How to Determine the Average Benefit Cost Per Employee in 2024

Feb 1, 2024 | Employee Benefits

Ben McIntyre

Client Success Manager at Abenity. With more than seven years of experience in the industry, Ben has a unique understanding of how companies can offer the strongest benefits to their employees.

Understanding where your business finances go is pivotal for long-term success. No one wants to squander money, especially on employee benefits.

So, how much should you allocate per employee for benefits?

While the thought of costs might be daunting, remember that the right benefits not only boost morale but also productivity and retention.

In fact, studies highlight respect, compensation, and benefits as the top job satisfaction drivers.

Investing in benefits can yield greater efficiency, lower turnover, and a positive work culture.

Let’s dive into ensuring you get value for every dollar spent on benefits.

What Is an Employee Benefit Program?

An employee benefit program allows companies to provide their employees with additional financial relief, protection, and security. 

These benefits can include insurance coverage like family health insurance, life, dental, vision, and unemployment. 

401k matching and profit sharing allow employees to feel like they have real skin in the game. Their employer is committed to their employees’ retirement funds and therefore, the employee is more likely to stick around long-term. 

Other benefits like paid time off, wellness programs, and additional perks and discounts are icing on the cake to an employee benefits package and are becoming more competitive and desired in the workforce today. 

Top talent desire a great benefits package and companies know this, so they compete to offer the best packages to attract those desired candidates.

A solid employee benefits package is beneficial to all companies from small businesses to large corporations.

Budget obviously plays a hand in what a company can afford but, even small businesses can offer perks and discounts that show employees they want to incentivize and reward hard work

Providing additional financial relief is an easy way to stretch your employee’s paychecks without sacrificing your company budget. 

Even large corporations that do have the budget to cover all available retirement planning and insurance benefits we’ve discussed can still benefit from a perks program

Offering discounts on items that are regularly purchased by employees on a daily basis is another way to create that competitive employee benefits package and also build appreciation,  loyalty, and long-standing service from your employees. 

What Is The Average Employer Cost per Employee Hour in 2024?

Employer costs per employee hour worked by ownership 

Employment TypeTotal CompensationWages and SalariesBenefits
Civilian Workers$43.26$29.86$13.39
State and Local Workers$58.25$35.90$22.35
Private Industry Workers$41.03$28.97$12.06

Based on the most recent data sourced from the U.S. Bureau of Labor Statistics (BLS), let’s break down the hourly rates for total compensation, wages and salaries, and benefits across three distinct employment categories.

  • State and Local Workers command the highest hourly total compensation at $58.25, breaking into $35.90 for wages and salaries and $22.35 for benefits. 
  • Civilian Workers, in comparison, receive an hourly total compensation of $43.26, with $29.86 allocated to wages and salaries and $13.39 to benefits. 
  • Private Industry Workers, falling in between, have an hourly total compensation of $41.03, comprising $28.97 in wages and salaries and $12.06 in benefits.

To show you how this has changed over time, we’ve also included comparative insights based on 2022 data from the U.S. Bureau of Labor Statistics (BLS).

Employer costs per employee hour worked by ownership (Updated September 2022)

Employment TypeTotal CompensationWages and SalariesBenefits
Civilian Workers$41.86$28.88$12.98
State and Local Workers$57.02$35.29$21.73
Private Industry Workers$39.61$27.93$11.68

Key takeaways:

  • Comparing recent data to 2022, State and Local Workers saw a slight boost in total compensation, increasing from $58.25 to $57.02.
  • Civilian Workers experienced a moderate increase in total compensation, rising from $43.26 to $41.86.
  • Private Industry Workers also observed a slight uptick in total compensation, increasing from $41.03 to $39.61.
  • Across the board, wages and salaries contribute the most to total compensation, with State and Local Workers consistently leading in this category.
  • Benefit allocations remained relatively stable for Civilian, and State and Local Workers, while Private Industry Workers saw a minor decrease.

What is the Average Benefit Cost Per Employee in 2024?

Benefit costs per employee hour by ownership 

The data illustrates variations in average benefits across different employment types. State and Local Workers lead with the highest average benefits at $22.81, followed by Civilian Workers at $13.58, and Private Industry Workers at $12.19. 

This discrepancy suggests that public sector jobs, particularly at the state and local level, tend to offer more substantial benefits than private industry positions.

