7 Misconceptions – Canadian Small Business Employee Benefit Plans
Our team at Brightin helps organizations across Canada implement and service their small business employee benefit plans. Here are the most common misconceptions we hear from our clients about small business employee benefit plans.
There are over 1000 new small business employee benefit plans implemented in Canada every month. Because the cost of employee turn-over and loss of productivity outweighs the cost of a comprehensive benefits plan, over 50% of small businesses offer employee benefits. So the largest group insurance carriers in Canada: Sunlife, Great-West Life and Manulife have teams dedicated to customizable small business benefit plans solutions. Benefit plans start at 2 employees with select insurers, and do not require employees to disclose evidence of good health. For more information on those, CLICK HERE to request quotes from all insurance carrier simultaneously with one of our local benefits specialists.
2. Employee benefits for small businesses are too expensive.
The premium for benefit plans depend on the following factors: chosen benefits, level of coverage, number of employees, and respective ages. For most full-time employees, the benefit plan cost starts at an average of 5% of payroll. That equates to an approximate $1/hour raise in pay for an employee with dependents, and about a $0.50/hour raise in pay for a Single employee. Furthermore, many organizations also have cost sharing where employees pay for a part of the plan. This allows employers to provide a very comprehensive plan, competitive in their industry and within budget. Rates are guaranteed for 15, 16 or 24 months, depending on the insurance carrier. Despite popular belief, a few insurance carriers offer stable/guaranteed insurance rates. So, small business owners do not need to worry about the annual increases.
3. Small businesses do not benefit from a health and dental package like larger organizations do.
Perception is often the driving factor in employee decision whether or not to join an organization. When an employee has a choice between a larger organization and a smaller one, benefits maybe THE determining factor. It is not that much more expensive for an employer to offer the most competitive plan in the market place. If a smaller organization offers a more generous benefits package than a larger one, a future hire might assume this generosity transfers into opportunities, bonuses or other benefits.
4. Small business employee benefit plans are too limited in coverage.
Starting at 2 employees, small businesses have almost the same access to benefits as larger organizations. They may choose higher limits and even 100% coverage for almost all benefits. That is not to say, there are no limitations at all. Here are the few limitations small businesses have:
At 2 employees, companies may only have Basic Dental coverage (cleanings, fillings, root canals, etc) Major Dental and Orthodontics is not usually available to this size.
a. Major Dental is usually available when an organization reaches 3 employees.
b. Orthodontics is usually available to employee groups of 10+ employees.
These guidelines however, are not black and white. In fact, very rarely are underwriting or insurer guidelines black and white. Experienced benefits brokers and consultants are often able to get exceptions and approvals plan set-up outside of the basic guidelines.
5. A small business employee benefit plans is more of a liability than a benefit to a small employer.
If a business implements a plan through a financial advisor or a broker who does not specialize in benefits, the plan may very well be a liability for the employer. That is why it is important to work with someone who specializes in the field who can ensure that your plan aligns with the insurer and CRA guidelines.
How do you know if your plan is compliant? Here are some questions you could ask yourself if you already have a plan:
Did my benefits advisor?
– Advise me on optimum plan taxability set-up? Payroll deduction set-up is very important for specific benefits like Life, AD&D, Critical Illness and Disability.
– Recommend that I implement clauses in my employee contracts to protect my business from liability. (** Consult legal counsel prior to making any contract changes.)
– Talk about the importance of timely and non-discriminatory enrollment of all eligible employees?
Most employee benefits specialists and benefits consultants do a great job in educating their clients on proper plan set-up and administration. At Brightin, we are a little bit different in that we handle out clients’ plan administration to ensure the plans remain compliant.
6. Many small businesses are ineligible for benefits based on years in business, industry or other factors.
There is a solution for any business out there. Underwriting guidelines change almost daily. What used to be a great risk for insurers ten or five years ago, has changed. Of course, there are still higher risk industries but even for those, there are solutions. The solutions may not be as flexible but they are available and quite comprehensive.
7. Small businesses can only offer benefits to full-time, permanent employees.
It is up to the employer to set-up the eligibility for the plan. If an employer wants to offer part-time employees benefits, it is possible. As long as employees work 20 hours per week, they will qualify under most benefits plans. Whether or not that makes financial sense for a business is another question.
Benefits are also now available for ”independent contractors”. If you wish to offer your independent contractor benefits, it is strongly advisable that you consult a tax lawyer prior to doing so. Generally, offering benefits to independent contractors does not change their status to employees. There are many factors which contribute to that equation. However, as an employer, you need to make sure you are safe and avoid what could be a very costly conflict with CRA.