Benefit plans are a great way to attract and retain employees, but do you know the cost of your benefits?  

In the past, I had two bad experiences when renewing group insurance for the companies where I worked. In both cases, I arrived at work and I received an email from the broker handling our file mentioning:  

“Hello Ms. Giroux, I am presenting the renewal for year X. Based on your group’s claims experience, the rate increase will be 25%. Please sign the attached renewal form and we will forward you the adjusted premiums per employee.”

Pretty fast, isn’t it?

I don’t know if all brokers are like this, but since they are paid a percentage of the premiums paid, what is the motivation for them to take all the time necessary to accompany you? The fewer questions you ask, the more profitable their case will be.

Nevertheless, I must say that from the very moment I became interested in the file and asked questions, I had excellent cooperation and was given the required explanations.

Experience has shown me that not all business owners have the time or resources to properly analyze the costs related to the group insurance they offer their employees. I understand this, having spent time modeling plans and simulating different scenarios, I must say that this is one of the most complex subjects I have had to work on.

Is it worth taking the time to learn about it? 

 

How to Calculate the Cost of Group Insurance? 

A basic plan costs about 4% of the company’s payroll. So for a payroll of $1M, the cost of the plan is $40,000. A 25% increase represents $10,000 paid 50% by the employer.

And group insurance is just one component of benefits!

 

What Are the Benefits ? 

  • Basic plan bonuses (dental, eye, protection) (2%)
  • Vacations (4%, 6%, 8%)
  • Holidays (10%)
  • Group RRSP or soon RVER (0%-1%-2%-3% voluntary employer contribution)
  • Payroll deductions (about 11%, depending on the industry)
  • Training (1% a goal)
  • Sick or floating vacations (1 day = 0.4%)
  • Incentive compensation (0% to 25%)
  • Group insurance 
  • Employee assistance program and others

All these elements are part of the total compensation package that is offered to the employee. Your company must be appealing and providing a range of benefits can make the difference in a candidate’s decision.

 

Expert Advice on Analyzing Your Benefit Plan 

A few weeks before your group insurance renewal, analyze the costs associated with your compensation structure (a summary analysis can still give you a good idea):

  • Verify your hiring needs for the coming year.
  • Validate the market positioning of salaries.
  • Check your employees’ interest in certain measures (use free, easy-to-administer online surveys like SurveyMonkey).
  • Check with your broker to optimize the cost of insurance for tax purposes by changing the premium payment allocation, and offer a flexible health care account to meet the needs of your employees’ different profiles).
  • Check if tax credits are available for training or hiring.
  • Check if you are subject to any new obligations based on the number of employees (as of December 31, 2016, the RVER or retirement savings mechanism for companies with 20 or more employees).

The overall benefits package represents an addition of about 25% to each employee’s hourly rate, so it’s definitely worth taking the time to get a return on your investment.

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