Benefit components per employment type 

ComponentCivilian WorkersState and Local WorkersPrivate Industry Workers
Legally required benefits$3.12$3.20$3.11
Retirement and Savings$2.26$7.93$1.41
Supplemental Pay$1.42$0.59$1.55
Paid leave$3.26$4.38$3.09

Increasing expenses are impacting businesses across the board, and employee benefit costs are no exception. Based on the latest BLS data:

  • Legally Required Benefits are quite similar across Civilian Workers and Private Industry Workers, with slightly higher costs for State and Local Workers.
  • State and Local Workers invest significantly more in Retirement and Savings, highlighting a focus on long-term financial planning in the public sector.
  • Insurance costs vary significantly, with State and Local Workers leading. This suggests potentially more extensive coverage in the public sector.
  • Private Industry Workers allocate more to Supplemental Pay, ensuring some additional compensation for their employees.
  • Paid Leave costs remain relatively consistent across all three categories, indicating a shared commitment to providing this crucial benefit.

What Impacts the Cost of Your Employee Benefits Program?

Building a strong employee benefits program is like putting together a puzzle. Ever wondered what factors influence its cost? It’s not a one-size-fits-all scenario. Job roles, industry dynamics, and geographic locations are factors that shape the overall cost of your employee benefits.

  1. Coverage and plan types

The extent and types of coverage offered in the benefits program significantly affect the overall cost. Comprehensive plans with extensive coverage tend to be more expensive.

  1. Employee demographics

The age, health status, and lifestyle of the employee population contribute to the cost. An older workforce or one with specific health needs may lead to higher premiums.

  1. Geographical location

The cost of living and healthcare varies by location. Programs in regions with higher costs will generally be more expensive. As per BLS 2023 report, employee benefits costs are highest in the Pacific region.

  1. Company size

Larger companies enjoy economies of scale, negotiating better rates and spreading costs across a broader workforce. These organizations often invest in robust benefit packages to attract and retain top talent, influencing overall program costs.

  1. Market trends

Evolving trends in employee benefits, such as the inclusion of wellness programs or mental health support, can affect costs.

  1. Insurance carrier

The choice of insurance carriers and providers can impact costs. Different carriers may offer varying rates for similar coverage.

  1. Economic Factors

Economic conditions, inflation rates, and fluctuations in the financial market can affect the costs of insurance premiums and benefits.

  1. Plan Administration Costs

The expenses associated with managing and administering the benefits program, including technology platforms and administrative personnel, contribute to overall costs.

What Employee Benefits Should You Budget for?

Employee benefits are more than just a regulatory requirement — they’re a strategic investment in your team’s well-being and the overall success of your company. While mandatory benefits are a given, voluntary plans open doors to elevate employee retention and engagement. Here are a few employee benefits that you should consider.

  1. Health Insurance

Including health insurance in your employee benefits program is crucial for attracting top talent, ensuring legal compliance, and fostering a healthy and engaged workforce. 

In 2024, here’s the average expense for health insurance, depending on the sector.

  • State and local government workers have the highest average cost of health benefits per employee, amounting to $6.52 per hour.
  • Civilian workers ($3.33 per hour) get more health benefits than private industry workers ($2.86 per hour).

Employee health coverage may depend on various factors, such as the specific health plan chosen, the level of coverage provided, the geographic location of the workforce, the size of the company, and the overall health and demographics of the employee population. 

Additionally, economic conditions, market trends, and the choice of insurance carriers can influence the overall cost of employee health coverage.

  1. PTO 

In the realm of employee benefits, Paid Time Off (PTO) serves as a crucial umbrella term encapsulating various types of leave, including vacation, holidays, sick days, and personal days. 

Shockingly, around twenty-eight million Americans lack access to any paid vacation or holidays, highlighting a notable gap in work-life balance policies in the US. 

It’s time to consider comprehensive PTO packages to address the well-being of employees, recognizing the importance of rest and personal fulfillment in fostering a balanced work-life dynamic.

  1. Worker’s Compensation Insurance

Worker’s Compensation Insurance provides financial and medical benefits to employees in the event of a work-related injury or illness. It ensures that employees receive compensation for medical expenses and lost wages, contributing to workplace safety.

Imagine an employee in a manufacturing setting who sustains an injury due to equipment malfunction. Worker’s Compensation Insurance would cover their medical bills and provide financial support during their recovery.

  1. Life Insurance

A Forbes Advisor survey found that 45% of employees and 43% of employers named life insurance as a top benefit. 

It becomes a financial safety net for employees and their families. In the event of the employee’s death, it provides a lump-sum payment to beneficiaries, ensuring financial security for loved ones.

