If you're an HR executive at any level with budgeting responsibilities, you've dealt with the pleasure of the Benefit Squeeze.
What's the Benefit Squeeze? It's the magical number that's attributed to the budget model for all your benefit and payroll tax costs. In the golden days, the number was pretty fat and you never saw a lot of pressure on the number. Unfortunately, with healthcare costs up 200% in the last decade, the number takes on a lot more importance.
So, the game goes like this - if you're fully insured, you have a good idea of what your entire benefit load is. However, if you're self insured, there's some variability in the model that you want to protect yourself against. Unfortunately, no one else in the organization cares about your needs. They just need the number you give them to be two things - skinny and predictable.
The U.S. Bureau of Labor Statistics recently gave some quality stats across the public and private sectors that can help. The average cost to employers for employee pay and benefits was $28.48 per employee hour worked in June, the U.S. Bureau of Labor Statistics said today.
"The cost of wages and salaries averaged $19.85 an hour, or nearly 70 percent of employers’ total compensation costs. As usual, there was a pay and benefits gap between average compensation costs in the public and private sectors.
Total compensation costs to employers in the private sector averaged $26.78 per work hour, compared with $38.30 an hour for state and local government workers. The report did not include federal employee compensation costs. The cost of wages and salaries averaged $18.92 per employee hour in the private sector, versus $25.19 for state and local employees. The cost of employee benefits averaged $7.86 an hour in the private sector, compared to $13.11 an hour on the public side.
Overall, the 30 percent of total payroll costs that went to employee benefits broke down this way:
•$2.39 per employee hour worked for health, life and disability insurance.
•$2.25 an hour for legally required benefits, including Social Security, Medicare, unemployment insurance, and workers’ compensation.
•$1.99 an hour for discretionary paid leave benefits, including vacations, holidays, sick leave, and personal leave.
•$1.25 an hour for employee retirement and savings plans.
•76 cents an hour for supplemental pay, such as shift differentials, premium pay for overtime and weekend or holiday work."
Helpful stats to be sure. At first, the total cost for health insurance seems light, until you do the multiple and see that the numbers mean a budget of around $5,000 per employee - not a bad figure.
So, take a look and use this in your budgeting sessions to justify your benefit spend number. Just don't be alarmed when you take a 10% haircut to your budget as an across the board treatment to get to the earnings target. It's all part of the budgeting process...