Hiring costs include total compensation costs, which are base salary, overtime or supplemental pay, vacation and other paid time off, the employer's portion of health coverage, employee taxes, and workers' compensation insurance premiums. The average cost of benefits compared to base salary ranges between 20 and 30 per cent, according to sources such as the U.S. Bureau of Labor Statistics and the Employee Benefits Research Institute.
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Employer Percentage of Total Benefits
According to the Employee Benefits Research Institute (EBRI) 2010 data, about 29.2 per cent of total compensation is attributed to employee benefits. The EBRI includes overtime and supplemental pay as part of employee benefits, including pay for bonuses not related to employee production. These types of bonuses usually refer to employee incentives and cash rewards.
When employers consider the cost of insurance, the per cent of employee compensation is almost 8percent. This figure includes health insurance, disability and life insurance. EBRI data was gathered prior to enactment of the Affordable Care Act that was signed into law by President Obama in March 2010. There is speculation among employers that this health care reform legislation will increase employer's costs. On the other hand, small businesses that provide insurance may be eligible for tax credits or subsidies that will help lower the per cent of health insurance for total compensation.
Overtime and Bonus Pay
The amount of overtime pay depends on the portion of a workforce classified as nonexempt. These workers are entitled to 1 1/2 times their hourly salary for more than 40 hours per week. Roughly 3 per cent of total compensation is for overtime paid and other forms of wages for hours worked. Excessive overtime can cause this number to increase; however, this is a manageable challenge for employers who enforce workplace policies that prohibit unauthorised overtime.
Vacation and Paid Time Off
Almost 7 per cent of total compensation is employer-paid for vacation time and paid time off. This figure inevitably rises when absenteeism occurs or when temporary workers are employed to fill vacant positions, particularly for leaves of absences, sabbatical and other times where a replacement worker is necessary.
Employers who offer retirement, pension or other income protection benefits spent 3.4 per cent in defined contribution and defined benefit plans. Companies that offer short periods for vesting money to which both the employee and employer contribute may experience higher percents of employee benefit costs when they are required to liquidate retirement savings plan amounts upon an employee's departure.
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- U.S. Bureau of Labor Statistics: Employer Costs for Employee Compensation; December 2010
- "Consumer Reports"; Perking up Your Benefits; August 2007
- MIT Enterprise Forum: How Much Does an Employee Cost?; Joe Hadzima
- "Entrepreneur": A Primer for Offering Retirement Benefits; Karin P. Mueller; July 2010