What stops small businesses from offering benefits?
BY Chris Presley, BenefitsCanada.com | July 7, 2015
But for small employers, offering a benefits plan is easier said than done.
While many small business owners want to provide their employees with some degree of coverage, obstacles stand in the way. As a result, many of the almost eight million Canadians who work at a small business are left without coverage, according to 2013 government stats.
A 2011 LIMRA study shows 72% of Canadian employers with 50 to 99 employees offer some sort of health benefits. That number drops to 53% for employers with 20 to 49 employees, 34% for those with 10 to 19 employees and 24% for those with five to nine employees.
What’s holding these employers back? Over the past few years, I’ve met informally with small business owners across Canada in a range of industries to discuss the challenges. Here are the main ones they’ve identified.
Diverse needs – Small employers traditionally haven’t had the same benefits options as large companies. While their teams are small, they still include people from a range of age bands, family situations and health profiles. The one-size-fits-all benefits plans typically available have made it difficult to meet those diverse needs. And small businesses don’t want to take on the effort and cost of offering a plan their employees will neither use nor appreciate.
Financial concerns – Small business owners told us cost—particularly cost predictability over the long term—is a big concern. They want to avoid making a commitment to employees they can’t sustain. They also wonder what amount of cost-sharing is fair, how to broach the subject of sharing costs with their staff and how to help them understand the value of their benefits program within their overall compensation.
Expertise gap – Unlike large companies with sizeable HR departments, the person making benefits decisions at a small company is often the owner. He or she may have no background or expertise in HR, let alone an understanding of group insurance.
Business owners are also concerned about the day-to-day demands involved with offering a health benefits plan, as well as how much of their busy schedule would be spent learning about the plan and looking after the details. And they wonder how much service and support they can expect to receive in areas such as employee communications and education.
Other business owners just don’t know where to begin: they don’t know where they should go to investigate the options or who to turn to for objective advice.
What to do
So how can business owners move forward? The first step is to realize it is possible for a small business to have a group benefits plan that meets its needs.
Ask the right questions.
Here’s what small employers need to ask themselves before deciding on a benefits program:
1. Why do you want to offer a benefits plan?
2. What will be the program’s main goals?
3. What are employees’ needs, and how will they change over time?
4. What’s the annual budget for providing coverage?
5. Will employees understand the benefits offered?
The next step is to choose a solution— many cost-effective products and services are available to fit a range of objectives and budgets. But first, you need to understand what you want to accomplish with your benefits program.
Employers that want to provide industry-competitive benefits at the lowest price might consider more traditional benefits solutions with basic life, extended health and dental coverage.
Employers looking for a lower-cost option may want to go with DC-style programs such as a stand-alone healthcare spending account (HCSA) or some of the new flex options that are fully pooled.
Employers whose goal is to combine flexibility while controlling costs may look at a hybrid benefits plan that reduces traditional benefits coverage in exchange for an increase in HCSA credits.
Finally, for employers that want to use the benefits plan as a tool to attract and retain skilled employees, flex programs could be an option.
Making the decision to offer benefits and choosing the right ones isn’t easy. But small business owners can start with a small step: know what you want to achieve with your benefits within your allocated budget.
Chris Presley is regional vice-president, national consulting and myFlex Benefits, with Equitable Life.