How Much Do Benefits Cost Per Employee?

the Average Cost of employee benefits varies

The average cost of employee benefits per employee is not a one size fits all number. Many factors contribute to the overall cost of your benefits, and is usually determined on a per employee per month basis. Depending on your insurance carrier, or standalone benefit provider, your total cost may fluctuate greatly. For this reason, it’s important to understand why you should budget for your employee benefits, how to budget, and to choose a budget that is sustainable for your organization.


Oftentimes, the cost of benefits are dependent on fixed rates, how many employees work for your organization, and the types of benefit products you choose for your plan. Fortunately, this doesn’t mean there isn’t a plan for any size of budget. In 2022, employee benefit plans are highly customizable, which means it’s easier than ever to stay within your budget, and meet the healthcare needs of your staff.

In this blog post, we’ll run through some of the considerations involved in developing a budget for your employee benefits, how to know when you’re paying too much, and affordable options for small business owners.


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What do benefits cost per employee on average?

The cost of benefits, also known as the employer premium, can range from 1% to 30% of payroll.

Premiums vary due to coverage levels, company size, and benefit provider.

Costs for small businesses can be reduced through the use of Healthcare Spending Accounts, and EAPs.

If you’re curious about the exact premium of a plan and the benefit breakdown, you can generate your own sample plan by signing up for CloudAdvisors here (it’s free!). The price quoted below is based on an organization with less than 50 employees, and costs an average of $375 per employee per month. 

sample plan quote

How Is the cost of a plan determined?

Fixed vs. PEPM

Employee benefit pricing tiers generally follow a per employee pricing model, though in special cases they will use a fixed rate. Pricing models are determined on a per provider basis. Most providers opt for a per employee model to offer volume discounts to large employers. As with any purchase, the most products you add to your plan, the more your monthly cost will increase.


Common products in a benefits plan include:

  • Drug
  • Paramedical
  • Dental
  • Vision
  • Travel
  • Life Insurance
  • Short & Long Term Disability
  • Accidental Death & Dismemberment
  • Critical Illness

Generally, larger insurers in Canada require the purchase of life insurance, AD&D, and/ or disability insurance as part of your purchase. Because of this baseline standard in benefit plans, any competitive plan worth its merit should generally include one of these basic offerings. That said, ‘because everyone is doing it’ isn’t a great reason to offer benefits. Rather, take the time to benchmark your plan against companies of similar demographics.

Determining Core Offerings

Plan offerings, and therefore price, will vary greatly depending on industry, company size, and provinces of operation. Large employers who choose large insurance carriers are capable of paying within the high range of premiums, and may therefore skew baseline standards. In essence, just because a 1000 life organization can offer all the benefits listed above, it may be in your organization’s best interest to allocate funds elsewhere. 


In addition, asking your employees what they value will help you prioritize which core benefits should be part of your plan. Employees may value higher mental health coverage, wellness programs, or access to lifestyle spending accounts above standard benefits. Listening to your employees is the best method to ensure a strong retention strategy. Learn more about how to choose the best benefits for your organization here.

Coverage Levels & Deductibles

From there, the levels of coverage you choose to offer will determine your premium. Offering a higher coverage level per benefit will increase your monthly premium. It’s important to decide how many benefits you’d like to offer, and if it makes more financial sense to offer more benefits at lower coverage levels, or less benefits at 100% coverage.


Often, employers will offer several tiers of coverage to employees (also called coinsurance), include deductibles, or enact cost sharing between employers and employees to mitigate costs. When working within a small budget, offering coverage tiers allows employees to select the coverage level for each product that best meets their needs. Placing limits on the number of benefit products where employees can opt for 100% coverage can ensure you stay within budget. 


Simple examples include:

  • Employee A, who takes a prescription medication, may opt for 100% drug coverage, but only 80% vision coverage.
  • Employee B, who wears contacts, will select 100% coverage for vision and eyewear, but only 80% for paramedical practitioners.


Some insurance carriers will require an employee deductible, or enable cost sharing of the monthly premium. Both of these options will make your plan less competitive, though more affordable for your organization. It’s important to benchmark your company demographics to see if similar organizations require a deductible, and if so, how much they require.


From CloudAdvisors’ data, we’ve found:

what is the cost of employee benefits per employee

For a more extensive breakdown, benchmark your plan at


Finally, some organizations will enact cost sharing of monthly premiums to bring down the cost of your overall plan. While coinsurance ensures employees who use more benefits pay more, traditional cost sharing sets a fixed percentage of premium every month. Common examples include employees and employers each paying 50% of the total monthly premium every month regardless of use, though 100% of claims are reimbursed. Generally, cost sharing can be more cost effective for employers, but is not recommended for competitive recruiting.

How to set a benefits budget

Establishing a budget for your benefits plan is dependent on your recruiting goals, the sustainability of your cash flow, and the advice of your advisor. Begin by assessing the predicted growth of your team over the next year. Are you planning to double your team? If so, are you capable of paying for an extensive benefits plan with those added team members? Reducing coverage to accommodate team growth should never be your first option. Rather, start with a plan you can afford to add members to, and scale up coverage levels later if possible.


In the same vein, choosing a sustainable monthly cost is important. Employees won’t take well to plan reductions if you run out of cash to fund your monthly premiums. Plan out the cost of your benefits for a minimum of a year before you commit to a quote.


In planning for over a year, your advisor is your best resource to determine how much your premium may increase. Premium increases are largely dependant on employee usage, in addition to factors like inflation. Your advisor may be able to help you estimate premium increase over a period longer than a year so you can choose the most sustainable option for your business.


Are you overpaying for benefits?

Existing benefit plans should be assessed every year for relevance, need, and cost. Many small business plans are susceptible to being overpriced as they are assessed less frequently by an advisor in thorough detail, compared to larger or more competitive clients. All benefit plans should be benchmarked annually, rather than just renewed.


In addition, employers should consider conducting an annual employee survey. In combination with benchmarking, this ensures important benefits have not been left out, or that you haven’t included benefits not needed. As a business owner or plan sponsor, it’s important to ensure you meet with your advisor annually and have a thorough evaluation of necessary updates. 

Affordable options for any business

While it can be easy to follow traditional benefit plan models, there are extensive options available for small businesses with stricter budgets. As an employer, it’s important to always talk with your employees and determine their priorities. Working within a small budget can be difficult, but if your goal is to support your employees, prevent burnout, and boost retention, basic plan offerings like life insurance may be valued less than mental health support, wellness programs, or prescription coverage.


In general, options that allow for more customization per employee will allow members to spend dollars where it counts. For instance, Healthcare Spending Accounts and Lifestyle Spending Accounts allow employees to allocate funds where it benefits them best. Accounts will generally have between $500 to $2000 annually for employees to spend from, though amounts can vary greatly. These are excellent alternatives to allocating a fixed amount per paramedical practitioner, as not all employees will need access to all extended healthcare options. HCSAs can be used to cover dental options, vision care, or drug prescriptions as well. Meanwhile, LSAs can be used to cover “fun” benefits, or perks, such as gym memberships, meal kits, pet insurance, and more.


Further affordable options include EAPs, or employee assistance programs, which tend to be very low cost options for access to mental health care. EAPs tend to range around $2 to $5 per employee per month, and typically cover 5 to 10 counselling sessions for plan members. You can learn more about EAPs here.

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What is an employee benefits plan booklet?

It's a document provided by your employee benefits provider that details the coverage level, types of benefits, and cost of your plan. Ask your advisor or your provider to provide you with this document.

If you're still unsure, reach out to us at [email protected] and we can show you examples.


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