The current economic environment has led to widespread concerns about the stability of businesses and employment. We continue to see an increase in the cost of living due to rising interest rates and inflation, with a moderate recession predicted for Canada in early 2023.1 Some employers may find it difficult to sustain current spending levels. Unfortunately, employee benefits are often one of the first cost reduction measures that companies make during a recession.
In this blog post, we’ll explore why companies should consider prioritizing employee benefits, even in periods of financial volatility, and discuss how benefits can be used strategically to serve employees’ interests while protecting long-term business sustainability.
We are witnessing the impact of rising interest rates and inflation as the overall cost of living soars. The Bank of Canada raised interest rates seven times in 2022, and economists from the Royal Bank of Canada predict that Canada will experience a moderate recession in early 2023.2 Employees are also experiencing an increase in the cost of products and services. For example, 2023 Dental Fee Guide increases are historically high, with Ontario fees rising by 8.50% compared to past increases of 4.75% in 2022, 4.60% in 2021, 1.27% in 2020, and 4.19% in 2019.3 In addition, the cost of medical plan claims is expected to increase by 7%.4
Money is tight for Canadians, and group benefits help offset expenses and provide access to much-needed services.
Employer-sponsored benefits offer employees a financial security net that can prove invaluable during unexpected life events, particularly when economic uncertainty looms. Money is tight for Canadians, and group benefits help offset expenses and provide access to much-needed services.
Many companies believe their employees will understand cost-cutting measures due to rising costs from higher interest rates and inflation. Employers who are quick to cut benefits for short-term financial relief may want to consider the long-term. While eliminating employee benefits may seem like a sensible cost-cutting measure to some, providing comprehensive employee benefits can give employers the winning edge in a competitive job market, helping them retain and attract valuable talent during difficult times. A report completed by LifeWorks says that 34% of Canadian employees stay with their current employer mainly because of the benefits offered.5 In addition, the Harvard Business Review found that if employees had to pick one, 80% would choose additional benefits over a salary increase.6
When employees receive benefits, they feel respected and valued.
Group benefits play a role in boosting employee morale and productivity. When employees receive benefits, they feel respected and valued. The value that employees place on their plans has increased over the last few years to levels not seen in nearly 25 years.7 Not only do benefits motivate employees, but they also help keep workers healthy, reducing absence and turnover due to illness.
Employee benefits plans can be invaluable to a company’s overall HR strategy and business plan, especially during economic difficulty. By offering comprehensive packages that fit their budget, employers can help protect their employees from economic insecurity while also boosting job satisfaction and employee morale, loyalty, and productivity. Moreover, in today’s competitive job market, employers must stand out to attract top talent. Offering comprehensive group benefits packages can help them do just that.
Now is the perfect time for chief human resources officers and their teams to become strategic about total rewards programs instead of reducing benefits coverage. Removing employee perks may offer short-term relief but could lead to significant and permanent losses in the long run. An employee wellness plan that incorporates physical, mental, social, financial, and emotional support can ensure a positive employee experience. Promoting the value of your employee benefits program is critical with today’s increased cost of living. It is also essential to ensure that your organization has an agile total rewards strategy that will allow you to respond to changes quickly during uncertain times.
Some companies struggling financially may be tempted to shift benefits costs to their employees. There is a way to have employees help build a sustainable plan through provisions that encourage employees to make “smart” decisions and reward them when they do so by reimbursing them at the highest level. Your consultant can provide options and best practice guidance about this tactic.
Also worthy of note, The Government of Ontario recently announced the launch of an initiative to switch patients from eight originator biologic drugs to biosimilar versions.8 Patients in Ontario using affected originator biologic drugs will have until December 29, 2023, to switch to a biosimilar version of their medications to maintain coverage under the province’s public drug plans. The number of insurers offering biosimilar formularies is expected to increase, resulting in significant savings for plan sponsors in Ontario if they amend their plans.
Ultimately, a group plan provides employers and employees with cost savings alike. By offering a collective group benefits policy, employers can often access lower premiums, which can help them save money while still providing quality coverage.
In our current economic environment, benefits are more important than ever. Group benefits provide many advantages for employers, such as improved recruitment and retention, enhanced employee morale and loyalty, and cost savings. By delivering comprehensive packages that cover extended health and dental care, life and disability insurance, vision coverage and more, employers can give their employees the peace of mind that their future is secure even during hard times. There are plans available for companies of all sizes that can be tailored to fit a company’s budget.