In addition to planning for the fixed cost of employee salaries in your business’s financial plan, it’s important to map out the cost of employee benefits. On average, employee benefits cost employers roughly a 50% increase in payroll expense. That’s not an insignificant amount!
It’s time to ask yourself: How much do employee benefits really cost your business?
How Much Do Employers Spend on Benefits?
According to a March 2021 report by the Bureau of Labor Statistics, civilian employers in the U.S. spend about $12.18 per hour on employee benefits, while private employers spend about $10.83 per hour. State and local government employers, on the other hand, spend roughly $20.47 on benefits.
Let’s take a deeper look at the total cost of each employee. For example, the average wage for a civilian employee is $26.84. Add the cost of $12.18 per hour in benefits and the total cost for that employee is around $39.02 per hour. Thus, an employee that earns around $50,000 per year could actually cost the company around $75,000 in total costs.
Although the wages, benefits, and total costs will likely vary for your business, it’s generally safe to assume that benefits will cost you about 30% of total employee compensation. This is especially true if you want your business to remain competitive.
Types of Employer Benefits
The cost of employee benefits for your business largely depends on how many core benefits you offer your employees. The five main types of benefits include:
- Insurance (such as health, life, and disability insurance)
- Retirement and savings
- Paid leave (such as vacation, sick, and holiday leave)
- Supplemental pay (such as overtime)
- Legally required benefits (such as Social Security and Medicare)
To really stand out from other businesses, you may also choose to offer more creative benefits. Depending on your business’s budget, this may include such benefits as unlimited vacation time, paid volunteer work, gym memberships, reimbursement for health initiatives, free snacks or lunches, pet leave, paid mental health days, or child care assistance.
However, small businesses may not be able to offer competitive benefits in the way that larger businesses can. But there are still plenty of employee benefits you can offer that won’t break the bank, including remote work, flexible hours, business casual dress codes, or longer lunch breaks. All of these benefits will show employees that they are still valued and appreciated, which in turn will boost employee happiness and productivity.
No matter what benefits you decide on, remember: If you really want to attract and retain employees, fun benefits like free snacks aren’t a substitute for core benefits like health and disability insurance.
The Cost of Neglecting Employee Benefits
Although employee benefits are expensive for businesses to cover, a generous benefits package will help you to attract and retain great employees. This is especially true during the coronavirus pandemic — employees are now placing even more value on employer benefits. According to a Prudential Insurance survey, 52% of employees would quit their job for one that offers better benefits.
Skimp on the benefits — or neglect to offer crucial benefits altogether — and you’ll likely face consequences like decreased productivity (due to unhappy employees) and a high turnover rate, both of which will lead to financial losses for your business. How will you be able to reach your business goals if your employees aren’t productive or you’re constantly spending all of your time and money on new hires?
With Employee Benefits, Consider the Big Picture
When thinking about the true financial cost of employee benefits, there’s a lot your business needs to consider beyond the total cost of an employee. If you’re hiring great people, the cost to keep them will be in your best interest financially — they’ll be more productive, increase profits, and actively help your business to reach its goals.
Do you need more information about providing retirement benefits for your employees? Get started on a customized strategy by contact one of our team members for a complimentary consultation. Call us at 1-888-692-2654.