Employee Benefits: Average Costs & What to Know about Budgeting

Source

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

Source

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.

Insurance

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 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

Source

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.

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.