Employee benefits are a cornerstone of a competitive compensation package, pivotal in attracting and retaining top talent.
This article will explore what is considered legally required benefits (disability insurance, unemployment insurance, workers’ compensation insurance, etc.) and what might be considered voluntary benefits.
How Much Does the Average Company Spend on Benefits Per Employee?
The cost of employee benefits varies widely, depending on a large set of factors.
The general rule of thumb, however, is following the 1:2 ratio. In other words, your employee benefits cost will be about 1/3 of the total cost of employee compensation (the other 2/3 being wages).
Labor statistics show a slight variance across sectors, with government worker benefits reaching 39% of total compensation cost and private industry workers’ benefits programs accounting for about 29% of total compensation.
How Much Should I Budget for Employee Benefits?
It’s recommended that employers budget between 1.25 and 1.4 times their employees’ base salaries.
That said, when considering the overall cost of employee benefits, there are several factors to consider:
Some industries are more competitive than others when it comes to retaining top talent.
Tech companies, for example, tend to offer considerable fringe benefits beyond the employee’s base salary, as these companies often find themselves jockeying for the most talented minds in their field.
Other industries may not be as competitive and, therefore, may not feel the need to offer extensive benefits programs.
Knowing the dynamics of your industry and what other companies are doing will help determine the benefits packages an employee may expect.
Larger companies often have the economies of scale to provide comprehensive benefits at a lower per-employee cost than smaller businesses.
Small businesses will often scale back on voluntary benefits due to the costliness of offering extensive packages to so few people.
The cost of employee benefits can vary significantly depending on scale, which is why many larger corporations are able to offer things like mental health benefits or a gym membership, promote work-life balance with paid vacation time, and even offer family coverage.
Areas with a higher cost of living will make everything more expensive, including benefit packages.
Companies operating out of major citiescan expect to pay more per employee than groups working in less populated, less expensive areas.
4. Benefit Package Extensiveness
The cost of employee benefits can vary significantly depending on what is being offered.
Disability insurance, workers’ compensation, unemployment insurance, and health insurance are the essentials of employee benefits.
Offering other employee benefits like onsite fitness classes, programs that promote wellness, and a focus on improving and sustaining mental health will show that a company does what it can to support employees in and out of the office.
This kind of extensive employee benefits program may be more costly than the bare minimum, but it has been shown to increase job satisfaction, increase employee retention, and make the workplace more productive.
How Benefit Providers Structure Their Employee Benefits Costs
There are several ways to structure pricing for your employee benefits program.
These are the most common:
1. Per Employee Per Month (PEPM)
This is generally the easiest pricing model to budget because it’s consistent month to month.
You simply multiply the determined fee by the number of employees you have to calculate your monthly budget.
These benefits, such as workers’ compensation, are based on real-time payroll data and are charged accordingly.
These are specifically tailored employee benefits programs that are made based on the size and needs of a company’s benefits package and the benefits purchased.
Employee benefits are ever-changing, typically tied to the lifestyle and needs of individual employees and the changing workforce trends. As employees grow within the company, so will their benefit needs.
For example, a 25-year-old, unmarried employee may be more attracted to a free gym membership, a cell phone stipend, or other fringe benefit programs.
On the other hand, a 35-year-old, married employee will be more interested in family coverage, while older employees may emphasize retirement plans as they navigate their benefits package.
With Edenred, you can save valuable time and money putting together a comprehensive benefits package that your employees will appreciate.
We think you’ll love what Edenred has to offer:
Edenred offers commuter benefits that allow employees to use tax-free dollars on commuting costs.
This benefits program allows companies to save money by reducing payroll taxes, and employees keep more of what they earn.
Currently, the IRS allows up to $300 per month to be set aside, pre-tax, for employees to use on transit and parking expenses. The limit is increasing to $315 starting January 1, 2024. That’s $15 more than in 2023!
2. Lifestyle Spending Accounts
The most flexible benefits program available is Edenred’s Lifestyle Spending Accounts.
This can be used to pay for health, fitness, and more to help promote wellness and good health among your staff.
Lifestyle Spending Accounts positively impacts both employees and employers, helping reduce stress and increase morale and productivity.
Learn how LSA can positively impact your employees.
3. Claims Reimbursement
Claims reimbursement gives employers the option to reimburse out-of-pocket expenses made by their employees.
This product is now through our Commuter Benefits and Lifestyle Spending Accounts programs. We also offer it as a standalone product to complement your existing benefits system.
This program is a massive time-saver for HR and is convenient for employees who can simply upload their receipts through the Edenred app.
With so many households experiencing financial difficulties, getting a paycheck advanceis more important than ever.
Offering AnytimePay will enhance your benefits budget package and help improve your employees’ satisfaction and financial well-being.
This is a great program to help employers stand out by offering unique perks that can positively impact company culture and helpretain talented employees.
Ticket Restaurant is Edenred’s most popular meal perk in over 35 countries and offers employees a Prepaid Card funded monthly with a meal allowance.
This program allows employees pay for meals during work hours, promoting general health and employee well-being.
The Prepaid Card can be used at/through:
- Local eateries.
- Restaurants.
- Grocery stores.
- Food-delivery apps.
Ticket Restaurant can also improve employee retention by ensuring that your workers are always able to access healthy, delicious food.
Take out the guesswork of daily lunch options and allow employees to plan ahead, saving time for everyone.
Edenred, like all benefits providers, understands that commuting needs are changing.
To help you adjust, we’ve added new shared mobility options integrated into one commuter account.
Best of all, we will identify pre-tax eligible expenses, so your company and employees continue to receive tax incentivesand remain compliant with the IRS regulations.
Along with traditional pre-tax options like public transit and parking, we are proud to offer new micromobility commuting options such as:
- Bike sharing.
- Bike shops.
- E-scooters.
- E-mopeds.
- Corporate shuttles.
Whether the daily commute starts on a train and ends with a shared bike, or if your employees want to avoid crowds,we got them covered!
In the dynamic landscape of employee benefits, there’s no one-size-fits-all answer to the question of the average cost per employee.
Rather, it’s a multifaceted puzzle influenced by industry dynamics, company size, and the evolving expectations of the workforce.
By decoding the investment in employee well-being, companies can craft benefit packages that attract and retain talent and contribute to a thriving, satisfied, and engaged workforce.
If you’re like to learn more about Edenred and what we can offer to you and your employees, book a meeting with us today so we can further discuss.
