Growth in Total Compensation Cost Slows for Employers

​Employers spent more on employees' overall compensation from March to June this year, according to figures released today, but the pace at which they are hiking total compensation is slowing.

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According to the latest Employer Costs for Employee Compensation report, released September 12 by the U.S. Bureau of Labor Statistics (BLS), employers spent just 0.59 percent more on wages and benefits in June 2023 compared to March 2023.

Total employer compensation costs for private-industry workers averaged $41.03 per hour worked. Wages and salaries averaged $28.97 per hour worked, accounting for 70.6 percent of employer costs, while benefits costs averaged $12.06 per hour worked, accounting for the remaining 29.4 percent, according to the report.

That's up just slightly from the total employer compensation costs for those same workers in March: Then, total employer compensation costs for private-industry workers averaged $40.79 per hour worked. Wages and salaries averaged $28.76 per hour worked, accounting for 70.5 percent of employer costs, while benefits costs averaged $12.02 per hour worked, accounting for the remaining 29.5 percent, according to the BLS' previous report.

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 $58.25 per hour worked in June 2023, the BLS reported. Wages and salaries averaged $35.90, accounting for 61.6 percent of employer costs, while benefit costs averaged $22.35, accounting for 38.4 percent.

The data comes as other figures paint a picture of employer salary strategies, finding that compensation is still strong, but showing signs it may be slightly cooling. Recent WorldatWork research found that U.S. employers, on average, boosted salary budgets by 4.4 percent in 2023, higher than projections of 4.1 percent. That's the highest level in 20 years.

Many organizations have raised salaries—and added new benefits—as a response to unrelenting inflation, higher employee expectations and a tight labor market.

Although signs point to employers staying aggressive on compensation next year, some experts expect momentum to slow down as inflation starts to cool and as the labor market gets less competitive.

Benefits Breakdown

Aside from pay, what's taking the biggest cost bites for private-industry workers? Paid leave (vacation, sick, holiday and personal) and insurance (health, life and short- and long-term disability) take a sizable bite out of total compensation, both accounting for 7.4 percent of total compensation, according to the BLS report. Health insurance on its own accounts for 6.9 percent of total compensation.

Legally required benefits, including Social Security and Medicare, account for 7.5 percent.

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.