What should I be budgeting for healthcare benefits for my employees?


What should I be budgeting for healthcare benefits for my employees since we will be hiring soon/recently received funding?


Brian Hassan

Brian Hassan

by Brian Hassan, Managing Director, BayPoint Benefits

If you define full benefits like most Bay Area technology companies (and startups) as:

(1) Medical
(2) Dental
(3) Vision
(4) Group Life ($50,000)
(5) Short Term Disability
(6) Long Term Disability

Then here is my answer:

Typically when VCs ask me for this “number” they do not have an idea on how the employee demographic will be structured. Meaning, some employees will have spouses, some kids, while others are just single.

As I am sure you can guess, the rates are higher for those with dependents.

According to the BLS (Bureau of Labor Statistics) in December 2009, private sector employer benefits cost $7.98 per hour worked and make up 29.2% of the total compensation of an employee. Total compensation is measured by the sum of:

(1) Earnings
(2) PTO + Vacation Time
(3) Employer matched FICA
(4) 401K match
(5) Employee Healthcare and Disability Benefits

$7.98/hour x 40 hours x 52 weeks = $16,598.40.

Don’t be alarmed by that figure. That is if the Employer is paying 100% of both the Employee’s benefits and the Dependent’s benefits. If we pull out PTO, FICA, and 401K (because that is figured into that number) we can estimate the hourly number to be close to $5.

Meaning the cost to provide 100% employer paid benefits per employee is $10,400 annually.

Of course, only some employers pay 100% employee and 100% dependent.

So if you were to pay the state mandated minimum of 50% employee and 0% dependent, it would be at around $3,000 per employee per year.

If you still have questions, please contact me directly at brian.hassan [a] baypointbenefits.com

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