The average employer cost for employee compensation in the US is $41.03 per hour. Maintaining an employee is expensive for employers, putting an emphasis on just how important hiring the right person really is.
For instance, employers are responsible for paying not only wage and salary costs but also for benefits like retirement, medical care, insurance, and more.
To understand just how much the average employee costs their employer in 2022, we’ve gathered all of the latest data. According to our extensive research:
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69% of employee compensation costs come from wages and salaries, while 31% comes from benefits.
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The average employee compensation costs for the public sector are $55.47, while the average for the private sector is only $38.91.
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The private industry compensation cost for full-time workers is $45.11, but for part-time workers, only $20.78.
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The Northeast has the highest regional employee compensation costs at $43.18, while the South has the lowest at $35.06.
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Companies with 500+ employees have the highest employee compensation costs at $55.48, while companies with one to 49 employees have the lowest at $31.49.
For further analysis, we broke down the data in the following ways:
Ownership | Public Vs. Private Sector | Occupation | Full-Time Vs. Part-Time | Union Vs. Non-Union | Region | Company Size
Employee Compensation Costs By Ownership
| Compensation component | Compensation cost | Share of compensation |
|---|---|---|
| Wages and salaries | $28.31 | 69% |
| Paid leave | $3.03 | 7.4% |
| Supplemental pay | $1.27 | 3.1% |
| Insurance | $3.41 | 8.3% |
| Retirement and savings | $2.07 | 5.1% |
| Legally Required benefits | $2.94 | 7.2% |
Public Vs. Private Sector Employee Compensation Costs
| Compensation component | Private industry | State and local government |
|---|---|---|
| Wages and salaries | $27.44 | $34.23 |
| Paid leave | $2.87 | $4.10 |
| Supplemental pay | $1.37 | $0.56 |
| Insurance | $2.96 | $6.44 |
| Retirement and savings | $1.33 | $7.11 |
| Legally Required benefits | $2.93 | $3.03 |
Employee Compensation Costs By Occupation
| Occupation | Total compensation |
|---|---|
| Management, professional, and related | $65.83 |
| Education and health services | $46.47 |
| Natural resources, construction, and maintenance | $41.61 |
| Production, transportation, and material moving | $32.60 |
| Sales and office | $30.58 |
| Service | $22.59 |
Full-Time Vs. Part-Time Private Industry Compensation Costs
| Type of work | Wages and salaries | Total benefits |
|---|---|---|
| Full-time | $31.14 | $13.97 |
| Part-time | $16.60 | $4.18 |
Union Vs. Non-Union Private Industry Compensation Costs
| Type of work | Wages and salaries | Total benefits |
|---|---|---|
| Union | $30.61 | $20.60 |
| Non-Union | $27.15 | $10.65 |
Employee Compensation Costs By Region
| Region | Wages and salaries | Total benefits | Total compensation |
|---|---|---|---|
| Northeast | $29.84 | $13.34 | $43.18 |
| South | $25.41 | $9.65 | $35.06 |
| Midwest | $25.78 | $11.53 | $37.32 |
| West | $30.10 | $12.54 | $42.64 |
Employee Compensation Costs By Company Size
| Company Size | Wages and salaries | Total benefits | Total compensation |
|---|---|---|---|
| 1-49 employees | $23.67 | $7.82 | $31.49 |
| 50-99 employees | $26.10 | $10.20 | $36.30 |
| 100-499 employees | $28.02 | $12.38 | $40.40 |
| 500+ employees | $36.08 | $19.41 | $55.48 |
Employee Compensation Costs FAQ
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How is employer cost of employee compensation calculated?
To find the cost of employee compensation (hourly), an employer must add up all employee-related expenses and divide that number by the number of employees. Common expenses include: recruiting, salary, payroll tax, benefits and incentives. Here is an example:
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Unity Corp estimates that the hourly cost of benefits for all of their 200 employees is $3,000, while the cost of salaries and payroll is $9,000.
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$9,000 + $3,000 = $11,000
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$11,000 ÷ 200 employees = $55 per employee per hour
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What percentage should a company spend on salaries?
A company should spend 40%-80% of their gross revenue on salaries and benefits. However, most of the cost typically goes to wages and salaries, while benefits make up a smaller portion. The average for companies in the US is split between 69% of compensation going toward wages and salaries and 31% going toward benefits.
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What should be included in a compensation package?
A compensation package should include anything the employer provides to the employee. For example, a compensation package often includes:
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Salary
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Medical, dental and vision insurance
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401(k), Pension, etc.
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Bonuses
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PTO (holiday, sick, and vacation)
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Off and on-site childcare
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Flexible work hours
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Subsidized training or education programs
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Conclusion
Employer costs for employee compensation are crucial to consider when working to make a company successful and profitable. For instance, knowing that the average employee costs $41.03 per hour can help companies determine how many employees they can afford and what kind of benefits they can offer.
Overall, full-time, public sector employees who work at large companies are far more likely to have higher compensation costs than part-time, private sector employees who work for small companies.
Source:
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BLS – Employer Costs for Employee Compensation
Author
Jack Flynn is a writer for Zippia. In his professional career he’s written over 100 research papers, articles and blog posts. Some of his most popular published works include his writing about economic terms and research into job classifications. Jack received his BS from Hampshire College.
