HR Benefits for Small Businesses - Look Beyond the Salary Bottom Line [Part 1]
By Michelle Collins | October 31, 2001
Introduction
As a small business owner, you are probably well aware how difficult it can be to find and keep good employees. If you are competing against larger companies for potential hires, a comprehensive benefit plan might tip the scales in your favour.
To determine whether a benefit plan is the right move for your business, you need to consider a few things. What kind of benefits do you need? What costs are involved? And what will be the overall return on your investment? Smaller businesses with owners who are employed by the business will also want to look at the personal advantages that a benefits package can offer.
To help you evaluate the pros and cons of a benefits package, we spoke to several industry experts and have put together an overview of the key considerations.
Identify the needs of your business
When it comes to insurance needs, no two businesses are alike.
To get started, analyze the needs of your company. If you are planning to use a benefits plan to help recruit and retain employees, you'll want to know what benefits your competitors offer. You also need to determine what type of benefits your employees would value most. In offering benefits, do you need to match the competition, or can you offer something unusual with a high, intangible value to your employees?
Once you know what your employees want, it's time to consider the costs and the anticipated benefits. For example, will health care benefits, such as access to chiropractors, naturopaths and other specialists, be the key to keeping good employees? Or are they unnecessary extras that will cost you a lot of cash while offering little return? The salaries, marital status, and age of your employees will also play roles in your overall cost.
Smart tip: Make a chart listing benefits and the corresponding costs to help find the optimal plan for your business.
Types of benefits – your insurance options
The choices can seem overwhelming. From a basic plan that includes life, disability, and health coverage, the available options escalate to more extravagant plans that include massage therapy and hypnosis therapy to help employees quit smoking. As a small business, you will likely find that from the wide array of available options and considerations, the packages appropriate to you will be somewhat limited.
With that in mind, here is an overview of the most common benefits.
Life insurance
Options
You have two choices in this category. You can have a flat benefits schedule where each employee has the same claim amount, or you can have an earnings-related schedule where the claim amount is related to each employee's earnings.
Costs
Depending on the demographic makeup of your group, your costs will vary from year to year. The age and sex of each group member determine rates. As your group ages, costs will increase.
What to expect
You and your employees may have to fill out a medical questionnaire, depending on how much coverage you require. Individuals who require the maximum amount of coverage right away will probably have to provide more information to get life insurance.
Disability insurance
Long term: the time that an employee is off work after the short-term disability period is over
- insurance companies require medical evidence to pay wages
- if employees pay the premium, they aren't taxed on the wages
Options
You can set up a taxable or non-taxable plan. A non-taxable plan, which is recommended, will allow employees to receive two-thirds of their income up to a maximum amount that the insurance company determines. The taxable plan allows the employee to claim the benefit as earned income for a defined period of time. Insurance companies require medical evidence of the injury before they will pay the wages.
Costs
Once again, costs are directly related to group demographics. Yet they will vary with each insurance company. Rates will go up as your group ages.
What to expect
Rather than getting into great depth here, check out a previous article on CanadaOne, which took a detailed look at disability insurance.
Short term: usually refers to the first 17 weeks of leave
- employer usually pays for short-term disability leave
- premium costs are very high
- if employer cannot pay wages, then employee must seek EI
You can opt out of short-term disability and let Employment Insurance (E.I.) pay employee wages for the time off work.
Health care & drugs
Typical coverage
A typical plan could have no deductible, 100 per cent reimbursement, and each employee would have a maximum of $10,000 coverage per year. Other parts of the health plan could include paramedical coverage, out-of-province referrals, and emergency out of province and travel assistance. People are often unaware that they have travel coverage under their group plan.
Drug plans
Usually employers pay for 80 per cent of the coverage. You can set up a paper claims system or a drug card system. If you use a paper claims system, your employees pay for the claims themselves and then fill out a form to receive reimbursement in a couple weeks. Using a drug card will cost more but will allow employees to be reimbursed automatically from 50 per cent to 100 per cent.
Dental
Options
Deductibles are still used with dental plans because they keep the cost down. Most plans have the employer cover 80 per cent of the cost for basic dental work such as cleaning and scaling, routine examinations and root canals. On average, each group member is entitled to a maximum of $1,000 in coverage a year. If you have never had coverage, you will see the rates here increase more than for any other part of the plan because it will be the most widely used.
