Breaking the Paradigm: Employee Benefits, an Investment vs. an Expense

Written by Don McGowan, Principal, McGowan Insurance Services Ltd. (416-805-9999) at the request of TwoGreySuits

More and more, employers are shifting their thinking around benefit plans. Many businesses now consider an employee benefits plan as a business investment rather than simply a cost of doing business.

It’s about investing in your employees’ health and wellbeing and in your company. Investment in your employees has a rippling effect. Customer satisfaction is directly related to employee satisfaction. Healthy and productive employees who enjoy helping customers, create satisfied clients who enjoy their sales or service experience. Satisfied customers tend to be repeat customers. Improved customer retention drives increased/repeat sales and profits and boosts your marketplace valuation. So, the key to all of this is employee satisfaction.

Investing in your employees, including their health and wellbeing, is the same as investing in your company. An added bonus to investing in your employees is improved employee retention. This means less time and money spent on recruiting and training new employees, which means fewer dropped balls in the sales/service process and therefore, more satisfied customers. No matter how you look at it, it all links back to your employees, your most important asset. They are the ones making and selling your widgets. They are the ones who are in regular contact with your clients. They are the ones who make your clients feel special and make them want to do business with you. So how can you reward them?

Rewarding employees with purely monetary gains drives your payroll taxes up. Rewarding them through a benefit plan allows you to give them something they can really use without driving-up other costs. Employer premiums for accidental death and dismemberment, critical illness, long term disability (depending on tax treatment at the time of claim), health and dental care are not considered to be taxable benefits and, therefore, do not drive additional payroll taxes. Rewarding your employees with something that can improve their health and wellbeing can also help reduce hidden costs. Healthy employees tend to be ‘at work’ thereby reducing absenteeism costs. Absenteeism brings with it a whole host of hidden costs including unhappy clients because their needs are not being met. When should a company start a benefit plan?

The answer is simple: Whenever you want to invest in your company. There are benefit plans available for one to thousands of employees. There are defined benefit plans, flexible benefit plans and combinations of the two. Life, accident and disability benefits are usually defined so everyone knows that a certain amount is paid when something happens. Health benefits can be a little more complicated. Not every employee needs orthodontia coverage, so a plan that offers that and excludes something else may not be all that useful or rewarding to them. A good way to provide health benefits to employees without limiting their coverage is to set-up a Health Spending Account or a Flexible Benefit Plan where they can choose what they want to have covered. What benefits are appropriate for a new plan? Standard benefit plans often include life insurance, accidental death and disability, long term disability, weekly indemnity or short term disability, health and dental. Many plans now also include critical illness – a monetary benefit that helps when a covered individual is diagnosed with a critical illness, such as cancer. The benefits you select depend on your employee population. Not every group needs the same levels of benefits – younger groups are often more interested in health and dental benefits (the more immediate benefits) – older groups are more interested in disability and life insurance. Your benefit consultant can help you determine the best mix of benefits for your group. A new way of thinking about benefits Employee benefits should no longer be thought of as a cost centre but as an investment centre. They are a way to invest in your company and gain attractive returns including:

• Reduced Employee and Customer turnover

• Improved Customer Satisfaction & Retention

• Improved Repeat Sales and therefore Improved Total Sales

• Improved Profits, Equity & Market Place Valuation

Companies and governments in both Canada and the U.S. who have made this leap are reaping the rewards. The Ontario government provides free flu shots every fall and saves in reduced hospital visits due to influenza. Motorola Inc. refers to its core values of quality and people when making health investment decisions. With this focus, they have seen improvement in both cost savings and human benefits. Investing in the health and wellbeing of your greatest asset is something you do both for your employees and for your company.