BLS: Total Employer Compensation Costs Rose 1.4% in March

​Employers spent more on employees' overall compensation in March, according to figures released today, although momentum may be starting to slow as inflation continues to dip.

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According to the latest Employer Costs for Employee Compensation report, released June 16 by the U.S. Bureau of Labor Statistics (BLS), employers spent 1.4 percent more on wages and benefits in March 2023 compared to December 2022. 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 report.

"Total compensation costs for private industry workers were $15.91 [per hour] at the 10th wage percentile, $30.26 at the 50th (median) wage percentile, and $78.42 at the 90th wage percentile," the BLS reported.

That's up just slightly from the total employer compensation costs for those same workers in December 2022: Then, employer compensation costs for private-industry workers averaged $40.23 per hour worked. Wage and salary costs averaged $28.37, accounting for 70.5 percent of employer costs, while benefits costs were $11.86, accounting for 29.5 percent. Compensation costs for employers increased 1.6 percent from the third quarter to the fourth quarter of 2022.

Those costs for private-industry workers are significantly lower than the ones for state and local government workers: Total compensation costs for employers for government workers averaged $58.08 per hour worked in March 2023. Wages and salaries averaged $35.89, accounting for 61.8 percent of employer costs, while benefits costs averaged $22.19, accounting for 38.2 percent, according to the BLS.

The data comes as inflation in the U.S. is slowing down after months of unrelenting increases. Sky-high inflation has spurred many employers to boost wages in some of the largest increases in recent years. But as inflation slows, that may change—the latest Consumer Price Index out this week from the BLS found that inflation dipped to a 4 percent annual rate in May, a significant improvement from when it peaked last summer at 9.1 percent.

The aggressive pay hikes given in the past year both to woo and retain workers and to help thwart inflation may be starting to slow. Data released by consulting firm Mercer in May found that many employers are shelling out bigger pay boosts to employees in 2023 than they have in years: On average, U.S. employers reported that 2023 annual merit increases average 3.8 percent, while total compensation—which includes merit awards as well as all other types of compensation increases impacting base pay, such as promotional, cost of living and minimum wage—increased by 4.1 percent.

But Mercer's survey found that despite their larger size, 2023 pay boosts are coming in slightly below what employers had budgeted a few months ago. Those findings indicate that "employers are continuing to invest in compensation to combat prolonged tight labor markets, but they are doing this with more prudence than what we saw in 2022," said Lauren Mason, senior principal in Mercer's Career Practice.

Benefits Breakdown

Aside from pay, what's taking the biggest cost bites for private-industry workers? Health insurance accounts for 6.9 percent of total compensation, followed by Social Security and Medicare contributions (6 percent) and vacation time (3.8 percent), 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.