By Howard Cheung, Account Executive, Immix Group: An Employee Benefits Company
1. How much does it cost to provide Employee Benefits?
Cost is often first thing that comes to mind when considering employee benefits. How much to budget, per employee, and what does this cover? Without an existing benefits program or past claims experience, insurers use “manual rates” which is pricing that factors in the demographic and occupational details of your group, for the requested coverage design(s), to provide your group with rates.
As for how much to budget, consider researching your sector’s benchmark salary and go from there to calculate a rough percentage. The % of total rewards cost (benefits is part of this) can range from 5% to 13% of payroll.
On the lower end, benefits could be under \$100 a month per employee, and on the higher end far upwards of \$1,000. It all depends on the details of your group and the plan you choose.
2. What do Employee Benefit plans typically cover?
Common coverage lines on benefit plans are:
- Basic life insurance
- Accidental death & dismemberment
- Long Term Disability
- Short Term Disability
- Critical Illness
- Health Care (drugs, paramedical, vision, travel)
- Dental Care
- Employee Assistance Programs (EAPs)
- Other common benefits include: Health Spending Accounts, Wellness Spending Accounts, Pensions, or Group Savings Plans.
Keep in mind that extended health care coverage (in particular, items covered under the Health Care portion of plans) is complementary to provincial healthcare (i.e. MSP in BC) and is not intended to replace or overlap.
3. When do employees receive benefits? Do they have to wait?
You can begin a new plan for existing employees at the first of any month. For new hires, most employers implement a waiting period of 3 months before benefits begin. You can customize this based on the needs of your business, but once determined, this needs to be followed unless a waiver is requested for an individual, or you change the waiting period for the whole program.
A “late applicant” situation occurs if a new employee is not enrolled in the program on time (after the waiting period). In this instance, the member may be required to go through underwriting and receive limited benefits.
4. Are part-time, temporary or hourly employees eligible to get employee benefits?
Standard employee benefit plans require a minimum of 20 working hours average per week in order to be eligible, plus completion of the waiting period. Employers may set their own minimum hours to determine who is eligible (eg. minimum 35 hours per week), and their own waiting periods.
Benefits classes may be used to set distinctive eligibility rules for different classes of employees (eg. management and other employees), and also to provide different coverage to different classifications of employees.
5. Will Employee Benefit plan premiums increase if my employees use the plan a lot?
New policies often have an initial rate guarantee period between 16 to 24 months for health & dental rates and even longer for pooled benefits (up to 48 months). After the initial period, most plans renew on an annual basis. The renewal pricing is generally based (at least in part) on assessing the claims of your group compared to the premiums you have paid. While a lot of factors come into play, there are many different ways that renewal pricing is determined and your premiums could either increase or reduce.
It is important to work with your advisor to thoroughly understand the pricing model recommended for your group, whether this is fully insured, refund account or ASO.
6. Are Employee Benefit costs tax deductible?
Yes, employer-paid premiums for employee benefits are typically tax deductible to the corporation. In contrast, reimbursing an employee directly for medical expenses is not usually deductible, per CRA rules.
Whether a premium is paid by the employer or by the employee vis payroll deduction makes a difference with regards to taxation. To avoid taxable benefits for employees, some benefits should be employee-paid.
7. What are the advantages for a company in providing a benefits plan? Does providing benefits improve morale?
There are numerous reasons to provide a benefits program for your team:
- Is a tangible form of compensation to attract the best people and keep them.
- Health, Dental & EAP coverage helps improve health both proactively and reactively, reducing pain, stress & depression thereby increasing productivity
- Group retirement savings help reduce financial burden and stress
- Promoting and communicating about provided benefits is an additional channel to reinforce company culture and values.
- Studies show employees value benefits more highly than the equivalent in a pay raise
8. Should I shop around multiple places for benefit plans?
An independent benefits consulting firm can provide quotes from various suitable insurers. Insurers themselves are not typically equipped to provide consulting services and do not have access to the entire market.
In addition, once an insurer has been approached to provide a quote for a business, they cannot release another quote for the same business to a different benefits consultant. Only the benefits broker who is able to provide a current dated “agent of record” or “authorization” letter can work on your behalf to obtain quotes.
Given the industry rules outlined above, it is not efficient to utilize multiple brokers or to shop around. It is better to ask for a referral from a trusted peer or interview reputable benefit firms to find the right fit. Once you have decided with whom you want to work, it’s then time to have your trusted advisor look for quotes on your behalf.
About myself and Immix
I’ve been a licensed benefits consultant and broker for businesses in the Lower Mainland for 14 years. I work with the Immix Group team toward benefits solutions for organizations of varying sizes. We would be happy to help you, no matter what your organization’s size!
Any questions, please feel welcome to reach out to me at howard@immixgroup.ca.
Disclaimer: All organizations and groups are different and applicable strategies should be reviewed with a licensed benefits advisor to review your situation.
