Blog post hero

Employee Benefits: Average Costs & What to Know about Budgeting

Cassandra Rose, SPHR, SHRM-SCP


Let’s talk about the cost of employ­ee ben­e­fits for a minute. Accord­ing to the Bureau of Labor Sta­tis­tics, the aver­age cost of ben­e­fits per employ­ee in the pri­vate indus­try is $10.88 per hour — around 30% of the total cost of hir­ing an employee.

The actu­al amount varies based on things like indus­try and base salaries. How­ev­er, there’s no deny­ing that ben­e­fits take up a sig­nif­i­cant por­tion of the company’s budget.

So, how does a com­pa­ny bud­get for the cost of employ­ee ben­e­fits? And why should they?

What are Employee Benefits?

Let’s first define what we mean by employ­ee ben­e­fits. Employ­ee ben­e­fits come in all shapes and sizes. When most peo­ple think of employ­ee ben­e­fits, the first things that come to mind might be med­ical insur­ance, life insur­ance, dis­abil­i­ty insur­ance and retire­ment ben­e­fits. How­ev­er, employ­ee ben­e­fits have changed sub­stan­tial­ly over time.

In fact, The very first rec­og­nized ben­e­fits pro­gram was cre­at­ed by the Amer­i­can Express rail­road com­pa­ny in 1875. They offered pen­sion ben­e­fits to woo farm­ers and work­ers away from agri­cul­ture and into man­u­fac­tur­ing.

Today, com­pa­nies need a lot more than pen­sion ben­e­fits to reel in top tal­ent and keep them. The five basic types of employ­ee ben­e­fits are:

  • Insur­ance
  • Finan­cial Benefits
  • Paid Time Off (PTO)
  • Work­place Benefits
  • Fringe & Lifestyle Benefits

There are some ben­e­fits that every employ­er is required by law to offer, like Social Secu­ri­ty and Medicare, work­er’s com­pen­sa­tion insur­ance, and unem­ploy­ment insur­ance. Then there are vol­un­tary ben­e­fits that help dif­fer­en­ti­ate employ­ers in the mar­ket­place, like health insur­ance, paid time off, stu­dent loan repay­ment, well­ness stipends, and child­care ser­vices, among oth­ers. These vol­un­tary ben­e­fits are increas­ing­ly tran­si­tion­ing from ​“nice-to-haves” to nec­es­sary in the mod­ern workplace.

Many com­pa­nies have a sam­pling of these ben­e­fit types to reach that $10.88 per hour aver­age cost of ben­e­fits per employ­ee. Insur­ances, finan­cial ben­e­fits and PTO are expect­ed in today’s work­place. Lifestyle ben­e­fits, on the oth­er hand, are the type of offer­ings that cause top tal­ent to choose one employ­er over anoth­er.

So what is the range of employ­ee ben­e­fits and how much do they cost? Let’s take a deep dive into the ben­e­fit categories.

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, we’ll break down the costs of pop­u­lar ben­e­fits offerings.


Health, dis­abil­i­ty and life insur­ance are the three most pop­u­lar insur­ance ben­e­fits offered by employ­ers. Some com­pa­nies also offer addi­tion­al insur­ances like vision and den­tal insurance.

In 2016, the ACA (Afford­able Care Act) began requir­ing com­pa­nies with fifty or more full-time employ­ees to offer med­ical insur­ance.

Health insur­ance ben­e­fits cost employ­ers approx­i­mate­ly $2.77 to $3.24 per hour per employ­ee based on com­pa­ny size.

Financial Benefits

Finan­cial ben­e­fits are anoth­er com­mon type of ben­e­fit. These include things like stock options, 401K match­ing, retire­ment and pen­sions, per­for­mance bonus­es, vehi­cle con­tri­bu­tions and more.

Accord­ing to a study from Bankrate, few­er than half of Amer­i­cans have sav­ings to cov­er a $1,000 sur­prise expense. Most employ­ees say that finan­cial stress is the biggest stres­sor in their lives. For exam­ple, 73% of Amer­i­cans rank finances as their top stress in their lives, and 63% of peo­ple say their finan­cial stress has increased since March of 2020.

The cost of pro­vid­ing employ­ee ben­e­fits like these varies based on what finan­cial ben­e­fits com­pa­nies offer and employ­ee behav­ior. For instance, the cost of pro­vid­ing 401K match­ing and per­for­mance bonus­es depends on employ­ees’ behav­ior. Stock options and vehi­cle com­pen­sa­tion perks can be chal­leng­ing to cal­cu­late — espe­cial­ly for IRS tax purposes.

