When times are tough, employers are often looking for a way to cut expenses as opposed to add to them. When it comes to benefits, it’s often tough to take away something that employees have without affecting morale or loyalty. This has become increasingly challenging given that health benefit premiums have been increasing as a result of rising health care costs at a rate of 10% to 15%.
Here are a couple of ways to help combat the rising cost of health benefits:
1. More voluntary benefits.
Recently, Benefits Canada reported that “Voluntary benefits could be tomorrow’s trend.” Voluntary benefits are typically paid 100% by the employee but more cost effective because of the buying power of a group.
Most plans already include some voluntary components, such as optional coverage for life insurance, accidental death and dismemberment, critical illness, even certain retirement products.
The article in Benefits Canada stats that the newer generation of workers (Gen Y) might actually prefer more voluntary benefits because they tend to be more discerning in terms of what benefits their potential employers are offering them.
As we move forward, it’s clear that benefits are changing and economies are changing. More and more people will see benefits as a privilege, not a right.
2. Group retirement savings
If the issues is solely about the rising cost of health care costs, one of the benefits that has a more controlled inflation rate is group retirement savings. This might include a Group RRSP or a Defined Contribution plan. In both cases, the future cost of these benefits are not affected by the rising cost of health care. Instead retirement savings is driven by wage inflation which is generally lower and more consistent. The benefit is calculated based on base salary and you are not seeing base salary increasing by 10% to 15%.
Other than wages, the cost of a group savings plan can be influenced by the employer. For example bonuses can be put into a Group RRSP plan but the employer controls the amount of the bonus.
Other than a matching program, there is very little cost to the employer in implementing a group RRSP or event a Defined Contribution pension.