Study: Cost of Providing Employee Benefits Continues to Rise

Small businesses have seen the cost of providing certain benefits to employees rise dramatically from 2006 to 2007, according to the U.S. Chamber of Commerce's 2008 Employee Benefits Study. In 2007, the cost of providing health insurance rose 15 percent, averaging $4,559 per employee, up from $3,961 in 2006.

The cost of retirement and savings benefits increased 14 percent, from $2,356 per employee to $2,694 per employee.

"This study shows the ever-increasing cost pressures businesses of all sizes are facing in their efforts to provide health insurance to employees -- in addition to the significant economic headwinds posed by the economic downturn," said Randel Johnson, the U.S. Chamber's vice president of Labor, Immigration, and Employee Benefits.

The study also shows that as the economy slowed in 2007, employers of all sizes began scaling back on employee benefits. The average dollar amount that employees received in benefits decreased from $21,527 in 2006 to $18,496 in 2007. Legally required payments accounted for the largest share of employer benefit costs at 10.5 percent (which include payroll taxes, workers' compensation, and unemployment) and retirement benefits followed by medically related benefits at 9.9 percent. Payments for vacation, holidays, and other paid time off resulted in 7.7 percent of costs, according to the study.

The 2008 Employee Benefits Study details the latest benchmarking data on employee benefits for U.S. businesses. The data are derived from the 2007 payroll expenditures of a cross-section of more than 250 companies of various sizes, industries, and geographic regions.

The study is designed to help business owners and executives evaluate their companies' benefits package, determine how it compares with others, and assess the costs of providing benefits.

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