Benchmark: Employer Costs for Employee Compensation

What this episode covers

Benchmark: Employer Costs for Employee Compensation Employee compensation packages usually contain at least two components: base salary or hourly wage; and group benefits. Base salary depends on competitive considerations such as the available talent pool, the role of bonuses, and the company’s stated philosophy to pay at a specified percentile of the market salary. Group benefits may be in the form of protective benefits — health care or prepaid legal services — or in the form of profit-sharing or gainsharing. Regardless of the particular benefits that comprise a compensation package, a big concern for most employers is paying for it. Although some employees are required to contribute to the cost of various benefits, the bulk of the compensation package is often provided by the employer. BLS survey. The U.S. Bureau of Labor Statistics (BLS) publishes a quarterly Employer Costs for Employee Compensation survey. The survey measures the average cost per employee hour worked that employers pay for wages, salaries, and benefits. Data is collected for the pay period including the 12th day of the survey months of March, June, September and December. Results are issued approximately three months after the month of reference. Quarterly results for March 2018 are as follows: Survey description Survey is conducted quarterly by the BLS. The payroll period that includes March 12, 2018, is the reference period. Survey release date: June 8, 2018. Data from both private industry and state and local government is included. Self-employed, farm, household, and federal government workers are not included. Cost levels are based on a sample of approximately 27,300 occupations within approximately 6,600 private-industry establishments and about 8,000 occupations within approximately 1,400 state and local government establishments. Summary of survey results Compensation costs for civilian workers In March 2018, employer costs for employee compensation for civilian workers (private industry and state and local government) in the United States averaged $36.32 per hour worked. Wages and salaries, which averaged $24.77 per hour, accounted for 68.2 percent of these costs, while benefits, which averaged $11.55 per hour, accounted for the remaining 31.8 percent. Legally required benefits ( e.g., Social Security, Medicare, workers’ compensation, unemployment insurance) averaged $2.66 per hour (7.3 percent of total compensation). Other benefit categories and their average cost per hour worked were: life, health and disability insurance: $3.18 (8.8 percent of total compensation); paid leave: $2.58 (7.1 percent of total compensation); retirement and savings: $1.92 (5.3 percent of total compensation); and supplemental pay: $1.20 (3.3 percent of total compensation). Compensation costs in private industry Private-industry employers spent an average of $34.17 per hour worked for total employee compensation. Wages and salaries, which averaged $23.76 per hour, accounted for 69.5 percent of these costs, while benefits, which averaged $10.41 per hour, accounted for the remaining 30.5 percent. Legally required benefits averaged $2.65 per hour (7.8 percent of total compensation). Other benefit categories and their average cost per hour worked were: life, health and disability insurance: $2.74 (8.0 percent of total compensation); paid leave: $2.40 (7.0 percent of total compensation); retirement and savings: $1.30 (3.8 percent of total compensation); and