As companies look to reduce costs, more employees are being hired as freelancers or on contract.
The upside is that it provides businesses with flexibility and they can avoid offering costly benefits. For employees, however, the lack of benefits can be a major issue because they’re a form of compensation beyond hourly wages or salaries.
So how do small businesses provide them without taking on too much of a financial burden? I reached out to Chris Gory, president of Insurance Portfolio Inc., a family owned, independent insurance brokerage that specializes in employee benefits coverage for small businesses.
Q: What are the challenges of offering benefits to employees of these companies?
A: The first would be deciding what type of coverage they want to introduce:
- A traditional, fully insured employee benefits plan?
- An administrative services only (ASO) plan (some of the coverage is self-insured)?
- A health-care spending account (also known as an HSA or HCSA)?
- A combination of a traditional benefits plan or an ASO plan, and an HSA?
The next challenge would be education. This can include educating staff on the included coverage, submitting claims, accessing the insurance company’s website, etc. But more frequently, it involves educating staff on being smart with the plan – claims, dispensing fees, co-insurance, etc. The more the employees know, the less likely the chance of claims abuse and frivolous claims, which translates to higher premiums. Keep your employees engaged in the plan.
Q: How important are benefits in terms of attracting and keeping employees?
A: Next to salary, employee benefits coverage is the most important tool in attracting and retaining key staff. The 2011 Sanofi-aventis Healthcare Survey polled 1,598 people who currently have employee benefits coverage. When asked if they would rather keep their benefits coverage or receive $10,000, 59 per cent said that they would rather keep their benefits coverage. And when asked if they would rather keep their benefits coverage or receive $20,000, 48 per cent said they would rather keep their benefits coverage. One of the reasons is that 45 per cent of the plan members surveyed said they take at least one medication to manage a chronic disease such as diabetes or hypertension.
Many employers who currently have employee benefits coverage in place for their staff are looking for new ways to stand out from other potential competitors. Many now offer:
- Group critical illness (an employee diagnosed with one of the listed medical conditions receives a lump sum, regardless of ability or inability to work).
- Medical access insurance.
- Employee assistance programs (typical cost: $3.50 to $5 a month per employee, depending on the size of the company).
Q: The perception is that offering benefits is expensive for a small business. Is that true?
A: An employer cannot afford not to offer employee benefits coverage. If you don’t, your competitor will.
A health care spending account (HSA) operates like a bank account. A pre-determined allotment is put in the HSA for each employee, and they cannot exceed their allotment. An HSA can even be set up with different classes of coverage, each with different annual maximums. Any employer contributions revert back to the employer if not used by the employee after two years. HSAs also have a longer list of eligible medical expenses than a traditional employee benefits plan, as per the Canada Revenue Agency.
As for traditional employee benefits plans, a good employee benefits broker can help design one that fits an employer’s budget, through coverage maximums, co-insurance, deductibles, and per-visit maximums (for paramedical practitioners). As well, some insurance companies prefer not to write businesses in certain industries, and either outright decline to provide a quote, or they may provide a quote but with higher premiums.
Q: What are some of the things small businesses need to think about when considering offering benefits?
A: The first thing to consider is what coverage to include. Survey your staff to see what they want. A staff made up of 20- and 30-year-olds will want different coverage than 50- and 60-year-olds. The most common components are life insurance, dependent life insurance, accidental death and dismemberment, extended health care coverage – which includes prescription drugs, semi-private hospital coverage and emergency medical travel coverage – dental coverage, long-term disability coverage, and short-term disability coverage. As an employer, you can’t implement a benefits plan and, other than adding and deleting staff, leave the plan alone. It’s a living policy, and requires ongoing maintenance. Recent court decisions support this.
