How Much Do Employee Benefits Cost?

How Much Do Employee Benefits Cost?

In the war for talent, HR leaders are constantly searching for better ways to remain competitive, cost-effective, and most importantly innovative on both fronts. With the latest data from the U.S Department of Labor’s Bureau of Labor Statistics, we are able to shed light on the intricacies of the essential question: how much do benefits cost per employee? From healthcare and retirement plans, to emerging benefits, perks, and incentives, understanding the true investment in employee well-being is essential for both employers and employees alike, especially when it comes to the broader impact on organizational culture, employee satisfaction, and a company’s bottom line.

Average cost of employee benefits in 2023

Based on 2023 data from the U.S. Bureau of Labor Statistics (BLS), the average cost of employee benefits account for 29.4% of the average cost per private industry employee, or $12.06 per hour, per employee. The remaining 70.6%, or $28.97, goes toward wages, for a total cost of $41.03 per hour. 

Based on a 40-hour work week, the average monthly cost for an employee’s benefits is $1,929.60 for private industry workers. Private industry employers need to factor in not only salary expenses, but also these total compensation costs—including benefits—when budgeting for employee salaries, especially when competing for the best talent. 

While employee benefit costs vary by job position, industry, and geographic area, these numbers provide valuable insight on the average breakdown for salary and wages versus the average benefit cost per employee. 

ComponentCost
(2023)
% of total
compensation
Cost
(2022)
% of total
compensation
Total Compensation$41.03100%$38.61100%
Wages and salaries$28.9770.4%$27.1970.4%
Benefits$12.0629.6%$11.4229.6%
*Costs were rounded to two decimal points

2023 takeaways: 

There have been very small raises in both compensation and benefits since 2022, and even 2021, but are they enough as workers continue to struggle with the rise in inflation and increased costs for their standard of living?

  • Total compensation is only up $2.42, a 6.3% increase compared to 2022
  • Wages and salaries are up $1.78, a 6.5% increase compared to 2022
  • Employee benefit costs for 2023 are up $0.64, a 5.6% increase compared to 2022

Employee benefit costs are increasing, but not by a lot

According to BLS’s 2023 benefit data, the total cost per employee, per hour for benefits is $12.06. Below, we can see the percentage of that overall benefit spend allocated across different benefit types.

ComponentCost
(2023)
% of total
benefits
Cost
(2022)
% of total
benefits
Insurance$3.0225%$2.9325.7%
Legally required benefits$3.0825.5%$2.9125.5%
Paid leave$3.0525.3%$2.8825.2%
Supplemental pay$1.5312.7%$1.3712%
Retirement and savings$1.3911.5%$1.3311.6%
*Costs were rounded to two decimal points

Rising costs are impacting businesses in many ways, including average employee benefit costs. As you can see in the chart above, the average employee benefit cost per private industry employee is currently at $12.06 per hour. 

In 2022, it was $11.42. Average annual wages and salary costs also jumped, from $27.19 in 2022 to $28.97 in 2023. While these weren’t major increases, they are something for employers to be aware of when it comes to budgeting projected employee expenses.

Below, we’ll cover the three largest components of employee benefit costs in 2023: insurance benefits, legally required benefits, and paid leave benefits.

Insurance benefits

According to BLS’s 2023 benefit data, the total cost per employee, per hour for insurance benefits is $3.02. Below, we can see the percentage of that overall benefit spend allocated across different benefit types. Some of the most common insurance benefits that employers pay part or all of include:

  • Health
  • Short-term disability
  • Long-term disability
  • Life
ComponentCost
(2023)
% of insurance
benefits
Cost
(2022)
% of insurance
benefits
Health$2.8494%$2.7694.2%
Short-term disability$0.092.9%$0.082.7%
Long-term disability$0.051.7%$0.051.7%
Life$0.051.7%$0.041.4%
*Costs were rounded to two decimal points

2023 takeaways:

  • Health insurance typically makes up the biggest chunk of employee benefit costs for employers at 94% of insurance costs in 2023.
  • Health insurance is only up $0.01 per employee from 2022, a slow down from the $0.09 increase from 2021.

Legally required benefits

According to BLS’s 2023 benefit data, the total cost per employee, per hour for legally required benefits is $3.08. Below, we can see the percentage of that overall benefit spend allocated across different benefit types. These are examples of the mandatory benefits that employers need to foot the bill for:

  • Social Security
  • Medicare
  • Workers’ compensation insurance
  • Unemployment insurance
  • Sick leave (depending on state and local laws)
ComponentCost
(2023)
% of legally required
benefits
Cost
(2022)
% of legally required
benefits
Social Security & Medicare$2.4579.5%$2.2978.7%
Workers’ compensation$0.4614.9%$0.4515.5%
State unemployment insurance$0.144.5%$0.144.8%
Federal unemployment insurance$0.030.9%$0.031%
*Costs were rounded to two decimal points

2023 takeaway: Social Security and Medicare accounts for 79.5% of legally required benefit costs for 2023.

Paid leave benefits

According to BLS’s 2023 benefit data, the total cost per employee, per hour for paid leave benefits is $3.05. Below, we can see the percentage of that overall benefit spend allocated across different benefit types. These include benefits that are not required, but that many employees expect to receive at a bare minimum, including:

  • Vacation days
  • Holidays
  • Sick pay
  • Personal days
ComponentCost
(2023)
% of paid leave
benefits
Cost
(2022)
% of paid leave
benefits
Vacation$1.5651.1%$1.4751.2%
Holiday$0.9029.5%$0.8630%
Sick$0.4113.4%$0.3913.6%
Personal$0.175.6%$0.155.2%
*Costs were rounded to two decimal points

2023 takeaway: Vacation time and holidays accounts for 80.6% of paid leave costs for 2023.

For many, the pandemic changed not only where we work, but our expectations of work. Employees now expect to have at least some flexibility when it comes to their schedule, including the ability to work remotely. Working caregivers are also feeling empowered to speak up about the fact that traditional paid leave often doesn’t meet their needs. 

One way employers are differentiating their benefit strategies is with care benefits for working families. According to the 2023 Future of Benefits report, 46% of companies are prioritizing childcare more in 2023 and 43% are prioritizing senior care benefits.

Employees want benefits that address their full selves

Now more than ever before, workers are letting companies know that they expect more from their employer as they try to meet the demands of today’s economic and caregiving challenges. This includes acknowledging that it’s often impossible to separate their work self from their role as a caregiver. Many workers are now asking for:

  • Child care benefits
  • Paid parental leave
  • Senior care benefits
  • Family-forming benefits, such as fertility treatments and adoption assistance
  • Pet care benefits
  • Personal well-being benefits

Offering these types of in-demand benefits can help companies retain their best workers. Otherwise, they might seek out another company with benefits more in line with their needs. A comprehensive benefits package can also save companies money, since the average cost to hire a new employee can range from $4,000 to $20,000.

Care for business employee benefits

Employer-sponsored Care benefits help support employees by providing care for the ones they love, including children, parents, grandparents, other adults, pets, and themselves. Care for Business benefit offerings include:

Here are some examples of how Care for Business benefits have helped companies support their employees, create a better work/life balance, and improve productivity:

Best Buy logo

Backup Care has helped Best Buy employees save more than 7,000 days of missed work since they began using the program in 2019, including 1,400 missed days in the first half of 2022.
Read the full case study

Sharp HealthCare

Backup Care saved Sharp HealthCare doctors, nurses, and staff more than 4,500 days of missed work in just six months. In the second year since launch, they’re seeing a healthy 10% enrollment and 34% overall utilization of the program benefits.
Read the full case study

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