Employers' payroll costs for employee benefits

Nation's Business, Feb, 1989 by Richard Thompson

Employers' Payroll Costs For Employee Benefits The yearly cost of private-sector employee benefits climbed in 1987 to an average $10,708 per full-time worker, compared with $10,283 the year before, according to Employee Benefits 1988, a new U.S. Chamber of Commerce survey of large, midsized, and small businesses. Average employee benefits as a percent of payroll dipped slightly to 39 percent in 1987 from 39.3 percent in 1986, the survey found. The decline, the Chamber said, indicated that benefits are rising but at a slower pace than pay.

"The study of employee benefits issues is more than just a matter of idle curiosity," said Richard W. Rahn, vice president and chief economist of the Chamber.

"In the past year a number of bills have been introduced in Congress that would mandate employers to provide health-care, parental-levae, and other benefits at federally mandated levels. With the information provided in this survey, employers, can determine the impact of such legislation by analyzing the cost of providing benefits to their employees and by understanding the full cost of an individual employee."

Health insurance was the most widely provided voluntary benefit reported. Ninety-nine percent of the comanies indicated at least some payment toward employee health care. The only benefits as widely available to employees were the legally mandated ones--Social Security, unemployement compensation, and workers' compensation.

Hospital, dental, and other medical coverage cost employers an average $2,189 per worker in 1987, virtually unchanged from $2,184 the year before. Stringent cost-containment programs, begun in 1987, helped keep down such expenditures despite a 6.6 percent jump in medical costs generally, a Chamber spokesman said.

Benefits varied significantly among industries, with costs in dollar value and as a percent of payroll generally higher among manufacturing firms than among service-sector firms. The Chamber noted, however, that service firms are increasing their benefits at a faster clip than manufacturing firms.

Sharp regional variations in benefit costs also appeared. Companies in the East North Central area, home of many older companies with huge liabilties for retirees' pensions and health-care benefits, paid more than 44 percent of payroll on employee benefits in 1987. In other rergions, outlays ranged from 36.2 percent of payroll in the Northeast to 39.2 percent in the Southeast.

PAyment for vacations, holidays, and other leaves appeared to be the fastest-growing employee benefit, averaging 11 percent of total payroll cost in 1987, up from 10.2 percent in 1986. The survey turned up a trend in the paid-leave field: Some firms have begun offering employees a fixed number of leave days each year to use as they like for vacations, holidays, and sick leave.

As in previous years, larger companies reported higher expenditures for employee benefits than did smaller companies. The highest amount--39.5 percent of payroll-was paid last year by companies with 5,000 or more employees. Firms with 10 to 49 employees paid the lowest, 31.9 percent of payroll.

Employee Benefits 1988 is the 26th such survey by the Chamber. Originally biannual, it has been conducted yearly since 1979. For a copy, send $20 to Employee Benefits, U.S. Chamber of Commerce, 1615 H Street, N.W., Washington, D.C. 20062, or call (301) 468-5128.