Paid Time Off (PTO)

Work-life bal­ance is incred­i­bly impor­tant to today’s work­force. 76% of Amer­i­can work­ers think employ­ers should pro­vide paid vaca­tion time. As a result, paid time off has become a stan­dard offer­ing for most larg­er com­pa­nies. PTO includes things like vaca­tion time, sick days and mater­ni­ty leave.

Where com­pa­nies dif­fer­en­ti­ate them­selves is in the amount of PTO offered. Accord­ing to the Bureau of Labor Sta­tis­tics, more than one-third of pri­vate indus­try U.S. work­ers get approx­i­mate­ly 10 to 14 paid vaca­tion days a year (com­pared to 30 in the UK, France, Ger­many and Spain).

As a result, unlim­it­ed PTO is one of the new­er employ­ee ben­e­fits trends. Sur­pris­ing­ly though, this ben­e­fit doesn’t usu­al­ly cost employ­ers as much as they expect, because Amer­i­cans don’t use around $65.5 bil­lion in PTO each year.

Workplace Benefits

Work­place ben­e­fits are intend­ed to care for employ­ees while at work. These in-office perks include break rooms, cof­fee, snacks, catered lunch­es and oth­er ameni­ties. Some orga­ni­za­tions even offer child­care, on-site gyms and med­i­ta­tion rooms.

The cost of on-site perks varies great­ly depend­ing on what’s offered. For many orga­ni­za­tions now, though, the cost is $0 due to employ­ees work­ing pre­dom­i­nant­ly from home.

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 it’s impor­tant to offer a wide vari­ety of unique ben­e­fits to meet the needs of your diverse work­force. Aston­ish­ing­ly, 84% of employ­ees pre­fer lifestyle ben­e­fits to in-office perks.

Typ­i­cal­ly, com­pa­nies uti­liz­ing these ben­e­fits are spend­ing $50-$200/month per employ­ee. It may be more fea­si­ble than ever to find mean­ing­ful bud­get capac­i­ty for lifestyle ben­e­fits. After all, com­pa­nies are sav­ing about $4,000/year per employ­ee while they work remote­ly. Top com­pa­nies are uti­liz­ing these sav­ings to sup­port their peo­ple in new ways.

Remote work is here to stay — which means flex­i­ble work hours, cre­ative child­care solu­tions and oth­er COVID-era changes are like­ly to stick around as well. Lifestyle ben­e­fits are one way employ­ers can pro­vide per­son­al­ized and mean­ing­ful sup­port to their employ­ees. The uti­liza­tion and employ­ee sen­ti­ment around this fast-grow­ing cat­e­go­ry of ben­e­fits has been unprece­dent­ed. Com­pa­nies that wish to recruit and keep top tal­ent must lean into the tide. Offer­ing cus­tomized lifestyle ben­e­fits is a great way to improve employ­ee reten­tion.

Why Offering Employee Benefits Matters


While com­pet­i­tive salaries mat­ter, increased wages alone isn’t enough to solve your hir­ing and reten­tion chal­lenges. Com­pre­hen­sive ben­e­fits are key to attract­ing and moti­vat­ing employ­ees in the work­place. Tra­di­tion­al ben­e­fit offer­ings are not enough any­more to attract and keep employ­ees. Lifestyle ben­e­fits can sig­nif­i­cant­ly improve your recruit­ment and reten­tion efforts.

Need help planning out your company's lifestyle benefits program? We can help! Customize what your stipend program could look like with our benefits calculator. See how much you'd need to invest for your team to feel appreciated and celebrated.

The Best Way to Manage Employee Benefits

Com­pa­nies spend a great deal of time and mon­ey sur­vey­ing their employ­ees to dis­cov­er which lifestyle ben­e­fits are most appro­pri­ate. This process can be time-con­­sum­ing and dif­fi­cult. Offer­ing choice to employ­ees may be a bet­ter route.

Here at Fringe, we believe your employ­ees should choose the lifestyle ben­e­fits that moti­vate them. With our plat­form, you give your employ­ees points, and they can choose the ben­e­fits they want and will actu­al­ly use.

It’s the best way to make sure your employ­ees are under­stand­ing and receiv­ing the ben­e­fits they deserve while simul­ta­ne­ous­ly ensur­ing that the cost of employ­ee ben­e­fits stays sta­ble for you.

If you’d like to learn more about Fringe and how we can help you with your company’s lifestyle ben­e­fits, sched­ule a free demo today.

Request demo

Subscribe to the Fringe newsletter.

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
By clicking “Accept All Cookies”, you agree to the storing of cookies on your device to enhance site navigation, analyze site usage, and assist in our marketing efforts. View our Privacy Policy for more information.