Worth of Your Well-Being

We all love the feeling of seeing our bank account grow on payday, but when it comes to getting paid, there’s more to it than just money. For many workers, an essential component of compensation is benefits. Health care coverage, retirement plans, and vacation time are just some of the ways employers provide meaningful support for their employees.

But just how much do these benefits cost employers? Using the National Compensation Survey’s Employer Costs for Employee Compensation (ECEC) report, which collects data from roughly 27,200 occupations and 6,600 private industries, we can get a better idea of how much companies are investing in these additional perks – and ultimately in their employees’ health and well-being.

The Total Cost of Compensation

For the average private industry employee, many elements comprise his or her total compensation. Salary or hourly wages are only a portion of the overall costs of retaining employee services.

Looking at our graph, comprised of data collected from the ECEC survey, almost 70 percent of a private industry employer’s compensation costs stem from wages and salaries.

Aside from wages and salaries, benefits account for approximately 29 percent of an employer’s compensation costs. Employers are required by federal and state law to provide benefits like workers’ compensation, unemployment, disability, and Social Security, and those requirements vary by state. Others, like retirement, life insurance, and paid vacation, are not mandatory, but they can help attract and retain workers.

Health insurance comprised 7.5 percent of compensation costs for the average private employer. With the introduction of the Affordable Care Act employer mandate, all businesses with 50 or more full-time employees are required to provide health insurance to employees or face tax penalties. Although smaller companies with less than 50 employees aren’t required to provide health insurance, they’re still encouraged to do so with financial incentives (like tax credits).

Social Security and Medicare contributions, an integral component of many employees’ retirement plans, comprised 5.8 percent of employer contributions.

Of course, all of these numbers have the potential to change as employee benefits packages continue to expand their offerings with benefits like student loan repayment and extended parental leave.

The True Cost of Employee Benefits

When most of us review our paycheck stub, often the first number we pay attention to is the net amount, meaning the dollars we can deposit or use as cash. However, the amount of dollars withheld costs employers more over time.

All your benefits add up to cost your employer $21,726 annually. With wages and salaries added, that amount jumps to an average of $71,334 for each worker.

Breaking down employer costs even further, we can see what it costs a private company to provide wages and benefits to an employee for a single hour and a full year.

For example, the cost to provide each employee at private companies with insurance benefits such as health, life, and long- and short-term disability amounts to $2.73 per hour. Annually, that adds up to $5,698 for every employee.

Outside of insurance coverage, the highest costs for employers in providing compensation comes from legally required benefits like Social Security, Medicare, unemployment, and workers’ compensation, at $2.65 a head per hour.

These costs almost always affect employers regardless of their business size, and each increases employer costs in different ways. While Social Security and Medicare are a mandatory tax withheld by employers based on their total compensation, unemployment and workers’ compensation are expenses that kick in when an employee is in need of them.

If your employer offers paid sick leave – which is only required by law in some U.S. cities – then they’re probably spending about $616 a year per worker. Once you throw holidays, vacations, and other paid absences into the mix, your employer is paying roughly $5,000 annually for time off.

Compensation Costs Over Time

It’s probably no surprise to anyone that the costs of employee benefits – like most things – have increased over time.

To put everything in perspective, the total costs of benefits for employers have increased 368 percent over 14 years.

Specifically, the cost of health insurance has increased by 28 percent, primarily due to increases in chronic illnesses throughout the U.S. and rising prices from health care providers.

Perhaps the most unexpected cost for employers is the 161.8 percent increase in employee vacation time. This could be due to employees using more of their allocated vacation time, rising to a higher level last seen in 2010.

Fortunately, the economy has improved in recent years, and more people are bringing home a steady paycheck. In 2018, the unemployment rate dropped as low as it’s been since 1969. Logic dictates state unemployment insurance costs would have decreased. However, the opposite seems true because these costs have risen an astounding 106.8 percent since 2004.

A part of the reason can be attributed to the recession of 2008 after the housing market and other related industries took a beating and sent the unemployment rate to 10 percent. Wanting to protect workers, lawmakers expanded the unemployment system, which resulted in increased costs for employers.

The cost of nonproduction bonuses has also increased to just under 68 percent since 2004, with overtime and premium expenses rising another 55.8 percent.

Benefits Costs Zoom Higher for Most Industries

The costs for employers to provide benefits are not standard across industries, nor have these costs remained steady throughout the years.

The finance and insurance industries have seen the most substantial increase in employee benefits at 17 percent, followed closely by utilities at 15.2 percent. The utility sector pays an average of $39,028 in annual benefits per employee, the highest of any industry in this graph.

Health care and institutions of higher education have experienced increases of 14.6 and 14.4 percent respectively. An interesting difference does exist, however: The average annual costs of benefits for higher education employers is $34,250, while the average cost of benefits for each worker in health care is $21,364.

