How much do benefits cost per employee Ontario?
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by Jea Yu Show
Assessing the real cost to hire employees involves factoring in benefits, marketing and training expenses which can significantly add to total employer costs. Calculating the true cost to hire employees involves factoring in many components beyond tangible wages and salaries. There are many direct and indirect costs that should be included in this calculation including benefits, hiring and training. Just like constructing a solid long-term investment portfolio, hiring employees requires the same preparation and planning. Costs of BenefitsThe Conference Board of Canada 2019 Benefits Benchmarking report indicates that benefits accounted for an average of 10 percent or $9k on average of total employer costs for an employee’s compensation. These benefits include paid leave, supplemental pay, insurance, retirement, mental health coverage, and savings plans. Costs to Hire and TrainIt costs employers an average of $4,129 and takes an average of 42 days to fill an open position according to a report by the Society for Human Resource Management (SHRM). The cost to hire employees increases proportionately based on the duration of the search, job role and salary range. As noted by the 2018 Training Industry Report, employee training costs decreased to an average of $986 per learner, down from $1,075 in 2017. This is relative to the type of role and the necessary skill sets. Larger organizations spent $1,046 per employee, compared to midsized companies at $868 and small companies at $1,096. Human Capital Investment ManagementHiring a workforce is akin to building a stable investment portfolio, but with human capital. The goal of investing in human capital is to maximize return on investment (ROI) in the most efficient manner and shortest period of time. Talent that can generate greater and quicker ROI naturally commands a higher premium in the jobs marketplace. Therefore, it’s prudent to plan ahead and be prepared with a mid to high-range number for each open position based on the real cost of hiring employees to alleviate sticker shock and loss of talent to competitors. Go DeeperIn today’s competitive job market, attracting and retaining top talent is crucial for your organization’s success. Visit the talent management resource page for the latest actionable insights from the ADP Research Institute® (ADPRI). The ADPRI 2019 State of the Workforce Report provides decision makers with organizational benchmarks to compare against their own internal HR statistics. This article originally appeared on SPARK Powered by ADP. When helping employers cultivate employee benefits packages, we’re often asked to aggregate insights on what their peers are spending on their benefit programs. The answers vary widely based on multiple factors, including geography, industry, size of the workforce, the overall health of the workforce population, and the health of their respective businesses and the economy. Employee benefits benchmarking is one of the best ways to figure this out and the best way to get at this data is through a combination of public and proprietary information (the latter of which can be costly, but also quite necessary). Some of our favorite sources for benchmarking include Truven, Kaiser Family Foundation (KFF), Mercer, Windsor, the Society for Human Resource Management (SHRM), the International Foundation for Employee Benefits (IFEB), and the Bureau of Labor Statistics (BLS). We are also in a unique position to provide an informed perspective thanks to our exclusive access to another unique employee benefits benchmarking tool - the United Benefits Advisors (UBA) Health Plan Survey, which is the largest in the United States. In addition to high level market trends and insights, the UBA Health Plan Survey allows us to compare our clients’ benefit plans to custom benchmarks for total plan costs, coverage tier-specific employee contributions, and plan designs (in and out-of-network deductibles, out-of-pocket maximums, copays, pharmacy benefits, and HRA/HSA funding). This unique combination of benchmarking resources yields a clearer perspective of our clients’ current positions, relative to the broader employee benefits market, which is a strategic advantage for any organization. We also tap into cost data from the Bureau of Labor Statistic (BLS), as they track and share this information on a quarterly basis. The Bureau of Labor Statistics (BLS) report breaks data down into multiple categories, including various components of compensation by sector (public, civilian, government). Let’s take a moment to look at the most recent data from the BLS so you can compare how your employee benefits costs stack up. Through December 2017 the average cost of employee benefits for employers per employee (including financial compensation and employee benefits) was $35.87 per hour. Of that amount, compensation accounted for an average of $24.49 (68.3%), with benefits accounting for the remaining $11.38 (31.7%). In other words, employers spend an average of $11.38 per hour per employee on benefits. From there, the BLS provides more detailed information about exactly what these benefits are, including insurance paid time off, retirement and other legally required benefits (like social security, workers’ compensation, and unemployment insurance). Average Cost of Employer-Sponsored InsuranceAccording to the BLS report, the term “insurance” encompasses four different types of coverage: health, life, short-term, and long-term disability. How much employers spend on each varies widely across sectors and industries. Civilian (Private SectorIn the public sector, the average employer-paid portion of all insurance types is $3.14 per hour per employee, which is about 8.7 percent of compensation. Of course, this varies across industries. For example:
Private SectorThere is more data for the private sector, and the data is broken out for all the available industries and categories. The private sector pays the smallest share of health insurance, coming in at an average of just $2.70 per hour per employee, making up about 8% of total compensation. Here are some additional points of interest:
State and Local Government WorkersNot surprisingly, state and local governments spend a bit more than the public and private sectors. The average employer-paid portion of all insurance types is $5.82, or about 11.8% of compensation.
