A Look At Total Compensation
Instead of looking strictly at benefits, salary, or wages, we encourage employers to create and provide their employees with total compensation statements. These statements pair the wages of an employee with the benefits provided by the company to give an accurate look at what employees are really making. This can help employees see things they may not consider when they think of just take-home pay.
The Cost Of Not Providing Benefits
Although it’s expensive for your company to provide benefits for employees, it can be more expensive not to provide them and lose worker talent as a result. Employee turnover is expensive, especially when you lose key staff with valuable experience. Workers choose and keep jobs with benefits in mind, especially in a hiring landscape where actual wages are stagnant.
Benefits are particularly important for employee retention, especially health care benefits, which most human resources professionals cite as the perk that is most effective for encouraging employees to stick with their jobs. Retirement benefits and paid leave are also high on the list of benefits that encourage employees to stay.
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.
|Average Cost for Employer of Single Individual
|Average Cost for Employer of Group
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Breaking Down The Average Cost
Knowing your average cost of hiring can help you plan ahead and allocate resources. Its an important metric that enables you to make better informed recruiting decisions.
To break it down, you should look at the recruitment process. Beyond the employees wages, hiring includes several costs.
- Recruiting and hiring: All costs incurred from advertising to interviewing and screening candidates are included here.
- Training: The expenditure on training programs and employee support is factored into the training cost of a new hire.
- Benefits and insurance: Various overheads calculated after the base salary, like the FICA, FUTA, or state unemployment tax, are added to the cost of hiring.
- Miscellaneous overheads: Expenses specific to a role, such as uniforms, travel allowances, or other services engaged for new employees, feature in miscellaneous costs.
Apart from these, onboarding a new employee results in certain fixed expenses, regardless of industry.
- FICA: The Federal Insurance Contributions Act is a federal payroll tax paid by both the employer and employee. FICA helps fund Medicare and Social Security programs.
- FUTA: The Federal Unemployment Tax Act is a payroll tax paid by employers on their employees wages. The revenue from the FUTA funds unemployment benefits.
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.
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Employees Pay Bigger Share Of Health Benefits
Health insurance premiums surged an average of 12.7% last year, the largest increase since 1990, leading more employers to scale back benefit coverage and increase employees share of the costs, according to an annual employer survey released by the Kaiser Family Foundation.
Premiums for individual coverage in group health plans cost an average of $3,060 this year, while family coverage averages $7,954, according to the survey of 750 employers. Employee costs for single coverage average $454 per year. The employee share of premiums for family coverage averages $2,084. Deductibles for in-network providers in PPO plans rose 37% to $276, up from $201 in 2001.
One of the most alarming findings is the continued growth of underlying health care expenses, which indicates that we can expect double-digit inflation for the foreseeable future, observes Jon Bagel, vice president at the Health Research and Educational Trust , which co-sponsored the survey.
The use of three-tiered cost sharing in prescription drug benefit plans has nearly doubled since 2000, increasing to 57% of the responding employers. The costs of drugs within the tiers is also higher, with brand name drugs with generic substitutes costing an average of $26, compared to $20 per prescription in 2001.
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How Much Do I Have To Pay Into My Employees Pensions
As an employer, your pension contributions are a percentage of employees earnings. The cost of pensions therefore depends on how many staff you have, their earnings and how generous your contributions are.
Under auto-enrolment, the minimum you must contribution to an employees pension is 3% of qualifying earnings.
While this is the absolute maximum you have to pay in by law, many companies pay higher contributions or offer to match staff contributions up to a set percentage. In a competitive labour market, it helps you stand out.
Qualifying earnings are all earnings between £6,240 and £50,000 you pay an employee. They include:
- Statutory Sick Pay
- Statutory maternity, paternity or adoption pay
£50,000 is the cut off for qualifying earnings. You dont have to pay 3% of anything your employees earn above this.
So, for example, if an employee earns £50,000, your contribution as an employer is £1,312.80 per year / £109.40 per month. You calculate this as follows:
£43,760 x 3% = £1,312.80 per year / £109.40 per month
However, if an employee earns more, say £55,000, the 3% employer contribution is still only on earnings between £6,240 and £50,000. Your total maximum contribution under auto-enrolment is therefore £1,312.80 per year per employee.
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What Are The Four Major Types Of Employee Benefits
The major types of benefits are those categories of benefits that are more commonly met in companies across countries. Many cite these benefits as health insurance, life insurance, disability insurance and retirement plans. However, this view is focused on the different types of insurance, and neglects other equally major benefits. In an effort to expand our scope, weve grouped insurance benefits together and listed three other major types of benefits offered by employers:
Is An Employer Required To Pay For Health Insurance
If you decide to offer health insurance to your team, in many cases, your responsibility doesnt end there. In the majority of states, carriers will require you to cover 50% of the premium cost for employees. This requirement, however, only applies to premiums for the employee, not their covered dependents. For other tiers of coverage, such as employee and spouse, employee and children, or family, the insurers want employers to pay 33%.
For 2020, the affordability threshold is 9.78% of an employees income.
Many employers even choose to contribute more than this amount. In fact, last year, on average, covered workers contributed only 17% of their premium for single coverage and 27% for family coverage. One reason for this, especially in companies with lower-wage workers, is that large employers covered by the ACA must offer affordable coverage or be penalized. For 2020, the affordability threshold is 9.78% of an employees income.
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.
