The true cost of employing a worker in America extends far beyond wages. In Q4 2024, the total employer compensation cost reached $44.46 per hour on average, but only $25.83 of that was paid in wages. The remaining $18.63 represents benefits—costs like payroll taxes, health insurance, and retirement contributions. This means benefits now account for a significant 41.9% of total compensation, emphasizing how non-wage expenses have become a major factor in employer budgets.
Among the various benefit costs, health insurance is the largest, adding $3.18 per hour, followed by legally required benefits like Social Security, Medicare, and unemployment insurance, which account for $2.91 per hour. Retirement contributions average $1.43 per hour, while paid leave, including vacation and sick days, adds another $2.40 per hour. These expenses, which have been rising steadily, reflect the broader trends in healthcare costs and the fierce competition for skilled labor.
For many businesses, especially small ones, these added expenses are a necessary investment in attracting and retaining talent. However, the growing burden of benefits can pose a significant challenge as companies try to balance these costs with profitability and growth. As benefit costs continue to climb, businesses are facing mounting pressure to adapt or risk falling behind.
Sources:
https://www.bls.gov/news.release/pdf/ecec.pdf
https://x.com/RealEJAntoni/status/1901609684030595205
https://www.wsj.com/lifestyle/careers/the-workers-getting-big-and-small-raises-in-2024-c124dd1f