Employer costs for employee compensation averaged $26.05 per hour worked in September 2005, the U.S. Department of Labor‚s Bureau of Labor Statistics reported. Wages and salaries, which averaged $18.28, accounted for 70.2 percent of these costs, while benefits, which averaged $7.77, accounted for the remaining 29.8 percent. (See table 1.) Employer Costs for Employee Compensation, based on the National Compensation Survey, measures employer costs for wages, salaries, and employee benefits for nonfarm private and State and local government workers.

Costs for legally required benefits, including Social Security, Medicare, unemployment insurance, and workers‚ compensation, averaged $2.13 per hour (8.2 percent of total compensation). Employer costs for life, health, and disability insurance benefits averaged $2.10 (8.0 percent); paid leave benefits (vacations, holidays, sick leave, and other leave) averaged $1.72 (6.6 percent); and retirement and savings benefits averaged $1.13 (4.3 percent) per hour worked.

Hurricanes Katrina and Rita, which struck the Gulf Coast during the reference period for the ECEC, have affected the lives of millions of Americans and resulted in significant disruptions in business both inside and outside of the impacted areas. Survey response rates in the affected areas were lower than usual, but the data from nonresponding establishments account for less than 1 percent of the overall sample. There does not appear to have been any tangible effects on the estimates.

Private industry

In September 2005, private industry employer compensation costs averaged $24.34 per hour worked. Wages and salaries averaged $17.23 per hour (70.8 percent), while benefits averaged $7.11 (29.2 percent). Employer costs for paid leave averaged $1.55 per hour worked (6.4 percent), supplemental pay averaged 71 cents (2.9 percent), insurance benefits averaged $1.78 (7.3 percent), retirement and savings averaged 90 cents (3.7 percent), and legally required benefits $2.14 (8.8 percent) per hour worked. (See table 5.)

NOTE: Collection of severance pay and supplemental unemployment plans, which comprise "other benefits" and are published in all tables, will be discontinued beginning with the March 2006 estimates to reduce the burden on survey respondents.

Employer Costs for Employee Compensation (ECEC) measures the average cost per employee hour worked that employers pay for wages and salaries and benefits.

Wages and salaries are defined as the hourly straight-time wage rate or, for workers not paid on an hourly basis, straight-time earnings divided by the corresponding hours. Straight-time wage and salary rates are total earnings before payroll deductions and include production bonuses, incentive earnings, commission payments, and cost-of-living adjustments. Not included in straight-time earnings are nonproduction bonuses such as lump-sum payments provided in lieu of wage increases, shift differentials, and premium pay for overtime and for work on weekends and holidays; these payments are included in the benefits component.

Benefits include: Paid leave-vacations, holidays, sick leave, and other leave; supplemental pay-overtime and premium pay for work in addition to the regular work schedule (such as weekends and holidays), shift differentials, and nonproduction bonuses (such as referral bonuses and lump-sum payments provided in lieu of wage increases); insurance benefits-life, health, short-term disability, and long-term disability; retirement and savings benefits-defined benefit and defined contribution plans; legally required benefits-Social Security, Medicare, Federal and State unemployment insurance, and workers‚ compensation; and other benefits-severance pay and supplemental unemployment plans.

The cost levels for this quarter were collected from a probability sample of about 41,000 occupations within approximately 9,500 sample establishments in private industry and about 3,500 occupations within approximately 800 sample establishments in State and local governments. Data are collected for the pay period including the 12th day of the survey months of March, June, September, and December.