New to Employee Benefits?
Here’s what to know before you start.
If you’re new to Employee Benefits and not sure where to start or how to proceed, here is both the ‘need to know’ and the ‘nice to know’ to make the process easier for you. And don’t forget to grab your Benefits Checklist (at the bottom of this post) to help you get started.
Why start an Employee Benefits program?
On a practical basis, an Employee Benefits plan is a tax effective way to offer additional compensation to employees beyond their salary however it is the personal worth that benefits represent to employees that make them an important organizational asset.
The most common reasons for starting a Benefits Plan are:
1. Recruitment
An attractive benefits package can sway potential employees in accepting an offer of employment. It can also attract applications for open positions if package details are shared in job postings. Recruiting can be tough when you can’t answer ‘yes’ to the benefits question.
2. Retention/Culture
No company wants to lose talented employees. You want to carry through on any promise that was made when they were hired as part of the future employment reward. Benefits plans that keep up with evolving offerings and take care of all aspects of an individual’s wellness – physical, mental and financial - are seen as being in touch with employee needs and help retain that talent. Fully supporting employees can go a long way to build company culture which in turn enhances the company reputation.
3. Employee Engagement
Addressing employee wellness through a cohesive Benefits plan not only supports their well-being but will improve productivity, and enhance motivation.
4. Hierarchical Needs
Maybe an Owner/Executive/Keyperson has a specific health, insurance or pension need that is achieved through your Benefits program and drives the decision.
5. Alternative Form of Compensation
The added value of providing Benefits is that they are a tax advantaged form of compensation. Health and Dental Benefits are non-taxable to employees and a tax deductible expense for employers.
6. Liability/Risk Management
Benefits can be a “must have’ for companies that prioritize a safe workplace or for those organizations with Employee Relations concerns.
When to start a Benefits Plan?
You might start looking at establishing an Employee Benefits plan for any of the reasons listed above. However, how do you know when it’s a good time to start looking?
Considering how you will finance your program is the first step before making a promise to employees:
Is your cash flow predictable enough to meet the monthly obligation to your Benefits provider
If you are using investment dollars, are your investors in agreement that Benefits are a priority
Can you comfortably allocate profits towards Benefits. This is ideal as it is unlikely that you will have to cancel the program unexpectedly.
Whether you are funding this through cashflow, working capital, or sharing cost with employees, can you sustain the investment? Taking it away from employees is more detrimental than waiting until you can confidently afford it.
TIP: Don’t promise a start date to your team until you have done some homework. A self-imposed deadline can cause you to compromise when trying to find your best option.
Who qualifies for Employee Benefits?
Good question! To cover Canadian employees, you must have a Canadian business entity and bank account. Employees do not need to be in the same location and can be located anywhere in Canada.
Companies as small as two employees can qualify for a program but keep in mind that smaller companies may have some limitations in their program choices. If a significant portion of your employees are related to one another, there may be more questions from the insurer to qualify for coverage.
Programs for smaller companies normally require mandatory employee participation to meet the contracted participation requirements of the Benefits provider. This means employees cannot pick and choose whether they join the program. Mandatory participation for any size company is a best practice as it reduces liability on you from employees that did not fully understand what they were forfeiting and to keep you compliant with your Benefits provider’s contract.
Coverage applies to employees considered permanent-fulltime and on your payroll. You can cover everyone, or you can customize your Benefit program by setting up different coverage for different groups within your team called a Class. Companies use locations, divisions, role and type of compensation (salaried vs hourly) to create Classes. To avoid issues of discrimination you must treat everyone the same that meets the definition of the Class and you must have at least two employees in a group to call it a Class.
What’s a Good Employee Benefits Budget?
Knowing what you can afford and what you’re comfortable in spending is a good starting point. Depending on the “level” of coverage (good support to fully comprehensive) think roughly in terms of 3-5% of your payroll – maybe a little higher if you are a small company with only a few employees.
Company size, demographics, occupations, and industry all affect pricing so take the opportunity to get quotations to understand your potential costs before making promises to your team. (Quotations will take approximately 10 business days). There is no obligation when asking for a quote but it will verify whether a program fits your budget.
Programs renew annually and pricing will change based on the amount of utilization by your members. In other words, high usage from your team can increase the price. Pricing changes need to be anticipated. Your broker can help you predict your renewal rates usually within the first six to nine months of the Program Year so you have time to prepare – it shouldn’t be a surprise when you see your renewal.
You can upscale and change your Benefits program at any time as your budget or company growth dictates. Start with what you can afford and build from there, it will make the program sustainable and create excitement as you roll out additional Benefits over time.
Employees will care most about the Health and Dental Benefits you provide but when “big” things happen, like a serious illness or disability, how the company responds is a loud message about the corporate culture. There is insurance that provides employees with important income replacement and available funds if they are unable to work at their job or have very high medical costs and this may be life changing for them while they recover – consider how this can be included in your plan. An impacted employee will be secure, the team will be proud, and the company will live its values.
TIP: Don’t start a Benefits plan until you’re ready and can afford one as taking it away sends an even louder message around your company’s stability and commitment to its employees.
Why Do You Need an Employee Benefits Broker?
There is lots of information online on Benefits provider sites but most employers in Canada are not large enough to buy directly from a provider. Doing online research is valuable but you will not be able to get the pricing and details that you are looking for and you will likely be redirected to find an Employee Benefits Broker to get the information you want.
A broker that is a Group Benefits Specialist will source quotes and help you analyze the different offerings against one another. They will make sense of the program options and highlight the important things to consider when selecting the right provider. A Group Benefits Specialist is not only your access point to the provider but they are your 'expert & advocate' in the whole Benefits lifecycle. A good broker will immediately "team up with you" to meet your interests and vision.
How to Find a Group Benefits Broker?
Referrals from other companies is the best way to engage a Group Benefits Specialist. Other sources include:
CGIB (Canadian Group Insurance Brokers) Member Directory
IFB Canada (Independent Financial Brokers of Canada) "Find an Advisor"
Online searching for ‘Group Insurance/Benefits Broker’ will bring up Insurers and large Consulting Houses but wading through the pages you will also find Brokers
You should only engage one broker to represent you. Providers will quote and release information to only one broker associated with your company. This means that having multiple brokers approaching the same providers on your behalf isn’t possible.
It pays to find the right broker because they will be the most important element in setting up a program that is engaging, easily managed, cost sustainable, and avoids risk. “Screening” competing brokers to make your choice is a great investment of your time. Use a selection process for your broker like you would for any other Services purchased for your company.
The broker needs to be licensed in the province (or one of the provinces) where you operate. Maybe you even want someone that is co-located with your operations so they can be onsite with your team for education and promotion?
How to Choose and Buy Your Program?
It can be confusing and overwhelming to get started with an Employee Benefits plan for your team. And if you’ve never done it before you might not know where to begin.
Once you’ve found your broker the breakdown of securing Employee Benefits goes as follows:
Broker works on behalf of the Client
Broker assists with plan design and program structure
Broker researches the marketplace
Providers will quote for only one broker associated with the client
Broker negotiates with the selected provider
Broker prepares application and contracting
Client contracts directly with provider and pays provider
Provider compensates broker with commission from the Benefits premiums charged to the client
Broker launches program and provides ongoing support, advice, reporting and advocacy for the client
TIP: The Broker and the Benefits Provider are not tied together, a client can terminate their relationship with one or the other or both at any time.
Navigating your Employee Benefits can feel daunting at first. There’s a lot to know if you want to make the best possible choice for your unique business. To help you navigate these unfamiliar waters you can download this Benefits Essentials Checklist to help keep things clearer. Use it as a reference while you do your research and begin your benefits journey.
Wondering if you’re ready for group benefits? We can help! Book a free discovery call with me – no commitment, no pressure.
