Growth of Benefits

Growth in the cost of providing employee benefits has occurred for a number of reasons. One reason benefits are growing is that there are federal and sometimes state tax advantages for companies that provide them. If the company provides its employees with a benefit, the firm can write off all or part of the cost of providing the benefit.

Federal—and, increasingly, state and local—laws require companies to provide certain benefits. A number of states have now made sick leave, other paid time off, retirement, health care, and other benefits mandatory for most or all private corporate employers in addition to the minimum wage increases.

A large part of collective bargaining is usually focused on employee benefits (for a variety of reasons), and once union members gain such benefits, employees in other competing companies use this as leverage to have the same benefits added to their workplace, even if the company is not unionized.

If companies buy benefits in bulk for employees, it is cheaper than if the employee buys the same benefits individually. As you can see, there are a variety of reasons why the costs of benefits have grown in the last 80 years. And once a benefit becomes part of the employee’s compensation package, it is very hard to delete that benefit in the future. We consider them an entitlement—we feel that the company owes us this benefit.

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