Employer Health Insurance Premium CoverageApplicants and potential employees view medical benefits as one of the most important factors in any employee benefit package. Offering desirable health insurance gives organizations a competitive advantage for acquiring top talent. In fact, the Bureau of Labor Statistics states that 70% of civilian companies and 67% of private firms offered medical insurance to employees in March of 2016. When considering how much of the medical premium to cover for employees, it’s important to check with your medical carrier as they sometimes mandate a certain percentage (usually starting at 50%). According to a report by the Kaiser Family Foundation in a 2016 Employer Health Benefits Survey, for employers covered an average of 82% of premium costs for those enrolling in individual coverage. On average, covered workers contribute approximately 18% of the premium for single coverage, and 30% of the premium for family coverage. For workers in smaller firms, the average contribution percentage for family coverage is closer to 39%. Benchmarking Beyond CostWhen you’re trying to figure out how much your business should spend on employee benefits, BLS data can be a good place to start, but cost is just one of many facets of your employee benefits package which can and should be benchmarked. While your entire benefits package doesn’t need to be benchmarked, there is an essential list you should measure. Here are the items we recommend: Health Insurance offerings, including:
Voluntary Benefits offerings, including:
In addition to:
Providing your employee benefits broker subscribes to Truven or some other reliable benchmarking resources, they should be able to help you determine if your offering is below, better, or on par with your competitors. It’s also important to keep in mind that your competitors in this instance are not those whom you compete with for customers, but rather whom you compete with for talent. For help with benchmarking the cost of employee benefits for your organization, request a complimentary benefits review here. If your employee benefits broker doesn’t seem able to help you with benchmarking the cost of employee benefits, we certainly can! Leave us a comment below or contact us. We’d love to hear from you! *This post was originally published on August 14, 2018 About The Author Founder & President Jeff is a 25-year veteran of the employee benefits industry and is the Founder and President of the... read more How much do benefits cost an employer in Canada?What percentage of the benefits plan do employees pay? Employers (plan sponsors) must pay at least 25% of the cost of the plan, which means employees usually pay up to 75% of the cost of benefits.
How much does it cost to provide benefits to employees?Employee Benefits Costs
Figures from the U.S. Bureau of Labor Statistics show that the employer cost for a civilian worker averages $38.91 an hour, with wages making up 69 percent of this number. This means benefits account for 31 percent of total compensation.
How much does it cost to have an employee in Ontario?As of 2021, the employee and employer CPP contribution rate is 5.45% for earnings over $3,500 and up to $58,100. A full-time bookkeeper at the average Canadian annual salary of $46,000 would cost the employer ($46,000 – $3,500)*0.0545 = $2,316.25 in 2021 CPP contributions.
How much should I budget for employee benefits?Experts suggest that you should expect to pay a range of 1.25 to 1.4 times each employee's base salary. That extra $10,000 might include things like $120 for life insurance—an average cost for your younger and older workers—$5,760 for family health coverage, $520 for dental insurance, and $200 for long-term disability.
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