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How Much Do Employee Benefits Cost In 2023?

By Jack Flynn
Apr. 19, 2023

Research summary: Employee benefits for private industry employees cost an average of $11.86 per hour, or 29.5% of the average cost per employee. Between 2021 and 2022, the cost of employee benefits in the US increased by an average of $1.03, partially due to inflation.

The cost of employee benefits changes over time, but to find out all of the details of the cost in 2023, here are some insights our research uncovered.

  • Employee benefits cost an average of $11.86 per hour (29.6% of the average cost per employee).

  • Public sector employee benefits (government workers) cost an average of $21.91, or a whopping 38% of total compensation costs.

  • Management occupations have the highest average cost of benefits for private sector employees, at an average of $20.74.

  • Service occupations have the highest average cost of benefits for private sector employees, at an average of $4.48.

  • Between 2021-2022, the average cost of employee benefits increased by $1.03 (From $10.83 to $11.86).

  • Insurance, Legally required benefits, and Paid leave are equally just over 25% of total benefits, accounting for over 76% of the cost of total benefits.

  • Retirement and savings account for the smallest portion of the cost of benefits, at only $1.37, or 11.6% of the total.

  • Healthcare costs typically account for a whopping 94.2% of total insurance costs ($2.86 out of $3.04).

For further analysis, we broke down the data in the following ways:
Private Vs. Public | Private Sector Occupation | Public Sector Occupation | Cost of Employee Benefits | Cost of Insurance Benefits | Over Time
private vs. public sector employee benefits cost

Private Vs. Public Cost of Employee Benefits

Sector Average cost of employee benefits Share of total compensation costs
Private $21.91 38.0%
Public $11.86 29.5%

Average Cost of Employee Benefits By Private Sector Occupation

Occupational group Average cost of benefits Share of total compensation costs
Management, professional, & related $20.74 30.7%
Sales & Office $8.39 27.2%
Service $4.48 22.2%
Natural resources, construction, & maintenance $13.59 32.2%
Production, transportation, & material moving $10.56 32.2%

Average Cost of Employee Benefits By Public Sector Occupation

Occupational group Average cost of benefits Share of total compensation costs
Management, professional, & related $24.70 36.0%
Sales & Office $17.05 42.6%
Service $18.33 42.5%

Cost of Employee Benefits by Type of Benefit

share of employee benefits costs by type of benefit

Type of benefit Average cost Share of the total cost of benefits
Insurance $3.04 25.7%
Legally required benefits $3.02 25.5%
Paid Leave $2.99 25.2%
Supplemental pay $1.42 12%
Retirement and savings $1.37 11.6%

Cost of Insurance Benefits by Type of Benefit

Type of Insurance Average cost Share of the total cost of insurance benefits
Health $2.86 94.2%
Short-term disability $0.08 2.7%
Long-term disability $0.05 1.7%
Life $0.04 1.4%

Cost of Employee Benefits Over Time

Year Average cost of employee benefits
2022 $11.86
2021 $10.83
2020 $11.82
2019 $11.60

Employee Benefit Costs FAQ

  1. What costs are normally associated with an employee benefits package?

    The costs that are normally associated with employee benefits include Insurance, Paid Leave, Supplemental pay, Retirement, and savings. In some states, other benefits may be legally required, but these are the most common ones.

    To understand how these components comprise the average total cost of benefits ($11.86), here are additional details:

    • Insurance: 25.7% of total benefits

    • Legally required benefits: 25.5%

    • Paid Leave: 25.2%

    • Supplemental pay: 12%

    • Retirement and savings: 11.6%

    These categories can also be broken down in further detail, such as the fact that health insurance accounts for over 94% of total insurance costs.

  2. How do you reduce employee benefit costs?

    You can reduce the cost of employee benefits by analyzing trends and implementing strategies. Here are some of the key ways you can reduce costs without harming your employees:

    • Analyze employee use of programs. This will allow you to determine which programs employees are using and which ones you’re wasting money on. If employees aren’t using the program, it can be a good idea to cut it.

    • Explore plan design options. No two employee populations are the same, so customizing the benefits plan for yours can help reduce premiums.

    • Look into pharmacy offerings. When the cost of certain medications rises, it’s crucial to assess lower-cost, clinically effective biosimilars. That way, you can offer the least expensive and most effective options to your employees.

    • Cut administrative costs. Tools like online portals or automated messaging systems can help reduce the cost of administration for your plan. Always ensure you’re keeping up to date with the most modern and cost-effective options.

    • Employee education. Employees who don’t understand their benefits can use them poorly, so it’s important to keep them informed, knowledgeable, and up-to-date. This can be done through consulting with an employee benefits broker and proper training.

    • Telehealth and medicine. Encouraging employees to use virtual health services can provide easy, quick, and convenient access to healthcare providers while also reducing costs on your end.

    • Design a wellness program. Wellness programs such as gym memberships, healthy eating programs, and stress management resources can provide employees with the positive environment they need to stay mentally and physically healthy, among other benefits.

  3. Are employee benefits overhead costs?

    Yes, employee benefits are considered overhead costs. This is because overhead costs include rent, utilities, administrative costs, insurance, and employee perks while operating costs are just expenses needed to perform services and create products.

    Therefore, the money employees spend on employee perks, including benefits, is considered an overhead cost. The coffee and snacks in the office, gym discounts, company retreats, and company vehicles are also included in that cost.

Conclusion

Employee benefits cost an average of $11.86, or 29.5% of the average cost per employee. These benefits are broken down into costs such as Insurance (25.7% of total benefits), Legally required benefits (25.5%), Paid Leave (25.2%), Supplemental pay (12%), and Retirement and savings (11.6%).

However, not all employees are created equal, with public employees (i.e., government workers) having an average benefits cost of $21.91. This cost also accounts for a larger share of their total compensation costs, at 38%.

Costs can also vary by industry, with Management workers having a higher benefits cost and Service workers typically having the lowest cost.

Ultimately, determining your cost of benefits as a business owner will depend on your own needs and the needs of your employees. As mentioned, it’s vital to analyze what plans work best for your business and engage with programs and training that can reduce costs while also maximizing employee wellness.

References

  1. BLS – Employer Costs for Employee Compensation

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Author

Jack Flynn

Jack Flynn is a writer for Zippia. In his professional career he’s written over 100 research papers, articles and blog posts. Some of his most popular published works include his writing about economic terms and research into job classifications. Jack received his BS from Hampshire College.

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