Total Employer Compensation Costs Rise Again in First Quarter

Rising employment costs have persisted into the first quarter of the year but at a slower pace, according to new figures.

According to the latest Employer Costs for Employee Compensation report, released June 18 by the U.S. Bureau of Labor Statistics (BLS), employers spent roughly 1.6% more on wages and benefits in March 2024 compared to December 2023. That’s down from the 3.8% growth notched in December 2023 from September 2023.

Total employer compensation costs for private-industry workers averaged $43.78 per hour worked in March 2024. Wages and salaries averaged $30.76 per hour worked and accounted for 70.3 percent of employer costs, while benefit costs averaged $13.02 per hour worked and accounted for the remaining 29.7%, according to the BLS report.

Although the rise in employer compensation costs is slower than the previous quarter, the data still signifies that pay increases are still occurring.

“In recent years, private-sector employee compensation costs to employers have been affected by rising costs, resulting in changes to compensation and expenditure strategies to account for inflationary pressures,” said Sydney Ross, junior economic researcher at SHRM.

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 recent Bank of America report found that employee financial wellness is still near all-time lows, while employees are more concerned about inflation this year than they were last year: 76% of workers said the cost of living is outpacing growth in their salary or wages, a big jump from the 67% who said so in June 2023.

Employers have also been footing more benefits hikes costs as not to push them all on employees.

Ross said the tight labor market “has led to employers devising compensation packages aimed at reducing cost burdens faced by employees due to high inflation, and to attract and retain talent.”

“The tight labor market, in addition to the increased demand for skilled workers due to a talent shortage, has led to workers having more bargaining status compared to employers,” Ross said.

The BLS report found 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 $61.27 per hour worked in December, up from $60.56 in December. Wages and salaries averaged $37.90 and accounted for 61.9% of employer costs, while benefit costs averaged $23.37 and accounted for 38.1%.

Benefits Breakdown

Employer costs for overall paid leave benefits (which include vacation, holiday, sick and personal leave) for private industry workers averaged $3.31 per hour worked and accounted for 7.6% of total compensation in March.

Insurance accounted for 7.3% of total compensation, while retirement and savings accounted for 3.5% of total compensation in March, according to the BLS report. Those figures are unchanged from December.

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.