Aug 30, 2010 –
You spend a lot of money to compensate your employees, but I bet you don’t get credit for a lot of what you spend. According to the Bureau of Labor Statistics Report “Employer Costs for Employee Compensation for the Regions, March 2010,” almost 30 percent of the total employee costs of average private employers are for the extra things that most employees don’t think about.
In order to make sure employees understand the complete value they receive from their employers, employers should consider showing employees their entire compensation package. Here is a list of the top 20 ways employers compensate their employees in addition to their regular salaries, wages and bonuses.
1. Social Security. Sure, there is a lot of doubt about the longevity of this program, but it is still a benefit for your employees and it costs you 6.2 percent of the first $106,800 of each employee’s earnings, or a maximum of $6,621 per employee per year.
2. Medicare. Health care coverage is getting more expensive, so this benefit is very valuable for retirees. Employers pay 1.45 percent of each employee’s earnings with no cap.
3. State unemployment insurance. Somebody has to pay for the right for your employees to make an employment claim. It costs you anywhere from $500 to well over $1,000 per year for each employee depending on your state and your company’s unemployment claim experience.
4. Federal unemployment insurance. Employers pay 0.8 percent of the first $7,000 of wages, or $56 per employee per year.
5. State disability insurance and other state and local mandatory benefits. Depending on the state(s) where your employees live and work, you may have to pay into state disability funds or pay other taxes based on the number of employees you have or the amount you pay them.
6. Workers compensation. This is a statutory requirement that provides a benefit to employees who are injured on the job. Depending on the type of work your employees perform and your company’s experience with claims, your premium could be as little as 0.25 percent or more than 10 percent of your employees’ wages, and some states have no maximums.
7. Health insurance. Most companies who offer health coverage pay for some, if not all, of the employees’ premium, which can often be more than $200/month. Some employers also help pay the premium for dependents of the employees, which can sometimes cost more than $1,000 per employee per month.
8. Dental insurance. Some employers pay at least some of the premium, which usually helps to keep participation up and rates reasonable.
9. Vision insurance. Premiums are usually lower than dental insurance, so is often included in health packages.
10. Disability insurance. Group plans, especially those with some level of contribution from the employer, have much better rates than voluntary plans.
11. Life insurance. The cost of the first $50,000 of coverage is usually tax deductible, so many companies pay for at least that.
12. Supplemental insurance. There are many other payroll-deducted insurance and benefit programs that employers pay to administer, and they often contribute to the programs as well.
13. Retirement plan. Although there are many different kinds and types of employer-sponsored retirement programs, some companies contribute 3 percent or even more of the employees’ wages into these plans.
14. Paid time off. Also known as PTO, getting paid even while you’re on vacation is often forgotten by employees as a valuable benefit.
15. Paid holidays. Many companies offer between six and eight days each year for which employees receive their normal pay but do not require their employees to come to work.
16. Bereavement and extra paid time. In addition to the formal paid time off, many companies also regularly give employees additional paid time off when emergencies or bereavement needs arise, not to mention comp time to make up for extra time worked during prior weeks and/or months.
17. Education reimbursement. Some employers reimburse employees for at least some of the costs associated with furthering their education, especially if the education is work-related.
18. Mileage, cell phone and other reimbursements. Owning a vehicle, cell phone and other items can become less burdensome for employees when their employers reimburse them for the portion that is used for company purposes.
19. Wellness programs. Many companies invest into programs and rewards/incentives to help employees get and stay healthy.
20. Training. In the information age, investing in the skills and knowledge of their employees is becoming a priority for employers. Some companies spend thousands of dollars per year per employee.
In some instances it is beneficial to disclose to your employees’ their total cost to you, their employer. To help you figure out how much each employee costs, we have a free spreadsheet available. Visit Compensation Calculator for the no-cost download and complete all of the shaded boxes with your company and each employee’s information.
Ken Kaufman, Founder & CEO of CFOwise®, serves as the Chief Financial Officer for a dozen start-up, emerging, and medium-sized businesses. With almost two decades of experience and as an adjunct professor and published author, Ken focuses his professional efforts on helping entrepreneurs maximize cash flow, improve profits, and obtain clarity.