Total Compensation Costs on the Rise

After months of slow growth, employers spent significantly more on employees’ overall compensation from September to December 2023, according to figures released today.

According to the latest Employer Costs for Employee Compensation report, released March 13 by the U.S. Bureau of Labor Statistics (BLS), employers spent 3.8 percent more on wages and benefits in December 2023 compared to September 2023.

Total employer compensation costs for private-industry workers averaged $43.11 per hour worked in December 2023. Wages and salaries averaged $30.33 per hour worked and accounted for 70.4 percent of employer costs, while benefit costs averaged $12.77 per hour worked and accounted for the remaining 29.6 percent, according to the BLS report.

That's a significant jump from the total employer compensation costs for those same workers last fall, and one indicating that despite slowing compensation growth over the past year, bigger hikes are not yet over.

The BLS figures comes as other data finds that inflation, although having cooled significantly since it reached a 40-year-peak in summer 2022, is continuing to have an outsized impact on employees. A report earlier this month from the American Staffing Association found that more than half of workers (53 percent) feel their paychecks are not keeping up with the pace of inflation. As a result, some employers have been looking at bigger pay hikes for workers. Employers, too, have been footing more benefits hikes costs as not to push them all on employees, so that may account for some of jump seen in the BLS data. 

The biggest jump for private employers was those in the professional and related occupations industry at 5.6 percent, according to the BLS. Meanwhile, costs for some industries—like construction, farming, fishing and forestry occupations—dropped by more than 2 percent.

The report finds that costs for private-industry workers are significantly lower than the ones for state and local government workers: Total employer compensation costs for state and local government workers averaged $60.56 per hour worked in December, up from $59.90 in September. Wages and salaries averaged $37.53 and accounted for 62 percent of employer costs, while benefit costs averaged $23.03 and accounted for 38.0 percent.

Benefits Breakdown

Employer costs for overall paid leave benefits (which include vacation, holiday, sick and personal leave) for private industry workers averaged $3.26 per hour worked and accounted for 7.6 percent of total compensation in December (up from 7.4 of total compensation in September).

Insurance accounted for 7.3 percent of total compensation, while retirement and savings accounted for 3.5 percent of total compensation in December, according to the BLS report.

Total benefits costs cover 18 items across five major categories, according to the BLS. Those are paid leave (vacation, holiday, sick, and personal leave); supplemental pay, such as overtime and premium; insurance (life, health, short-term and long-term disability); retirement and savings; and legally required benefits, such as Social Security and Medicare.