One interesting statistic is in the hospitality industry, specifically food services, which employed over 5 million Americans in 2016. Since 2004, the hourly cost of benefits for accommodation and food service employers has only increased by 5.9 percent to $7,715 per employee in 2018. This is one of the smallest increases in the industries we examined.

Employers in this industry have improved benefits to attract top talent and enhance workplace retention. Many now provide the benefits that job candidates are seeking. Corporations like Starbucks offer comprehensive benefits to its workers like medical insurance, commuter benefits, and company stock. Most recently, though, the coffee giant followed in the footsteps of Apple and Home Depot and expanded its employee benefits to include child care.

Changes in employer benefits costs were smallest among the retail trade, with only a 3.9 percent increase.

Employee Benefits Costs Vary by Geography

During our research, we found that employee benefits costs were highest around the San Francisco area, at $17.12 per hour – an increase of 81.5 percent over 14 years.

And while the total employee benefits cost for each employee is lower at $10.95 per hour in the Phoenix-Mason-Scottsdale area, its percentage increase since 2004 is the highest, coming in at almost 90 percent.

One contributing factor could be that Arizona is now home to six Fortune 500 companies. Scottsdale-based GoDaddy covers 100 percent of health premiums for its employees and 50 percent for their dependents.

Another reason the Phoenix-Mason-Scottsdale area has seen significantly increased benefits cost could be the Fair Wages and Healthy Families Act, approved in 2016, which raises the minimum wage to $10 an hour and requires Arizona employers to offer sick time benefits to employees.

It’s doubtful anyone will be surprised the New York City metropolitan area that includes portions of New Jersey, Connecticut, and Pennsylvania, came in second with an average hourly employee benefit cost of $15.14 per hour for every worker.

Employers in the Miami-Fort Lauderdale-Pompano Beach area of South Florida had some of the lowest costs to provide benefits, although the costs have risen by 63.1 percent or $8.92 per employee since 2004. The Miami metropolitan area is a growing startup hub, especially for international companies. Perhaps the low costs of benefits for employers could make Florida an even more attractive location for entrepreneurs to launch businesses.

Size Matters When It Comes to Employee Benefits Costs

The costs of benefits for employers are mostly dependent on the company size. As you might expect, larger employers spend more on the extras for each worker.

Companies with 500 or more employees spent an average of $49.16 per employee when wages and benefits were combined.

The largest corporations spent almost $10 more in total benefits per employee than businesses employing 49 or fewer workers, but only about $12 more in wages and salaries.

Employee insurance was the biggest culprit for the largest employers because they spent an average of $4.58 per employee per hour, compared to small businesses at $1.77 per head. We saw a similar difference in paid leave, with the big boys spending $4.24 per employee versus $1.63 for the little guys.

There are a few reasons costs vary between firms of different sizes. As previously mentioned, employers with more than 50 full-time employees must offer health insurance in compliance with the Affordable Care Act, increasing their overall benefits costs. Additionally, companies of all sizes can make costly mistakes when it comes to providing employee benefits, such as:

  • Absorbing the costs of all benefits
  • Not disclosing the costs of benefits to employees
  • Giving benefits that aren’t needed or wanted
  • Sloppy record keeping

Ultimately, small companies have fewer workers to provide benefits for, while the largest companies may benefit from an economy of scale that many small or midsized companies lack.


No matter what industry you work in or where you live, employee benefits are essential for helping you live your healthiest life while planning for a safe and secure future.

If you’re a business owner, it may be time to review your company’s benefits policies and make sure you’re providing benefits that are most relevant for your workforce without putting unnecessary strain on your bottom line. And if you’re a worker, you won’t necessarily be able to change your employer’s benefits policies, but you can make sure you’re getting the most out of the coverage they provide.

At Bay Alarm Medical, we’re committed to your security and well-being through products such as our medical alert systems that protect your family, health, and independence. With medical life alert technology for your home and the road, rest assured we’ll secure the best for your future as well.


Many thanks to the U.S. Bureau of Labor Statistics and the U.S. Department of Labor for researching and publishing the data used in this analysis. The Employer Costs for Employee Compensation (ECEC) report is a product of the National Compensation Survey. This survey measures employer costs for wages, salaries, and employee benefits. The ECEC measures the average cost to employers for wages, salaries, and benefits per employee hour worked.

For our purposes, we only included data on private industry workers, which include workers in the private nonfarm economy, except those in private households. According to the BLS, data were collected from a sample of about 27,200 occupational observations selected from a sample of about 6,600 private industry establishments.

For more technical documentation on the data included in this study, please review this BLS report.

To determine the annual costs of compensation and benefits, we multiplied the hourly cost by 2,087 hours, which is the legal number of hours in the work year. Additionally, to see how costs changed over time, we adjusted all prices to account for inflation.
























Fair Use Statement

Workers and their employers pay close attention to wages and benefits received and paid. If this information is of interest to your readers, then we invite you to share our findings for any noncommercial purpose. Our one request is to link back to this page so that everyone can examine the details if so desired.

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