  1. Unemployment Insurance

Unemployment Insurance offers financial assistance to employees who lose their jobs involuntarily. It provides a temporary income stream until the individual secures new employment. This safety net is especially vital during periods of economic flux.

In October 2023, the US observed a slight increase in unemployment benefit payouts, totaling 2.64 billion U.S. dollars.

As unemployment insurance continues to serve as a financial lifeline, the numbers still show how the economy constantly shifts, calling for a reliable support mechanism during uncertain times.

  1. Retirement Plans

Did you know that the average monthly benefit paid by the Social Security Administration only stands at $1,200? This calls for additional retirement plans to bridge the income gap and maintain financial stability in your golden years.

Retirement plans, particularly the popular 401(k)s, serve as a vital tool for employees to save funds for their post-work life. It’s not just a solo effort. Employers may offer contributions, helping employees build a financial cushion for retirement.

  1. Flexible Work Arrangements

According to Owl Labs, 82% of employees said they want to work flexibly in days and hours, and 80% of employees prefer to work flexibly in location. Either way, the majority of employees value flexibility in their work. 

By providing flexibility, employers can create a work environment that aligns with modern workforce expectations, fostering a positive and accommodating workplace culture.

  1. Employee Assistance Programs (EAP)

Employee Assistance Programs (EAP) are workplace initiatives providing confidential counseling and resources to support employees with personal challenges. Services include short-term counseling, mental health support, financial guidance, legal assistance, and personal/professional development resources. 

Adding an EAP to your benefits shows a commitment to employee well-being, contributing to a healthier workplace. EAPs enhance satisfaction, reduce absenteeism, and foster a positive work culture.

  1. Professional Development

Professional development is a crucial component of employee growth and organizational success. Inclusions may range from training programs, workshops, and certifications to educational resources and mentorship opportunities.

Now, adding it to your employee benefits package aligns the organization with a culture of learning and adaptability, contributing to overall success and competitiveness in the business landscape.

  1. Other Voluntary Benefits

Supplementary perks can set your offering apart, garnering appreciation and loyalty. Consider options such as:

  • Child care assistance
  • Student loan assistance
  • Employee recognition programs
  • HSA Options with your health insurance benefits
  • Electronics stipend
  • Lunch stipend
  • Gas stipends
  • Family management
  • Pet insurance
  • Employee discount programs

How to Maximize Employee Benefits and Reduce Cost

Discover the savvy strategies to get the most out of your employee benefits program while keeping costs in check. Here are a few ways to maximize the impact of employee benefits, creating a win-win for both employers and employees.

  1. Ask Employee Needs

Start by talking to your team! As a business owner, getting the most from your employee benefits program means understanding what your employees actually need. Consider conducting surveys or having direct conversations to figure out their unique preferences. 

This way, you can customize benefit plans to suit the diverse needs of your workforce. By pinpointing what matters most to your employees, you’ll craft a benefits package that not only makes them happy but also boosts overall satisfaction. 

  1. Customization

Customization is key to providing benefits that align with individual circumstances. Offering flexibility for employees to choose benefits based on their needs fosters a sense of empowerment and acknowledges the diverse life situations within your organization. 

It’s not merely about offering benefits; it’s about delivering solutions that address the specific concerns of your workforce, whether related to health, work-life balance, or personal development.

  1. Cost-sharing

Cost-sharing lies at the core of building enduring benefits programs. When employees actively contribute to their benefit plans, it creates a shared responsibility model. To make this approach work seamlessly, transparent communication is key. Clearly conveying the value of these benefits helps employees recognize the significance of their contributions, fostering a sense of appreciation. 

  1. Review Benefit Plan Designs Regularly

Regularly reassessing benefit plan designs is essential for ensuring they align with organizational objectives. Finding the sweet spot between cost and value while ensuring comprehensive coverage demands a strategic approach to plan design. 

It’s a proactive strategy that keeps both the organization and its workforce in sync with evolving needs and expectations.

Empowering Employees, Empowering Success

Creating an empowering workplace through employee benefits is an ongoing journey. It involves a continuous commitment to understanding and addressing the diverse needs of your employees, adapting to industry trends, and staying responsive to the shifting landscape of employee expectations. 

To help you along, we’ve put together a handy Perks Report for your reference. This side-by-side comparison with providers like AAA and AARP is a useful tool to make informed decisions and foster a workplace where your employees thrive. 

Click this link to save, print, or share it as you continue to empower your team and drive lasting success.

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