Cost Of Employee Benefits For An Employer
The average cost of employee benefits for employers is $11.60 per hour, according to a survey conducted by the Bureau of Labor Statistics late in 2018. The same survey reported the average total hourly cost of employment at $36.63, of which $25.03 is made up of wages or salaries. These numbers are noteworthy because the average cost of benefits for employers adds up to a nearly 50 percent increase in payroll expense.
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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:
How Much Do Employee Benefits Cost
Retaining top talent remains a major priority for HR leaders. One way to instill company loyalty is by offering a competitive benefits package. But in the war for talent, its important for HR leaders to crunch the numbers to see how they can offer an appealing benefits package while also being mindful of the total employee benefit costs.
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Variations By Industry And Size
As with any business statistics, there are large variations in employee benefits costs from industry to industry. Data from nearly 27,200 occupations and 6,600 private industries in the report cited by Benefits Pro revealed that the finance and insurance industries had the largest increase in benefit costs, at 17 percent. This was followed closely by utility companies, which saw a 15.2 percent increase, and healthcare and higher education, which both hovered around 14.5 percent.
Large companies tended to spend more on their workers, but they also offered better benefits packages, said the Benefits Pro report. They spent about $10 more per worker on benefits than companies with 49 or fewer workers, but only about $12 more than those smaller companies on salaries. Not surprisingly, the cost of employee benefits for a small business can be higher, simply because they dont have access to value-packed benefits packages with volume discounts.
Location matters when it comes to the cost of employee benefits. The average cost of health insurance per employee per year is higher in places like San Francisco and New York, where the cost of living is also high. Some cities, like Miami, enjoy lower benefit costs. Others, like the greater Phoenix area, have seen an increase in the recent past due to the influx of Fortune 500 companies that have set up shop there.
How Much Do Benefits Cost Per Employee
The final cost of hiring an employee includes several items in addition to their salary. According to the U.S. Bureau for Labor Statistics , benefits for employees make up 31% of total costs. Benefits included in the final bundle of wages can range from simple perks like free coffee and parking to large investments like health insurance, medical plans, and disability coverage.
Some laws may impact the cost of hiring employees as well, such as the Affordable Care Act , which requires certain employers to provide their employees with health insurance, and the Family and Medical Leave Act , which requires some companies to provide unpaid family and medical leave to their employees.
You should also check your states labor laws for the latest regulations in your area.
Us Employee Benefits Costs Projected To Increase 65% In 202: Report
Average benefits costs for U.S. employers will increase 6.5 per cent or more than $13,800 per employee in 2023, according to a new report by Aon.
This projection is more than double the three per cent increase to health-care budgets from 2021 to 2022, but below the 9.1 inflation figure reported through the consumer price increase.
The report, which gathered information from nearly 700 U.S. employers, found on average, the budgeted health-care costs for benefits plan sponsor clients was $13,020 per employee for 2022.
In 2022, employer s benefits costs increased 3.7 per cent, while employee premiums saw a mere 0.6 per cent increase from 2021, according to Aon. On average, employers subsidized roughly 81 per cent of plan costs, while employees paid the remainder.
Employees have contributed $4,412 for health-care coverage this year, of which $2,520 was paid in the form of premiums and $1,892 was paid through benefits plan design features such as deductibles, co-pays and co-insurance.
Other factors cited for adding pressure on health-care trends were new technologies, severity of catastrophic claims, blockbuster drugs and increasing share of specialty drugs.
Employer Health Insurance Premium Coverage
Applicants and potential employees view medical benefits as one of themost important factorsin any employee benefit package. Offering desirable health insurance gives organizations a competitive advantage for acquiring top talent.
In fact, theBureau of Labor Statisticsstates that 70% of civilian companies and 67% of private firms offered medical insurance to employees in March of 2016.
When considering how much of the medical premium to cover for employees, its important to check with your medical carrier as they sometimes mandate a certain percentage .
According to a report by the Kaiser Family Foundation in a 2016Employer Health Benefits Survey, for employers covered an average of 82% of premium costs for those enrolling in individual coverage.
On average, covered workers contribute approximately 18% of the premium for single coverage, and 30% of the premium for family coverage. For workers in smaller firms, the average contribution percentage for family coverage is closer to 39%.
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Lifestyle & Fringe Benefits
The popularity of lifestyle benefits has grown tremendously in recent years. Lifestyle benefits, also known as fringe benefits, include virtual learning and childcare, virtual fitness, mental health offerings, subscription boxes, streaming services and much more. No two employees are the same, so its important to offer a wide variety to meet the needs of your diverse workforce. Astonishingly, 84% of employees prefer lifestyle benefits to in-office perks.
Contact The Experts At Business Benefits Group
Businesses should consider expanded employee benefits as an investment in their future, enabling them to attract and retain high-quality and productive workers. For more information about benefits that align with your companys goals and budget, or to speak to an experienced business benefits consultant, contact the experts at Business Benefits Group today.
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Average Costs Of Employee Benefits
*Costs were rounded to two decimal points
According to the U.S. Bureau of Labor Statistics, benefits account for 29.6% of the average cost per private industry employee, or $11.42 per hour. The remaining 70.4% goes toward wages, for a total cost of $38.61 per hour.
This means employers need to factor in not only salary expenses, but also total compensation costsincluding benefitswhen budgeting for employee salaries.
- Total compensation is up $1.97 compared to 2021
- Wages and salaries are up $1.39 compared to 2021
- Employee benefit costs for 2022 are up $0.59 compared to 2021
Obviously employee benefit costs will vary by job position, industry, and geographic area. However, these numbers do provide some insight on the average breakdown for salary and wages versus the average benefit cost per employee.