Health Plans Top Benefit Costs

April 26, 2001 ( - Health insurance was found to be the highest employee benefit cost in 1999, averaging $2,777 per employee.

That topped the amount paid in federal payroll taxes, which average $2,666 per worker, according to research undertaken by the US Chamber of Commerce.

The 2000 Employee Benefits Study found that benefits packages cost employers added 36.8% to wages in 1999 and made up more than 30% of company payrolls, translating to an average of $14,060 per worker per annum.

The study of 532 employers found that:

  • larger companies offer more benefits than smaller ones
  • almost all the participating companies offered benefits beyond those legally required
  • fixed benefit packages are the most common type of plan, though nearly half offer a benefits cafeteria plan.

Most Common

The most common benefits were found to be

  • paid vacation and holidays, offered by 97% of respondents
  • health insurance, offered by 97%
  • retirement plans, with 401(k)s offered by 81%, and
  • life insurance.

Less common categories included:

  • paid sick leave
  • long-term disability
  • short-term disability.

While full-time employees receive more benefits than part-time employees, 40% of companies offer paid vacation, holidays and retirement plan benefits to their part time staff.

What It Costs

In terms of costs, the study found:

  • medical insurance premiums to be the most costly single benefit, at 20% of the total benefit cost, or $2,777 per employee on average
  • paid time off accounted for about one-third of all benefits, an average of $4,113 per employee
  • vision care was the lowest at $7.

The study also concluded that:

  • the value of employee benefits was greatest for companies with between 1,000 and
  • 2,499 employees, totaling $15,242
  • for those with fewer than 100 employees it was $11,147
  • for firms with more than 5,000 employees, $15,066.

Those amounts far exceeded the costs associated with providing legally required benefit payments, as follow:

  • between 1,000 and 2,499 employees was $3,572
  • less than 100 employees was $3,531, and
  • more than 5,000 employees was $3,274

Location, Location, Location

Research also indicated that benefit costs were nearly 20% higher in metropolitan areas, averaging 40% of payroll for metropolitan-based companies, compared to 34% for companies in non-metropolitan areas.

Metropolitan-based companies reported higher costs for paid time off and retirement and savings plan benefits, while their non-metropolitan counterparts reported higher medical benefit costs.