What Is the Typical Cost of Benefits Per Employee?

While the cost of paying an employee's salary makes up the majority of the total cost of employment, the cost to provide benefits to an employee adds substantially to a business' cost of hiring an employee. The largest benefit cost paid by most employers is health insurance. Due primarily to the increasing cost of health insurance, the percentage of total employee cost devoted to benefits has risen over the past decade.

Benefit Cost

As of March 2011, the average hourly cost of an employee is $30.07, according to the Bureau of Labor Statistics. Of this amount, employers pay an average of $20.91 per hour in wages and $9.15 per hour in benefits. This means that on average employers spend about 30 percent of the total cost of an employee, or about 45 percent of the amount paid in hourly wages, on benefits. The figures include both state and local government workers as well as private industry workers. On average, state and local government employers spend about 34.5 percent of total employee cost on benefits, while private employers spend about 29.3 percent.

Insurance

Insurance, particularly health insurance, is the most expensive benefit employers offer employees. Due to the high cost of health insurance, many employers do not offer coverage and those that do generally require an employee to pay a part of the cost. On average, employers spent about $2.53 per hour worked on health insurance in 2010. However, this number includes employers that do not provide health insurance. The average cost for employers that do provide health insurance is about $3.35 per hour worked. The cost of providing health insurance for employers grew by about $1.50 per hour between 2001 ($1.81 per hour) and 2010, according to the Kaiser Foundation.

Other Benefits

While insurance is the most expensive benefit, other benefits also make up a significant portion of the cost. Employers spend about $2.10 per hour worked providing paid leave and about $1.35 providing retirement benefits. Employers also spend about 69 cents per hour worked on supplemental pay, such as overtime and bonuses. As with other benefit costs, these averages are for all employers, including those that do not provide these benefits. The actual costs for employers that provide these benefits will be higher than the average.

Other Factors

Benefit costs for small businesses are generally higher than for larger businesses. This is due to larger businesses have more employees enrolled in benefits, which works to reduce the risk from a small number of employees having high benefit costs. Costs also vary by industry. For example, as construction workers have more risk of injury than office workers, it is more expensive for an employer to provide benefits for a construction worker.

References

• Bureau of Labor Statistics; Employer Costs for Employee Compensation News Release Text; June 2011
• The Henry J. Kaiser Foundation; Employer Health Insurance Costs and Worker Compensation; February 2011
• "The Kansas City Star"; Full-time Employee Benefits Average $14,000-$15,000; Diane Stafford; July 2010
• Bureau of Labor Statistics; A Look at Supplemental Pay: Overtime Pay, Bonuses, and Shift Differentials; John L. Bishow; March 2009