Implementing a benefits plan is an exciting leap for many! For most businesses, offering a benefits plan is a facet of their compensation package that helps to make them competitive and aids in attracting and retaining top talent.
Before we get into the thick of it – it’s important to look at your benefits package like your first car. You want something that is efficient and reliable and leaves room for growth after gaining an understanding of how plans work and what your employees like to use. By starting off in the shallow end based on depth of coverage, you can test the waters before moving onto more detailed offerings. Let’s get started, shall we?
What Should My Budget Be For A Benefits Plan?
First and foremost, any talk about budget needs to be prefaced with the statement that a budget is a relative thing and depends on your unique needs. With that being said, you can use a range of, say, 2-10% of your current payroll and use that as a starting point. Keep in mind that this does not include government programs like EI, and CPP payments. Different plan design structures and the type of program you would like to offer (traditionally funded, ASO, HSA) can significantly impact what your spending could look like. It is also important to consider the size of your company.
One additional budget question to consider is whether or not you will cost-share with your employees. Some employers will cover the whole cost as part of a compensation package or opt to pay a certain percentage on behalf of the employee. It is not uncommon to see cost sharing; however, in principal, the employer should be prepared to cover no less than 50% of the cost.
What Do My Group Insurance Premiums Cover?
In a fully insured or ASO program, the premiums from your employee benefits plan will cover the cost of items such as health and dental, vision care, prescription drug coverage, life insurance, disability, critical illness, etc. In the case of a health spending account, a business owner can set up a specific amount for each employee, such as $1200 annually, and then pay an administration charge of 8-15% depending on the company and advisor that you’re working with.
Should I Involve My Employees In The Conversation?
Finding out what benefits are important to your staff is a step that many companies take when looking to implement or change an existing plan. To get their feedback, you can do a survey or run small focus groups to get a general sample of what employees will value most. In turn this supports an inclusive culture and empowers employees to participate in something they might be paying a portion of.
On that note, we do caution that everything is taken with a grain of salt. It’s great to get a general consensus but doesn’t get too caught up in the exact coverage. For example, asking employees general questions (do they prefer massage and chiropractic vs orthodontic coverage, etc.) is perfect to gauge the value of items. However, you want to stay away from pointed questions that involve numbers (I.e. $5000 vs. Unlimited in prescription drug coverage) as this may set up unrealistic expectations that may not be achievable within the scope of your current budget.
Getting The Best Plan Design For Your Budget
Working with an advisor or brokerage is a great way to begin your employee benefits journey. Within their role, they will have access to major carriers and in the case of HMA, some additional proprietary profit-sharing products. Not only will they be able to advise you on the best plan design and program fit for your organization, they also possess the ability to quote with many insurers and get you the most suitable price on the market. When buying benefits, think years 2, 3 and beyond. Unlike a car, or a house, benefits are essentially ‘re-purchased’ annually. Insuring companies look at the premiums you paid vs the claims that they paid and use a series of mathematical formulas to forecast what they think your claims will be next year. This forecast will dictate your next years’ premium.
Implementing a benefits plan doesn’t have to be overwhelming and scary. It should be exciting and working with the right advisor will ensure that you have a positive experience and enough knowledge of the process that you avoid unnecessary surprises, something the HMA team pride themselves in. Let’s talk today!