Increasing Retention through Employee Benefits Plans
Benefits are an essential part of an employee’s compensation package. In an ever-changing industry with a competitive market for skilled labour, a good benefits plan can help your company retain and attract the right people. A portion of each employee’s benefits plan is legislated, but some aspects can be adjusted to be attractive to current or potential employees.
All employers in Ontario must provide the following employee benefits:
- Employment Insurance – Canada Revenue Agency (CRA) requires both employer and employee contributions
- Canada Pension Plan – CRA requires both employer and employee contributions
- Workplace insurance coverage – Ontario’s Workplace Safety and Insurance Board requirements will vary depending on the industry and work environment
While it is important to offer a competitive employee benefits package, the cost should be considered and weighed against the benefits. The cost of employee benefits typically makes up around 10% of the total payroll costs for a company but can be as high as 30%.
Optional elements of a benefits plan, on top of typical compensation, bonuses and profit sharing, if applicable, include:
- Health coverage
- Dental insurance
- Life insurance
- Vacation days in excess of that required by the Ontario Employment Standards Act
- Paid sick days
- Group RRSP plans
- Flexible work arrangements
- Short-term or long-term disability insurance
- Employee Assistance (including mental health components)
When developing a benefits plan, consider the unique needs and growth trends in your industry as well as the shift in attributes that resonate best with the current workforce. It’s important to think about what your employees’ value most. Consider conducting a survey to find out what your employees really want before creating your plan.
Be sure to communicate with employees about the development of the benefits plan and let them know that their feedback helped to influence its design. The positive impact the benefits program will have on recruitment, employee morale and retention may be lost if it is not communicated effectively. Make the plan clear, include measurable goals that can be easily understood and communicate how employees can contribute so that they can take better advantage of it.
As an employer, also think about what your company can afford to spend. Consider starting with less and scale up when possible. It is always better to add more than take things away after you have provided them. Some cost containment strategies include sharing the cost of insurance premiums between the company and employee, limiting the level of coverage (e.g. covering 80% of dental costs), building deductibles into the plan, capping coverage at certain limits (e.g. setting out a maximum of $300 coverage for vision care per year), or using a self-administered plan.
A self-administered plan, or Private Health Services Plan (PHSP), allows your company to write off the medical expenses incurred by you and your employees as a business expense. As an alternative to traditional benefit plans offered by insurance companies, PHSP’s allow employers to pay the actual medical costs incurred by employees. This typically involves setting an annual limit per employee. For instance, a company will reimburse medical expenses deductible under the Income Tax Act, to a limit of up to $2,000 per employee, per year. If set up correctly, the PHSP will provide a deduction to the employer while simultaneously providing a tax-free benefit to the employees. Depending on the size of the company, this option is quite often more effective than using an outside provider. It can help to keep costs down as the employer only reimburses costs actually incurred by employees, as opposed to paying for health insurance for all employees where some may not use it. In addition, PHSP’s provide flexibility to employees in how they use their coverage.
A comprehensive benefits program is an important tool in recruiting and retaining motivated people. This is especially true in today’s job market, where employees may be tempted to move to other sectors of industry, and for employees with family responsibilities. By retaining and attracting the right staff, the benefits earned by your company will exceed the increased cost.