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.
Who Needs 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 Benefit Cost Per Employee?
For state and local government employees, the employer’s total compensation costs averaged $57.02 for each hour worked. That hourly total breaks down to $35.29 wages and salary and the remaining $21.73 represent the benefits cost.
Private industry compensation costs totaled an average of $39.61 per hour, breaking down to $27.93 for wages and salary and $11.68 for benefit costs.
This is all according to the Bureau of Labor Statistics from the US Department of Labor. And these numbers only represent the benefits already required by law – Family and Medical Leave, Social Security and Medicare, unemployment insurance, and disability insurance.
There are many other employee benefits that companies can choose to offer in addition to required benefits by law. As discussed earlier, providing a great employee benefits package is a great way to retain top talent in your company.
While it may seem expensive, it could save you thousands of dollars. Replacing talented employees that chose to find employment elsewhere is expensive and time-consuming.
We’ve provided details below on the average cost of other common benefits offered in the workplace to give you an idea of what may best fit your budget and your business!
The Average Benefit Cost Per Employee by Category
Family Health Insurance
Health Insurance is essential to a competitive employee benefits package. Companies are able to receive discounted group health plans from commercial insurers.
Companies then pay a portion or all of the insurance for their employees and dependents. (The amount paid is of course dependent on the size and budget of the company.)
If you’re wondering which benefit typically costs an employer the most to provide?
This is it!
In a recent 2021 study, it was discovered that the average cost per employee for health insurance for single and family premiums has been on the uptick for a total of 4% in the last year and 22% in the last five years.
The annual premium employers typically pay for their employees’ health insurance benefits is $7,739 for single coverage and $22,221 for family coverage.
The US Department of Labor has further details on fiduciary responsibilities as an employer, health insurance laws, and other helpful details if you are currently in the process of building out your employee benefits package.
After seeing the price tag of family health insurance benefits as well as the increasing percentage each year, you may be wondering if you really need to invest in your employees’ health insurance.
If you are a company with more than 50 full-time employees, then you know that health insurance benefits are mandatory. But companies with 50 or fewer full-time employees may be avoiding the additional cost because it IS a cost.
But, Family Health Insurance is a HUGE added benefit and top talent will be looking for this benefit in any package presented.
If you are a smaller business, adding health insurance shows that you care about your employees’ health and want to alleviate the additional financial stress for your workers by carrying some of that burden as well.
Whether you pay 100% or a smaller portion, offering a company package makes everyone’s premium slightly less than if they were to search out private insurance. It also makes current employees appreciate your effort to take care of them and their families which encourages long-term commitment to the job.
A recent Gallup study, “State of the Global Workplace 2022”, showed well over half the working force is disengaged and unhappy at work. It also revealed 50% of US workers experience daily stress at their job.
Offering family health insurance can certainly take away some of that daily stress, creating more engaged, happy workers!
Dental Insurance
In a recent study, it was discovered that “85% of Americans believe oral health is very or extremely important to their overall health”.
It’s safe to say that dental insurance is pretty high up on the list of employee benefits desired by an employee or new prospective employee.
Dental insurance is relatively inexpensive compared to the health insurance benefits we just mentioned. Dental plans average around $300 per year for a single plan and $600 per year for a family plan. This is an average of $24 per month for singles and $48 per month for families.
Dental insurance participation rates for most employers is very high. Without company dental insurance, 40% of Americans will not go to the dentist because of the additional cost.
Going to the dentist for regular cleaning is so important to overall health. Many gum and tooth decay issues can lead to other illnesses in the body. If your employees are not maintaining good dental hygiene, that can create more overall healthcare costs and can mean more sick days.
According to Colonial Life, “people who do not have dental benefits are more likely to suffer from other, non-related diseases. 67 percent are more likely to have heart disease, 50 percent are more likely to have osteoporosis and 29% are more likely to have diabetes.”
Providing Dental Insurance is not mandatory but it is a huge benefit that most employees consider most important right after Health Insurance.
Vision Insurance
Like Dental insurance, vision insurance is much more affordable than health insurance and is also a benefit that is not mandatory but extremely beneficial to your employees.
The monthly investment for vision insurance can be anywhere from $2.50 – $10 per month. Studies show that most Americans have good vision but 14 million Americans are visually impaired.
Those who are visually impaired can experience headaches from extended hours of screen time at work.
Providing insurance that helps employees receive glasses and/or contacts to relieve visually impaired symptoms is not only appreciated by employees but a benefit that is taken into account when determining whether or not to accept a position with a company.
Many employees have expressed they would rather take a salary pay cut if it meant better benefits; A discovery that is certainly worth taking into consideration when saving on wages by increasing benefits.
