NOT HAVING AN EMPLOYEE BENEFITS PLAN IS COSTLY

If you’re a business owner and you’re not already sponsoring an employee benefits plan, you probably don’t know that you may be paying more by not sponsoring a plan. Sponsoring an employee benefits plan is an important investment in your business and your employees, and there are many financial reasons it makes sense to do so.

You’re paying for it anyway

As a business owner, you’re probably already paying for designer eyeglasses for yourself or braces for your kid. If you have a sore back, you probably book a physio appointment. If you need a prescription, you probably pay to have it filled.

What this means is that you’re spending your cash on expenses that are typically covered by an employee health benefits plan. So in this case your “benefit plan” is the cash in your bank account. Unfortunately, you’re missing out on the tax savings that your business could be enjoying. At first glance, the expenses you’re paying may seem far less than sponsoring a plan. But when you look at the big picture, sponsoring an employee health benefits plan probably makes more sense.

A Tax-Deductible Business Expense

In Canada, the money you spend sponsoring an employee health benefits plan is a tax-deductible business expense. This means that you can subtract the amount you spend on the benefits plan from your gross income to determine your taxable income. Basically, you pay less tax.

When you and your family are covered under your employee benefits plan, you can continue to purchase designer eyeglasses or braces but now these expenses are helping you at tax time. In many cases, the tax savings for your business far outweigh the cash you’re already spending out-of-pocket.

It Matters to your Employees

In addition to the financial advantages you’re missing out on at tax time, NOT sponsoring an employee health benefits plan is likely to cost you in other ways.

1. Recruitment and Retainment – Studies have shown that the presence or absence of an employee benefits plan can be a deciding factor in a potential employee’s decision to accept a job offer. It’s a competitive labour market and attracting good employees makes all the difference in a company’s success.
   Retainment is just as important. Without an employee benefits plan, you’re likely experiencing a higher turnover rate than if your employees were supported with a benefits plan. Attracting, onboarding and training new employees is costly, so a low turnover rate makes good financial sense.
2. Productivity – Without employee health benefits, employees are less likely to take care of their physical and mental well-being. Visiting a medical practitioner, filling a prescription or having dental work completed all costs the employee out-of-pocket. Many times, people without coverage either don’t have the money to spend on these items/services or choose not to spend their money on them. This can result in employees coming to work with unaddressed health conditions. Both mental and physical health conditions can have a negative impact on productivity. By not supporting employees with health benefits, your company’s productivity can suffer.
3. Morale – If your employees look around the market and see many other companies supporting their employees with benefits, they may feel that you don’t value them. This can lower morale across the organization. Employees who have negative thoughts and feelings for your company are absent more often, less productive and are more likely to look for employment elsewhere. So if NOT sponsoring an employee benefits plan is lowering the morale in your organization, it’s costing you.

Finding the Right Fit

Every organization is different, so it makes sense that an employee benefits plan that is the right fit for one company may not be the right fit for another. Find out what is important to your employees and incorporate their feedback when designing a plan. Consider utilizing a confidential survey to get honest feedback from your employees.

When choosing an employee benefits provider, it’s very important to choose a provider who can customize a plan to meet the needs of your organization. You’ll need benefits that can support people who are in different life stages. For example, a young, single employee may value having access to more modern benefits such as virtual healthcare or a central dispensing pharmacy. An older employee with a family may be more concerned with coverage and optional benefits that provide support during a critical illness.

Giving employees input into how their benefit dollars are spent is always a good idea. This can be done by providing shared maximums for some services, and by including a health spending account (HSA) in the plan. A health spending account acts like a bank account for eligible health and dental expenses. Employees start with a specific dollar value in their account and can draw from it for eligible health and dental expenses. This way the employee is choosing how their benefit dollars are spent.

The right fit for your employee benefits plan must fit within your budget. It must also fit your budget over the long term. The way to do this is to build cost control into the benefit plan. Look at ways of supporting employees with benefits, while also controlling the cost of the plan. This may mean incorporating a central dispensing pharmacy into the prescription drug coverage for the plan. It may mean focusing on mental health and providing support via an Employee and Family Assistance Program (EFAP). It may also mean including disability management services along with disability coverage, to help shorten the length of disability claims. Whatever the cost control mechanism, it’s important to proactively target costs to protect the long-term sustainability of your plan.

Good Advice is Key

Have you ever looked at the direct and indirect cost implications of not sponsoring an employee benefits plan? Chances are, there are sound financial reasons why you should sponsor a plan. It’s never too late to start supporting your employees with an employee benefits plan. Review your options with one of our licensed advisors on the phone or in person or contact us for a comparison quote.

Whether you’re looking for extended health and dental coverage, disability coverage, or life and critical illness coverage, GroupHEALTH has affordable benefits packages that work as hard as you do.