How to Calculate Benefits As a Percent of Payroll

Knowing the percentage of your payroll expense that goes to pay benefits helps any manager understand the impact of the company's benefits package on the payroll bottom line. These figures are an important part of understanding your company's cash flow and payroll liabilities. With a few simple steps, you can understand the percentage of your payroll expense that is being spent on employee benefits as opposed to direct employee compensation.

Things You'll Need

• Current accounting figures for salary and benefits
• Calculator

Instructions

1. Calculate the total salary cost. This should include salaries, overtime and all federal employer payroll taxes.

2. Calculate the cost of benefits. This should include all benefits offered by the company, including insurance, retirement, profit sharing, worker's compensation, gym memberships and any other expenses which are a part of the company benefit package.

3. Add the salary and benefits totals together to obtain a total, or loaded, salary cost.

4. Divide the benefits cost by the loaded salary cost. Multiply this result by 100 to obtain the actual percentage. This is your benefits percentage of payroll.

References

• Salary and Benefits Survey
• Evaluating Your Benefits Package