Human Capital & Careers

Cost of Perks Piling Up

Employee benefits made up 39 percent of total payroll costs in 2001.
Joseph McCaffertyMarch 1, 2003

With salaries stagnating and health-care expenses booming, benefits are becoming an increasing portion of the total cost of employment. The U.S. Chamber of Commerce reported in January that employee benefits made up 39 percent of total payroll costs in 2001, up slightly from 37.5 percent the prior year.

“The good news is that although the economy is not performing as well as we would want it to, companies have not significantly cut into their benefit programs,” says Chamain O’Mahony, director of information resources at the Chamber of Commerce. Since the data is from 2001, however, it’s possible that benefits cuts have yet to show up in the results, she cautions.

In fact, union workers at General Electric went on strike last month to protest the company’s plan to shift more of its health-care costs to workers. Benefits experts believe that unions at other companies may follow suit as workers are asked to shoulder a greater percentage of medical-benefit costs, which are skyrocketing.

For the second year in a row, medical benefits, which accounted for 11 percent of total gross payout, made up the largest share of employee-benefits costs, surpassing pay for time not worked. “They are certainly a bigger part of the benefits mix,” O’Mahony says. According to several recent studies, premiums for employee health-care insurance went up by around 13 percent in 2002.

Respondents said vacation time for workers averaged just over 10 percent of payroll costs. Retirement- and savings-plan programs, accounting for an average of 8 percent of payroll, came in third on the list.

Bulging Bennies

How the payroll dollar is spent. “Legally required payments” includes Social Security payroll tax, unemployment insurance tax, and state workers’ comp premiums.
Source: U.S. Chamber of Commerce

  • Wages: 61%
  • Medical benefits: 11%
  • Pay for time not worked: 11%
  • Legally required payments: 8%
  • Retirement and savings: 8%
  • Other benefits and costs: 1%