Employee Benefits 101
Why implement employee benefits?
Benefits increase morale and long-term loyalty in your company.
42% of employees who switched jobs listed better benefits as a reason for switching.
79% of employees prefer employee benefits over a higher salary.
Benefits create healthy employees which increases productivity and reduces sick days.
Group benefits plans are tax-deductible, and are only 5% of payroll on average.
Can be split 50/50 between the employer and employees.
- Forbes: Discover The Top 5 Reasons Workers Want To Quit Their Jobs
- Sun Life: The Benefits of Group Benefits
3 Types of Standard Employee Benefits Plans:
Non-Pooled Plan
Your group consists of everyone working at your company.
Every year, a renewal is negotiated based on inflation & benefits usage.
Renewals tied to usage, can be higher and varying (15-25+%).
Recommended for groups of 20+ people.
Pooled Plan
Your group is combined with other groups.
Eg. Your 15 lives join a group of 5,000.Every year, the usage for everyone is combined and averaged for the renewal.
Higher initial expense, with lower and more consistent renewals (5-8%).
Recommended for groups of less than 20 people.
Health Spending Account
Each employee is given an amount to spend on healthcare each year.
Unused money can be carried over to the next year.
Expense is ~13.5% admin fee + ~11.5% taxes per claim. Pay per use.
Recommended as a cost-efficient option.
Insurance companies target a 70% “loss ratio”. If a client is paying $10,000/yr for benefits, they want to target $7,000/yr in claims. This is how renewals are calculated.
On average, employees use 65% of their maximum benefits available.
Things To Consider:
Plans require 100% mandatory participation for all eligible employees & their families.
Employees can waive health & dental coverage if their spouse has benefits.
All plans have “reasonable and customary” limits, to prevent abuse of the plan.
Plans have a “waiting period”, a length of time that new employees must wait before being enrolled in the plan. (Typically 3 months).