The Cost of a US Employee - Benefits

In previous posts we have discussed recruitment and salary costs. We will now consider both Federal costs and additional benefits.

Federal Costs:
The Federal Insurance Contributions Act (FICA) imposes two taxes on employers & employees. The first is Old Age, Survivors and Disability Insurance (OASDI; commonly known as the Social Security tax), and the second is for Hospital Insurance (HI; commonly known as the Medicare tax).

For 2018, the FICA tax rate for employers is 7.65%—6.2% for OASDI and 1.45% for HI.

Example
On a salary of $128,400 (or more), an employee and his employer each will pay $7,960.80 in Social Security tax in 2018.

For more details on the calculations and implications see the following sites:

Additional Benefits:
While many of these are optional, many are seen as requirements for attracting quality employees.
Unlike many European countries, the US does not have socialized health care. Each individual must bear either the direct cost of medical care or obtain some form of health insurance. 

Many employees pay either the entire cost of this insurance or a portion of it. This will typically cost in the range of $2000 - $4000 per year per employee depending on age, gender and any pre-existing conditions. Note that it is illegal in the US to ask candidates their age or if they have any pre-existing medical conditions. Candidates can not be excluded from consideration based on age or gender.

Several companies offer managed healthcare benefits packages for small to mid-sized organizations:


Other benefits that organizations may include in compensation packages include Dental insurance plans, Vision insurance plans, Childcare assistance, Tuition reimbursement, Retirement planning, Long term disability payments and dependant care costs.

At the very least an organization should factor a range of 1.25 - 1.5 times the base salary as a complete compensation package. It is also worth considering the mix of benefits that are offered to employees, some work well, others are not so well received. See this Forbes article on which work better.

There are several companies that can manage payroll for a business, including making the appropriate deductions, Federal, State and Elective: