Although a significant cost to an employer, there are many intrinsic benefits to providing employees with a comprehensive benefit plan. For most employers, it is the ability to find and keep highly qualified employees that is the key driver to providing these benefits and becoming an employer of choice.
Despite cost containment efforts in recent years, employer spending on benefits programs for employees represents a significant cost and is currently averaging about $8,500 per full-time equivalent. And according to a recent report by industry experts at Mercer, these costs are going to continue to increase, "Affordability in a global context is taking on increasing importance as labour cost vies with the need for productivity growth to remain competitive. Sustaining benefits in the longer term requires employers to plan for rapid cost escalation over the remainder of the decade and to develop strategies to maintain benefit plans that will become increasingly more important to attract and retain employees as the baby boom generation retires. The challenge will be to do so while mitigating cost increases."
A recent Conference Board of Canada survey shows the percentage of medium to large employers providing full-time employees benefits:
92% provide vision care coverage
96% provide private or semi-private hospital accommodation
99% provide out-of-country medical coverage
99% provide paramedical services like massage therapy, chiropractic coverage, and physiotherapy
98% provide major restorative dental services
91% provide accidental death and dismemberment
99% provide long-term disability
35% offer full-time employees critical illness insurance
Without this valuable benchmark, it becomes extremely difficult to measure and evaluate whether your efforts in promoting a safe and healthy workforce and attracting and retaining the right employees, is really working.
Several years ago, there was a report that showed the average benefits cost as related to payroll. (see example below) These numbers were for a particular employer within a particular industry and may not be at all relevant today, however, understanding the cost of employee benefits and how it is related to other employers in your industry, is a must.
- Incidental Absenteeism: 16.39% of benefit costs -- 1.5% of payroll
- Worker's Compensation: 20.77% of benefit costs -- 1.9% of payroll
- Weekly Indemnity: 19.13% of benefit costs -- 1.75% of payroll
- Short-Term Disability: 18.03% of benefit costs -- 1.65% of payroll
- Long-Term Disability: 9.29% of benefit costs -- 0.85% of payroll
- Drug Plans: 6.56% of benefit costs -- 0.6% of payroll
- Extended Health Care: 8.2% of benefit costs -- 0.75% of payroll
- Employee Assistance Program: 1.64% of benefit costs -- 0.15% of payroll
How do your numbers compare? Are your numbers changing significantly? How do they compare with others in your industry?
Industry experts are projecting increases of about 5-8% for dental plans, 10-15% in paramedical benefits and up to 20% for long-term disability coverage over the next couple of years, but it will be dependent on the demographics of the employee group.
While reducing benefits costs may be difficult, and adding benefits may not be in the budget, from an attraction and retention perspective, being creative and considering additional ways to improve access can improve your overall offering. This could look like:
- Allowing employees to access their benefit as of their hire date
- Eliminating the probationary period language from contracts/offer letters
- Allowing for some increased flexibility in personalizing benefit options; i.e. health spending accounts, vision care versus dental, and more paramedical coverage
- Being able to accumulate sick days to bridge disability coverage
While balancing what to offer, with what is needed and can be afforded, is a never-ending struggle, the key is to understand your employees and their needs and to program accordingly. As with many aspects of wellness programming, communication is the key. Helping your employees to understand their benefits and to utilize them appropriately will positively impact your culture and your reputation as an employer of choice.
Do you know your costs?
If you have some strategies to share – comment on this posting!