing well in itself.
Certain types of businesses will find it easier to create benefits at a lower cost, but most can provide some internal benefits that are attractive to current and prospective employees.
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:
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.
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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 there’s 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
How Much Do Employee Benefits Cost On Average
We can use statistics gathered by the U.S. Bureau of Labor to get a good idea of what various employee benefits cost on average.
In June 2021, the bureau reported that employer costs for civilian workers averaged $38.91 per hour. Wages comprised about 69% of that number, which means that benefits made up 31% of total compensation.
This fits into lecturer Joe Hadzimas basic model for calculating the cost of salary plus benefits, which usually totals in the 1.25 to 1.4 times base salary range. Thus, an employee who makes $100, 000 a year could cost the company $125,000 to $140,000 once benefits are calculated.
However, this only gives us an insight into the lump sum that businesses are paying for benefits. To help you better understand how much your plan will cost, lets break down how much some of the most popular and necessary benefits will cost:
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Employer And Employee Contributions To Monthly Premiums
As a small business with less than 50 full-time equivalent employees, you are not required to offer group health insurance. If your company does decide to offer health coverage to your employees, then you are typically required to pay for at least 50 percent of employee premiums as a small employer. Keep in mind that your business can also decide to contribute a larger amount to your workers premiums.
If you are a small business with less than 50 full-time equivalent employees, youre not required to offer group health insurance. If you do choose to offer health coverage to your employees, then youre typically required to pay for at least 50 percent of employee premiums as a small employer. Keep in mind that your business can also decide to contribute a larger amount to your workers premiums.
The Employer Health Benefits 2019 Summary of Findings noted that the level of employer contributions to worker premiums tends to vary:
- 31 percent of covered small firm employees had their employer pay the entire premium for their single coverage.
- 35 percent of covered small firm employees were enrolled in a plan where they contribute more than one-half of the premium for family coverage.
- In 2019, the average amount covered employees contributed was $1,242 for single coverage and $6,015 for family coverage.
Source: Kaiser Family Foundation 2019 Employer Health Benefits Survey
It Benefits You To Plan For Contingencies
When you consider that record-low unemployment is putting pressure on companies to raise wages, healthcare costs are continuing to rise, andoh yeaha is threatening massive downturns for everyone, it’s no wonder compensation planning is becoming a more and more stressful endeavor.
To avoid blowing budgets down the line, start contingency planning now. Identify the benefits you may be able to offer if company performance beats expectations, and the ones you can cut first if performance underwhelms. Complete a cost-benefit analysis as well to determine which benefits you can’t afford to lose.
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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.
Source:Kaiser Family Foundation 2019 Employer Health Benefits Survey
How To Know Which Employee Benefits Are Required
There are some employee benefits that are 100-percent mandatory, such as Medicare and Social Security, no matter what industry you’re in.
Then there are other benefits that will be deemed as a required benefit by the state, like workers’ compensation and unemployment insurance. While most states require both, the degree or level of requirement differs from state to state.
You’ll also need to consider federal laws such as the Family Medical Leave Act, which demands a company with more than 50 in-house workers to provide eligible employees with health insurance coverage during unpaid leave for specific family or medical reasons. This protects employees who need an extended leave of absence due to life-altering medical issues or the birth of a child .
Luckily, advanced bookkeeping software can help you balance and budget for both the required and optional employee benefits you’re going to provide.
For example, the Botkeeper platform can show you what you’re paying for all required employee benefits. And from there, it will show the extra room in your budget for optional benefits you can provide your workers.
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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.
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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Show Your Employees That You Care
Employee benefits shouldn’t be a cost that drains the funds of the employer. However, the employer should take pride in the perks it offers its workers.
This is your opportunity to show what’s so great about working for your company above all others out there.
Not only will you retain top talent that’s already in your workplace, but the best talent will want to join your ranks when they learn how great they could have it!
Use Our Calculator To Estimate Your Employee Benefits Costs
Thanks to the BLS, we get updated data every quarter detailing how much employers spend on different benefits per hour worked. Using this data, we built a calculator to help you estimate your employee benefits costs.
Enter how many employees you have and how many hours they work per week on average to calculate your employee benefits costs for the year:
As an example, if a 25-person business with employees who averaged 40 work hours per week wanted to offer all of the benefits we’ve covered here, it would cost $596,960.
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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.
Affordable Options For Any Business
While it can be easy to follow traditional benefit plan models, there are extensive options available for small businesses with stricter budgets. As an employer, its important to always talk with your employees and determine their priorities. Working within a small budget can be difficult, but if your goal is to support your employees, prevent burnout, and boost retention, basic plan offerings like life insurance may be valued less than mental health support, wellness programs, or prescription coverage.
In general, options that allow for more customization per employee will allow members to spend dollars where it counts. For instance, Healthcare Spending Accounts and Lifestyle Spending Accounts allow employees to allocate funds where it benefits them best. Accounts will generally have between $500 to $2000 annually for employees to spend from, though amounts can vary greatly. These are excellent alternatives to allocating a fixed amount per paramedical practitioner, as not all employees will need access to all extended healthcare options. HCSAs can be used to cover dental options, vision care, or drug prescriptions as well. Meanwhile, LSAs can be used to cover fun benefits, or perks, such as gym memberships, meal kits, pet insurance, and more.
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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.
How Many Small Businesses Offer Employer
When considering the costs of health coverage for employees, small business owners may wonder how common it is to provide an employer-sponsored plan.
According to the KFF survey, 57 percent of all firms offered health benefits, while 71 percent of firms with 10 to 199 workers offered health coverage in 2019. The percentage was lower for very small groups, with the survey noting that only 47 percent of firms with 3 to 9 workers offered health coverage to their employees.
Source: Kaiser Family Foundation 2019 Employer Health Benefits Survey
Given that only about half of small businesses offeremployer-provided health insurance, companies that do offer this popular employee benefit have a competitive advantage. Offeringhealth insurance may be one way to stand out from other employers whilecontributing to a companys recruiting strategy and employee benefits package.
Overall, the KFF survey notes that trends in the employer-providedhealth insurance market have been moderate over the past several years.Premiums have increased annually, but in the low to mid-single digits,and cost sharing, especially for deductibles, has meaningfullyincreased over time.
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What Do Benefits Cost Per Employee On Average
The cost of benefits, also known as the employer premium, can range from 1% to 30% of payroll.
Premiums vary due to coverage levels, company size, and benefit provider.
Costs for small businesses can be reduced through the use of Healthcare Spending Accounts, and EAPs.
If youre curious about the exact premium of a plan and the benefit breakdown, you can generate your own sample plan by signing up for CloudAdvisors here . The price quoted below is based on an organization with less than 50 employees, and costs an average of $375 per employee per month.
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.
Example Premiums
The table below offers example Group Critical Illness Insurance premiums for companies of various sizes with slightly different policy options.
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£42.23 per month |
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If you would like to compare quotes from all the leading UK group critical illness providers dont hesitate to enquire below.
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