Keep staff happy with benefit plans

Many employees place almost as much value on workplace benefits as they do on salary. In a 2011 survey asking Canadians if they’d forgo them for a $20,000 raise, 56% said they’d keep their benefits.

So, covering your team is part of the cost of doing business. But what is that cost?

What it is

Health, dental and life-insurance coverage are typical core benefits, but packages could include everything from disability and critical-illness insurance to employee assistance and wellness programs.

Why you need it

It’s a vital part of overall compensation.

“To attract and retain good employees, you need competitive benefits,” says Margaret Reid, senior vice-president at Apri Insurance Services in Toronto.

How it helps

Providing a comprehensive benefits package shows staff you care, and gives them peace of mind. Their productivity will likely increase, too. A recent Harvard study finds that for every dollar spent on wellness programs, costs incurred due to absenteeism fall by $2.73. And a Towers Watson report shows employers with effective wellness programs perform 55% better than their industry peers, with higher average revenue per employee, and lower turnover rates.

Employee benefits

• $1,200 per employee per year
• Monthly health, dental and life package per employee: $100 for individual coverage; $250 for a family
• Long-term disability: between $1.50 and $3.50 per $100 unit of coverage
• Administrative expenses: broker commissions 5%; premium tax 2%; plus insurance company fees

Good to know

Shift some costs to employees by having them share the premium, and choosing a plan with less than 100% reimbursement. If you don’t, employees have no incentive to keep claims and health-care costs at reasonable levels, says Judy Bascu, director of group sales, The Co-operators, Calgary. Since they bear some burden, they’re more likely to choose generic drugs, for instance. Some companies give employees lists of pharmacies that charge lower dispensing fees to save even more money.

For long-term disability, if employees pay the full premium, any disability payments they receive will be tax-free; if the employer contributes even a penny, the full benefit is taxable. Make sure employees understand how the benefit is structured.

Disability earnings are often two-thirds of regular salaries, and taxes would further reduce those earnings to about 50%, says Yafa Sakkejha of The Beneplan Co-operative, Toronto.

Start with a program that’s conservative in its reimbursements. Once you see claim patterns and their effects on premium rates, you can add coverage.

Target-loss ratio

Every plan has administrative expenses that factor into the premium paid. The target-loss ratio (TLR) measures administrative expenses versus claims payments; the lower the ratio, the better.

Who can help

Benefits Canada includes a directory of benefits consultants and providers. Group benefits Online is another resource. Benefit consultants can suggest strategies to maximize coverage, advise on tax, and find the best plans.

Stuart Foxman is a Toronto-based financial writer.