Average Cost of Employee Benefits In the US

If you’re an employer, you probably want to keep employees happy and retain your best people. One effective way is to offer enticing employee benefits. However, employee perks can be expensive. At what point does the employee benefits cost outweigh its value?

According to a recent U.S. Bureau of Labor Statistics report, the average cost of employee benefits for each worker in the private sector is $26,561.60 annually. When added to the yearly salary of about $60,000, the total cost is over $85,000 per employee. This is significantly higher than the 2018 total cost of $71,726.  

The average cost of benefits per employee varies widely by industry, region, and your company’s perks. Typically, for each dollar of wages, an additional 30 to 40 cents is paid toward employee benefits. 

What are the most common employee perks? The benefits most frequently offered by companies are health insurance or reimbursement programs, paid time off, retirement benefits such as 401(k) plans, flexible work arrangements, and paid family leave. Other popular perks include life insurance, wellness programs, and tuition reimbursement. 

Designing your company’s compensation plan and determining the benefits you’ll offer candidates is an integral part of the recruitment process. Keep reading to learn more about what employee benefits cost.

Details of the U.S. Bureau of Labor Report

According to the BLS 2024 report, private industry employees’ total average compensation costs were $43.94 an hour in June, with the base salary accounting for a little over 70% of costs. The average benefit cost was $13.04, approximately 30%. 

Health Insurance Cost

What is the average cost of healthcare benefits for employees in the U.S.? Aon projects the average annual cost of health insurance for company employees in 2024 to be $14,823 per worker. This is a 6.4% increase from 2023. Employee compensation trends, in general, are on the upswing. 

Factors that influence what you pay for employee health insurance include:

• Insurance company
• Chosen plan (e.g., HMO, PPO, etc.)
• Provider network
• Company location
• Amount of contribution
• Employee demographics 

Companies typically select a group plan that covers all employees. This group plan is known as employer-sponsored health insurance (ESI). Consider how costs are projected to increase when creating a budget for employee compensation. How you structure your employee benefits packages will influence your company’s total expenses, so ensure that you use accurate data.

Reimbursement Programs

A healthcare reimbursement plan lets staff use their allowances to pay for their medical expenses, including health insurance premiums for their chosen providers. Given the rising costs of group health insurance and the difficulty of setting up a group plan, this type of reimbursement is becoming more popular among smaller to mid-sized companies. The IRS considers health reimbursement plans tax-deductible business expenses.

Companies with fewer than 50 workers that don’t have a group healthcare plan can contribute to healthcare costs through Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs). A reimbursement plan gives your staff greater control over their healthcare coverage while reducing costs and keeping your workforce healthy.

Life Insurance

When purchased as a group plan, life insurance can also be complex. To qualify for a tax deduction, you must comply with nondiscrimination regulations, such as covering a minimum of 70% of your employees. 

Group life insurance plans usually come in specific amounts, like $50,000, with employees and employers co-paying the policy’s premium.

Unemployment Insurance

Businesses contribute to unemployment insurance through their payroll taxes, and unemployment regulations vary by state. This can become complicated if your company is in different states. For information about the unemployment taxes your company is liable for, see the State Unemployment Tax Act (SUTA) and the Federal Unemployment Tax Act. Employers must pay most of the SUTA, but in some states, employees must pay a portion of it.

Social Security

Companies and workers contribute to Social Security payments. The current rate is 6.2% for employers and their employees, up to $127,000 annual salary. This adds up to 12.4% total. Self-employed contractors must pay the full 12.4%. 

Retirement Plans

How do retirement plan costs contribute to the overall average cost of employee benefits? Retirement plans, most often 401(k) plans, add considerable cost to employee benefit totals. There are costs for administration, investment management, and the company’s matching contributions. The benefit package cost is a percentage of the worker’s salary. Many factors, such as the plan size, design, fees, and provider, can affect the cost. The initial setup fee ranges from $500 to $3,000, while companies with between five and 15 employees pay $2,000 to $4,500 in annual fees. However, they may be eligible for tax credits in the first three years. Small companies with assets under $1 million will usually pay $5,000 to $10,000 annually.

Calculate the Value and Cost of Your Employee Benefits

If you want to attract and retain talent while staying on budget, optimizing your company’s employee benefits is essential. It helps to know what these benefits can cost and learn how to reduce them while still providing enticements to attract and retain your best team members. CulverCareers can help guide you through a benefits cost analysis and compensation planning. 

Our experienced recruiters can help you find the right candidates to drive your business forward. Contact us today to learn how we can meet your hiring needs.