Employee Benefits Survey
Employer Costs
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National cost trends
Employee benefits have grown to become a large part of many employers’ budgets, accounting for an ever-larger portion of total employee compensation. And the costs continue to rise. According to the Bureau of Labor Statistics, the national rate of twelve-month change in benefits costs has outpaced that of wages and salaries since 2000. (See Figure 1.) Between March 2004 and March 2005, the Employment Cost Index—the Bureau of Labor Statistics’ measure of changes in employment costs—rose 2.4 percent in terms of wages and salaries and 5.9 percent in terms of benefits costs.
These cost increases have resulted in small shifts in the share of compensation costs related to health benefits. The table below shows that nationally, in each year since 2002, the cost of both health insurance and retirement benefits (including defined benefit and defined contribution plans) have grown at a rate faster than the cost of wages and salaries for private employers.
|
Private Industry
|
Wages and
Salaries
(Avg. annual cost)
|
Health Insurance
(Avg. annual cost)
|
Percent of
Total Spent on
Insurance
|
Retirement
(Avg. annual cost)
|
Percent of
Total
Spent on
Retirement
|
|
Mar-05
|
$35,672
|
$3,411
|
8.7%
|
$1,872
|
5.0%
|
|
Mar-04
|
$34,611
|
$3,182
|
8.4%
|
$1,664
|
4.3%
|
|
Mar-03
|
$33,592
|
$2,933
|
8.0%
|
$1,394
|
4.0%
|
|
Mar-02
|
$32,864
|
$2,683
|
7.5%
|
$1,310
|
3.8%
|
Minnesota survey results
The Minnesota Employee Benefits Survey collected information on firms’ costs for three components of compensation: straight-time wages and salaries, insurance (medical, dental and vision only), and retirement plans. Total costs were divided by total average employment to create average annual expenditures per employee1.
It is important to note that the median costs of insurance per employee shown in the table below are not premium costs for insurance. Instead, they are the firm costs of insurance and retirement spread across every employee, including those employees who are not offered or choose not to participate in the benefit.hile these figures do not reflect the average benefit costs per employee for those workers enrolled in a firms' plans (e.g. premium costs), these estimates serve as useful benchmarks for operations or management decision making about the share of compensation costs being spent on these benefits. Information on health care premium costs in Minnesota is available in other surveys. For example see the Minnesota Department of Health publications at http://www.health.state.mn.us/divs/hpsc/hep/issbrief/2005-01.pdf and http://www.health.state.mn.us/divs/hpsc/hep/issbrief/2005-02.pdf
The statewide survey results correspond with national findings that benefits represent a significant cost for employers. Of employers who offer health benefits to their employees, 8.3 percent of the combined cost of wages and salaries and health benefits is spent on health benefits. Of employers who offer retirement benefits to their employees, 2.7 percent of the combined cost of wages and salaries and retirement benefits is spent on retirement benefits. (See Table 25.)
Those private firms in Minnesota that offer retirement or insurance benefits paid between $30,476 and $31,004 in wage costs at the median. (See Table 25.) Median wage costs varied between industries and size classes both because of the mix of high and low-paying jobs in these classifications, as well as because of differences in numbers of full-time and part-time workers. Wage costs were greatest in the financial services, professional and business services, and construction sectors. Insurance costs per employee were greatest in financial activities and manufacturing, while financial activities and construction topped the list of median costs of retirement per employee.
Wage costs were lowest in the leisure and hospitality sector, as were costs for retirement and insurance benefits. That sector also had the lowest share of costs going to retirement or insurance benefits (1.0 and 4.6 percent respectively). Regional differences likely reflect several things including local industry and size class mix, differences (particularly metro versus non-metro) in the availability or generosity of benefits, and differences in local wage levels.
Table 25:Cost to employers of providing wages, insurance, and retirement benefits
1Only firms that offered health insurance benefits were included in the calculation for the cost of insurance benefits. Likewise, only firms that offered retirement benefits were included in the calculation for the costs of retirement benefits.