What Are The Average Employer Costs For Employee Compensation In 2026?
The average employer cost for employee compensation in the US has risen to $45.34 per hour. As businesses navigate a competitive labor market, understanding the full scope of employee costs is vital for effective financial planning and workforce management.
Employers bear not just wage and salary expenses but also the weight of comprehensive benefits, including retirement plans, healthcare, insurance, and other perks that have become standard in today’s employment landscape.
To grasp the current financial implications of employee compensation in 2026, we’ve compiled the most recent data. Based on our thorough research:
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68% of employee compensation costs stem from wages and salaries, while 32% are allocated to benefits.
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The average employee compensation costs for the public sector stand at $59.21, contrasted with the private sector average of $41.78.
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For full-time workers in the private industry, average compensation is $47.54, whereas part-time workers receive approximately $22.63.
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The Northeast remains the region with the highest employee compensation costs at $45.92, while the South has the lowest at $37.21.
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Companies employing 500 or more workers incur the highest employee compensation costs at $60.84, whereas those with one to 49 employees have the lowest at $33.35.
For a deeper analysis, we have categorized the data in the following segments:
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 | $30.85 | 68% |
| Paid leave | $3.34 | 7.4% |
| Supplemental pay | $1.41 | 3.1% |
| Insurance | $3.78 | 8.3% |
| Retirement and savings | $2.34 | 5.1% |
| Legally Required benefits | $3.22 | 7.2% |
Public Vs. Private Sector Employee Compensation Costs
| Compensation component | Private industry | State and local government |
|---|---|---|
| Wages and salaries | $29.65 | $36.45 |
| Paid leave | $3.10 | $4.50 |
| Supplemental pay | $1.52 | $0.67 |
| Insurance | $3.19 | $7.18 |
| Retirement and savings | $1.88 | $8.02 |
| Legally Required benefits | $3.10 | $3.20 |
Employee Compensation Costs By Occupation
| Occupation | Total compensation |
|---|---|
| Management, professional, and related | $70.12 |
| Education and health services | $48.93 |
| Natural resources, construction, and maintenance | $43.26 |
| Production, transportation, and material moving | $34.20 |
| Sales and office | $31.34 |
| Service | $25.67 |
Full-Time Vs. Part-Time Private Industry Compensation Costs
| Type of work | Wages and salaries | Total benefits |
|---|---|---|
| Full-time | $33.52 | $14.82 |
| Part-time | $17.34 | $5.29 |
Union Vs. Non-Union Private Industry Compensation Costs
| Type of work | Wages and salaries | Total benefits |
|---|---|---|
| Union | $32.76 | $22.41 |
| Non-Union | $28.54 | $11.17 |
Employee Compensation Costs By Region
| Region | Wages and salaries | Total benefits | Total compensation |
|---|---|---|---|
| Northeast | $31.00 | $14.92 | $45.92 |
| South | $27.33 | $9.88 | $37.21 |
| Midwest | $26.67 | $12.18 | $38.85 |
| West | $31.85 | $13.45 | $45.30 |
Employee Compensation Costs By Company Size
| Company Size | Wages and salaries | Total benefits | Total compensation |
|---|---|---|---|
| 1-49 employees | $25.68 | $8.67 | $34.35 |
| 50-99 employees | $29.50 | $11.50 | $41.00 |
| 100-499 employees | $30.29 | $13.82 | $44.11 |
| 500+ employees | $40.12 | $20.72 | $60.84 |
Employee Compensation Costs FAQ
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How is employer cost of employee compensation calculated?
To determine the hourly cost of employee compensation, an employer aggregates all employee-related expenses and divides that total by the number of employees. Typical expenses include recruiting, salary, payroll tax, benefits, and incentives. For example:
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Unity Corp estimates the hourly cost of benefits for their 200 employees at $3,500, with salaries and payroll totaling $10,000.
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$10,000 + $3,500 = $13,500
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$13,500 ÷ 200 employees = $67.50 per employee per hour
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What percentage should a company spend on salaries?
A company should allocate 40%-80% of its gross revenue towards salaries and benefits. Typically, the bulk of this expenditure is directed towards wages and salaries, with benefits representing a smaller fraction. The current average distribution in the US indicates that 68% of compensation is allocated to wages and salaries, with 32% going towards benefits.
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What should be included in a compensation package?
A compensation package encompasses all offerings provided to an employee. Common components include:
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Salary
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Medical, dental, and vision insurance
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401(k), pensions, etc.
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Bonuses
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Paid time off (holiday, sick, and vacation)
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Childcare support
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Flexible work arrangements
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Subsidized training or educational programs
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Conclusion
Understanding employer costs for employee compensation is crucial for fostering a successful and profitable business environment. Recognizing that the average employee now costs $45.34 per hour enables companies to better assess their staffing capabilities and the benefits they can offer.
In summary, full-time employees in the public sector at larger organizations typically face higher compensation costs compared to part-time workers in the private sector employed by smaller firms.
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.
