TriNet Report Reveals Steep Increases in Compensation and Benefits Costs for Small High-Performing Companies

SAN LEANDRO, Calif. (June 6, 2007) - TriNet, a nationwide provider of human resource (HR) outsourcing services for small and medium-sized companies, recently released the findings of a proprietary study entitled Fighting Back Against Wage Pressures and Benefit Costs: Strategies for Small Businesses. Using data derived from over 700 small companies in the industries of technology, financial services and professional services, the study identified the challenges of rising wages and benefits costs in the small business market.

The recorded version of the presentation can be viewed here: http://www.trinet.com/HR_resources/HR_webinar/webinars.htm

Companies in the study population have an average size of 18 employees with an average wage of $102,828. All data used in the study is actual-not estimates, polls, or projections. Key findings include:

  • Small companies face wage and benefit costs that are rising much faster than the national average.
  • Employer-paid health benefit costs rose between three and six times the national average for all employers.
  • Job growth was strong, but only about half of surveyed companies added employees and hiring appeared to begin slowing in 2006.

Conducted by Jack Midgley, Ph.D, TriNet's vice president of human capital consulting, the study uncovers substantial hurdles in the ongoing effort of small businesses to compete with larger firms for in-demand employees:

  1. Small company compensation and employer-paid health benefits surpassed national averages. From 2005-2006, the national average compensation per employee rose by 3.2 percent. Among small companies in the west, wage and salary costs per employee rose by 15.3 percent, while central and eastern regions faced increases of 10.5 percent and 2 percent, respectively. Increases can be attributed to companies paying more for incumbents and a tight labor market pushing up costs for new employees.

    During the same time period, employer-paid health benefits costs per employee rose by 6 percent nationally, while small companies in the west, central, and eastern regions experienced increases of 40 percent, 31 percent, and 21 percent, respectively. In many cases, employers are shielding employees from overall premium increases while purchasing high-caliber benefits packages as a recruitment and retention tool.
  2. Location impacts company compensation. Companies located in the western United States pay premiums for talent. Companies in the west paid $111,996 per employee per year. Employees in the central region made $89,736, and employees in the east reached a salary of $98,232. Regardless of location, technology companies consistently pay premiums for top talent.
  3. Job growth was experienced in all sectors, with a lag in adding new employees and a slowing hiring trend starting to emerge. All three industry segments reported strong growth, with the overall population growing from an average of 13.5 employees to 18.1 employees. Technology and professional services companies made the largest leap from 18.7 employees to 26.6 employees. Financial services companies realized smaller gains growing from 11.5 to 12.9. Hiring appeared stronger in 2005 than in 2006, and early indications are that hiring has further slowed in 2007.

The report concludes by suggesting that outsourcing human resources can help management teams cope with volatile hiring markets regardless of whether workforces are growing or shrinking; it can also help executives confront the challenges of recruiting and retaining great people.

About TriNet Group, Inc.
Founded in 1988, TriNet delivers outsourced human resources throughout the United States and Canada and specializes in serving technology, financial service, and professional service firms. Its offerings include human asset administration, employer risk management, online employee benefits administration and support, payroll processing, tax compliance, workers compensation, group health and welfare products, and strategic human capital consulting services. More than simply an HR services provider, TriNet contractually assumes certain legal and financial responsibilities regarding employer rights, legal compliance and risk management. For more information about TriNet, visit http://www.trinet.com.