Growth of Total Compensation Costs Slows

While total employer compensation costs rose again from March to June this year, data released by the U.S. Bureau of Labor Statistics (BLS) shows a slowdown in the rate of growth.

On September 12, the Employer Costs for Employee Compensation report was released by the BLS. The report shows employers spent only 0.59 percent more on total compensation costs in June than they did in March of this year. The report also found that costs for state and local government workers are significantly higher than costs for private-industry workers.

State and local government workers averaged $58.25 per hour worked in June, with 61.6 percent accounting for wages and salaries and the remaining 38.4 percent for benefits. Private-industry workers averaged just $41.03 per hour worked, with 70.6 percent accounting for wages and salaries and the remaining 29.4 percent for benefits. This total cost for private-industry workers is an increase from $40.79 reported in March.

Recent research from WorldatWork found U.S. employers increased their salary budgets by 4.4 percent in 2023, on average. Higher salaries and new benefits were introduced by organizations in response to increased inflation, higher employee expectations, and a tight labor market. It is expected that employers will stay competitive on compensation next year, but some experts believe that a slow in inflation and a less competitive labor market will reduce the momentum of total compensation increases.

Although employee pay accounts for most total compensation costs, total benefits also make up a significant portion. According to the BLS, total benefits cover 18 items across five major categories that include:

• Paid leave (vacation, holiday, sick, and personal)
• Supplemental pay (overtime and premium pay)
• Insurance (health, life, and short- and long-term disability)
• Retirement and savings
• Legally required benefits (Social Security and Medicare)

For more information on the topic, check SHRM’s article Growth in Total Compensation Costs Slows for Employers. You can also view the most recent Employer Costs for Employee Compensation report released by the BLS.