Retirement Planning
Depending on the company used to set up the retirement plan, employers can expect to pay anywhere from $500 – $2000 as a one-time setup fee.
Most companies believe that only big corporations can afford to set up a retirement plan for their employees. Retirement plans are actually affordable and easy for employers to set up. Making employee benefits packages for small businesses just as attractive as larger companies.
After paying the start-up costs, employers’ other potential financial costs for company retirement plans can be employer contributions and other plan administration fees.
Employer matching and profit-sharing benefits are optional but a very effective way of showing employees that you care about their long-term goals and retirement and want to help them reach their retirement goals. This benefit is very effective in keeping employees at your company for the long-haul.
Creating a 401k with a matching program puts you in a position to be able to recruit great talent, keep the top talent currently serving on your team, and may also be tax deductible.
Retirement planning is not a one-size-fits-all program. There are many different options and plans to choose from so that you can still provide attractive and meaningful benefits to your employees while also not breaking the bank.
Voluntary Benefits
Voluntary benefits are a great way to encourage employees to stay with your company long-term, and provide financial relief on day-to-day purchases – alleviating stress for so many Americans and boosting overall office productivity.
One of the newest insurance benefits many companies are adding to their employee benefits package even includes pet health insurance and partial funding of children’s college tuition.
Companies are taking employee benefits packages seriously in their quest to attract and retain top-talent employees.
Your employees are going to be shopping for clothes, gym memberships, family entertainment like movie tickets, zoo passes, and even family vacations to resorts. Providing a “Perks and Discounts” program is an easy way to implement those added benefits.
If employees are less stressed about their day-to-day finances, then you just solved a huge problem in the workplace. According to Forbes, “about half of the workforce in the United States is dealing with financial stress, leading to $500 billion in lost productivity costs for employers.”
Companies like Abenity allow you to not only offer discounts and perks to hundreds of companies in both the US and Canada, but they also offer back office reporting and a branded website and mobile app for employees to browse.
Abenity has helped employees stretch their paychecks by more than $4500. That’s a huge relief to so many employees in America today!
What About the Average Benefit Cost Per Employee for YOUR Company? Do the Rules Change at All Based on Your Company Type?
Thankfully, you can expect the cost to be about the same as what we described above, regardless of your company type — with a few exceptions, mentioned below.
1. Sole proprietorship
A sole proprietorship business model is owned and operated by one person. Sole proprietorships can hire employees but, as that business grows, it is important to note that expanding into a Liability company is recommended as more liability may be needed.
As far as benefits are concerned, sole proprietors are not eligible for benefits like health insurance, dental, and vision insurance through the company unless they have at least one “common law” employee (excluding the owner and spouse).
Otherwise, the owner of the sole proprietorship would need to seek individual family and health insurance.
If you are a sole proprietor and do want to offer some type of employee perks or discounts. Companies like Abenity are available to do just that!
2. Corporations and Limited Liability Companies
As a Corporation, there are some benefits required by law to provide and some that are deemed optional. It is required by law for corporations to provide social security, workers’ compensation, unemployment, and disability insurance.
The optional benefits can be anything from health care, retirement, vision, dental, and other discount programs.
As an LLC or a corporation, you are able to assist employees with their retirement fund by offering IRA setup as well as payroll deductions and contributions if you so choose in order to assist with their retirement.
According to the Bureau of Labor Statistics, the average benefits package reflects 30% of an employee’s total compensation. This means on average, more than $27,855 is spent for a competitive employee benefit plan.
This essentially means that an employee making $65,000 per year plus an additional $28,000 in benefits is in all actuality making $93,000 per year.
If you’re a small business owner, your heart rate may have shot up after that last sentence but, keep in mind, you are only required to provide specific benefits mentioned above and the other (typically more expensive benefits) are optional.
Discovering what your employees value most in a benefit package will help you make the best decision for your budget, your business, and your employees.
Why You Need an Employee Benefit Program for Your Business
Providing benefits is so crucial when setting your company apart from other companies that are recruiting top-talent candidates as well.
With studies repeatedly showing that one key factor candidates consider when joining a new company is access to high-quality benefits, companies must see the importance of meeting that need.
Health Insurance including Dental and Vision are the top 3 benefits that employees desire and they will make a decision to accept a position and/or stay long-term with a company depending on these factors.
Providing additional Perks and Discounts is an added bonus that has become more and more appreciated and valued in the workplace. Providing gym membership discounts allows employees to take care of their overall health which in turn creates a more uplifting work environment due to exercise increasing mood stability.
Providing travel, food, childcare discounts, and even tax discounts is a huge financial relief that does not go unnoticed.
The most important thing we can do as business owners, HR Managers, and employers is to listen to our employees’ wants and needs and then implement sound employee benefit packages that are useful to your entire team!
