"Perspective" in Employee Benefits

Why bother?

Though often referenced as if it is single entity—one form of “insurance”—Employee Group Benefits—is, in fact, a GROUP of individual insurance products, GROUPed together for a GROUP of employees LINKED through common employment.

Like building a home, benefits form a “foundation” of insurance for the average Canadian employee—sometimes their only access to coverage such as Life and Disability, not to mention reimbursement for expensive medications.

But there is a cost, obviously, both monetarily and legally to both the owner and employee. When the contracts are signed and the policy is placed, the employer is expected to act in the best interest of all employees. There are fiduciary expectations that the employer won’t arbitrarily change a set program which will then adversely impact those covered. In the same vein, what an employer offers to one, should be available to all.

Once the decision is made to proceed, like any business decision, selecting the right benefit plan takes time, energy, and effort. There are professional dedicated to help who will streamline the process significantly.

As mentioned, the first step in this process is to ask “Why”?

• Why offer an employee group benefit plan?

• Why go through the ordeal of selecting, implementing, and managing a plan? Never mind the additional costs.

There are a few reasons, but the favourite three are:

• Tax: Employee receive the benefit tax-free (outside Quebec) and the corporation receives a corporate tax-deduction for all premium paid on the employees behalf.

• Attraction & Retention: Benefits are a proven method of offering a work-life balance for valued employees.

• Insurance: Providing protection for unforeseen, unexpected risks like death, disability, or the diagnosis of a major illness or disease.

John owns a small business. He pays competitive wages and provides good working conditions. It takes several weeks and many hours of his time to train a new employee.

He’s recently completed he own personal financial plan where he address the major “risk” both personally and professionally:

• risk of loss of life (what would happen to his family and then his business in the event of his death)

• risk of loss of income (what happens to his family/business if he is not there)

• risk of a catastrophic event (what if he is diagnosed with an illness where the medication is too expensive to afford)

Through this process John questions whether his staff have adequate protection for these life changing events?

Upon consideration, John notes that indeed his family have expenses from time to time for the occasional prescription, physiotherapy, and dental visit. He understands that having a GROUP benefit plan would mean he could turn those after-tax expenses into a corporate tax expense, and thereby save personally for the same claims.

Added to this is that despite his best efforts of creating a good work environment, John finds it difficult to keep some staff for more than a year or so. It’s naturally upsetting when some employee’s move on to work for a competitor. He has had trouble attracting and keeping someone who can handle the key position of assistant manager. Could a custom-designed benefit plan provide a better way to attract and keep quality people?

A good salary is certainly high on any employee’s list of reasons to stay with an employer. But staff are also concerned about what happens when they get sick or hurt, need dental work or perhaps die.

Creating a TOTAL COMPENSATION package through a well-developed, custom designed, Employee Group Benefits program might be the answer to control costly staff turnover. Typically, a group plan will provide all employees with life insurance, disability protection, extended health care, including pharmacy, and dental coverage. A Group Retirement Plan can also be part of the package.

Generally, the employer and the employee share the overall cost. If an employee pays entirely for certain benefits, such as disability insurance, any benefits received as a claim are tax-free. Employee contributions to a retirement plan are tax-deductible.

By providing a group benefit plan, John can profit by attracting and keeping top notch employees. Through the corporation, his costs of providing the plan are tax-deductible. The employees win by being provided with that cushion of coverage for the ‘just in case’ and John wins by retaining quality employees and taking advantage of the tax incentives.