Are you thinking about offering benefits to your employees?

By August 13, 2012Uncategorized

Are you thinking about providing benefits to your employees…?
If you are, you know it can be an overwhelming process. There are a myriad number of options out there and it can be confusing. The first thing you might think about is why you would do that. There are several advantages to providing benefits to employees:

  •  Will aid in recruiting new employees
  •  Excellent for retention – Benefits provide employee security, and often are more highly valued than their worth
  • They can support managerial strategy and allows the employer to be empathetic towards their employees
  • Less expensive than a raise because there are no additional increases in CPP, EI or WCP payments, and premiums can be tax-deductible. A tax effective form of compensation!
  • Can increase productivity, morale and the quality of employee’s work.
  • Healthier employees reduce turnover and absenteeism.

That being said, there are areas of caution that you would want to think about, so as not to create disadvantages for yourself:

  •  Costs can be substantial and sometimes difficult to control, however the premiums are tax deductible.
  •  Funders do not always reimburse employers for these costs
  • It can be difficult to develop an efficient and effective benefits package (but are many options to design a program)

In this post, we’re going to look at just what it means for a small or medium sized business to provide employee benefits. First of all, providing employee benefits (over and above that those which are legislated) is part of a total compensation strategy (more about this in a future post). This is what commonly is referred to as “indirect pay”, as opposed to base pay or performance pay.
So let’s look at what makes up indirect pay:

  • Benefits mandated by law
  • Pension plans
  • Medical, dental, vision care and/or life and disability insurance
  • Pay for time not worked
  • Employee Assistance Programs
  • Food services (such as discounted cafeteria options)
  • Discounts on purchases (such as computers)

Benefits mandated by law are:

  • CPP/QPP
  • Employment Insurance
  • Workers Compensation
  • Provincial Health Insurance plans
  • Vacation Time and Vacation Pay
  • Statutory Holidays
  • Paid Rest Periods
  • Termination or Severance Pay (pay in lieu of notice)
  • Leaves – Pregnancy/Parental/Personal Emergency/Family Medical (these are mandatory, but not paid by the employer)

Now let’s look at the most common types of benefits employers might provide:

  • Pension Plans – Defined Benefit, Defined Contribution, Hybrid, RRSPsHealth Care Benefits – Medical, Dental, Vision Care
  • Income Security – Life and Accident Insurance, Short and Long Term Disabili· Paid Sick Leave
  • Educational Assistance and/or Tuition Reimbursement
  • Employee Services – Employee Assistance Programs, Child or Eldercare Services

This is not to suggest that any small or medium sized business jump in and start a program offering all of these benefits. An employer needs to consider the size of their employee population, the demographic, and the cost. As well, some benefit payouts are taxable for employees, so you would want the support of the employees in the implementation (e.g. Registered Pension Plans, Group RRSPs). But, there are tax advantages in some areas to employers in providing these benefits. So here’s what you need to consider in the choice of a benefits package:

  • The relationship to the total compensation costs – are the benefits worth their cost or would it be better to put the money to another area of compensation?
  • Costs relative to benefits – will the level of benefit expense be acceptable now and in the future?
  • Your competition – is your benefit selection externally competitive?
  • What role do you want your benefits program to play – Attraction, retention, motivation?

And finally, your program must be compliant with legislation.
When you are ready to start down the benefits path, you have issues you need to consider for implementation:

  • The benefits are a factor in achieving the company’s compensation objectives
  • Decide on a process for designing the program
  • Decide on a benefit program and which specific benefits to include
  • Optimize each type of benefit for coverage
  • Funding the program, eligibility and flexibility
  • And developing your administrative process

Cost containment will be a big factor in the success of your program, and one way to do this is by cost sharing with your employees – it’s a simple alternative to some of the more complicated ways of containing costs. Another way is through the type of plan or program you choose – Flex or “Cafeteria” style plans. These plans offer lists of benefit options in exchange for a fixed amount to spend. These Flex Plans allow a company to identify the preferences of their employees and to show them which benefits are of the most importance. Flexible or semi-flexible benefit plans seem to be the best options for a diverse employee needs, and are well suited to the financial needs of the small or medium sized business.
Offering employees benefits will provide employers with many paybacks, staff retention and recognition. A solid well managed benefits plan will help recruit good employees. In developing your employee benefits plan, solicit the input of your employees – the best benefits are the ones your workforce wants.
Finally, going down this path alone is not encouraged; you need an Employee Benefits Specialist with you. I would recommend contacting Melanie Rousseau, melanie@alliancegroupbenefits.com for a chat and to see the process that the Alliance Benefits Team uses to facilitate benefit program implementation and ensure you meet your company’s objectives.
Stay tuned for our next post –“What is Total Compensation?” It will land here in a couple weeks.
Warm regards
Frances Mote
frances@niagarastreetconsulting.com