STRONGER HUMAN CAPITAL WITH BENEFITS
I found this fantastic article on value of employee benefits from our partners at CLU Institute.
Many small business owners often overlook employee benefits because of cost or administrative burdens. What you’ll see however is that benefits are investments an employer makes that can dramatically improve how their business runs.
Sean
Finding stability in times of uncertainty:
Adam Peros, CLU, CEBS, CHS I Financial Consulant
For many Canadian small business owners who are considering employee benefits, meeting their employees’ health needs is vital to growing their company by attracting and retaining top talent.
If you are a small business owner and have been thinking about offering employee benefits you most likely have looked into the cost benefit analysis; what will it cost me and is it worth it?
According to a 2023 Blue Cross Business Benefits Study, 80% of employees consider a business’s benefit plan prior to making their employment decision and another 73% would remain with their current employer over better pay at another company. Furthermore, 84% of Employees who
work at a firm with an existing health benefits plan would not change employers to one that did not offer health benefits.
In fact, 72% of small Canadian businesses (up to 100 lives) already offer benefits to their employees where as 94% of mid-sized business (100-500 lives) offer benefits.
Just under 50% of employees in Canada would rather have a health benefits plan over a $40,000
raise. Another finding was that not having benefits can increases business’s risk and
create substantial difficulties.
The same Blue Cross survey found that 76% of employees without health benefits would change
employers for better health benefits. The absence of benefits increases a small businesses risk of
lower employee productivity (21%) and falling behind the competition (19%).
“What we’re seeing now is that employers can’t afford not to have a benefits program,” said
Alaina Mackenzie, regional vice-president of business development at Medavie Blue Cross in
a Benefits Canada Article from 2021. “The value proposition that employers bring to the table
positions them as the employer of choice for prospective employees and their benefits
programs are part and parcel of that employee value proposition.”
91% of employee’s appreciated their benefits plan’s effect on their overall health and welfare, 89% of employees showed similar appreciation regarding their benefits contribution to their financial safety and 37% of employees stated peace of mind as the main reason they value their benefits plan.
Conserving the output employees contribute to a business’s success can be difficult when
you consider the amount of change Canada’s workforce has seen since the pandemic. According to respondents in an ADP Canada
survey conducted by Maru Public Opinion, employees left their occupations for the following main reasons; better income (32%),
career change (29%) and a taking a more senior position (17%).
Conversely, business owners selected the following as the top benefits of working for a small business; 53% said better work-life balance followed by 48% with more flexible schedules, 40% chose a closer relationship with the owner and/or executives, 36% of owners chose a stronger team bond as their reason and finally greater attention from management paid to their employees well-being and mental health was selected by 35% of business owner respondents.
In a separate Benefits Canada piece from the same year, Simon Bourgeois, Humi’s chief executive officer and co-founder said, “Offering benefits is key these days as “the demand for talent [has] skyrocketed,”. “The dial has been turned up with regards to recruiting process speed and hiring packages. It’s not just about salaries anymore. Canadians are recognizing
the value of work-life engagement, a better and more robust compensation package and the value of feeling like they belong.”
Business owners will undoubtedly face struggles in their nascent years as can be seen in the most recent Stats Canada Entrepreneurship indicators of Canadian enterprises report. 83% of businesses that closed in 2020 had 1-4 employees specifically in the professional, scientific and technical services sector which accounted for 16%. Conversely, small businesses also accounted
for 100,780 births (85.4%) which is a motivating highlight concerning job growth. 17.3% of these births were also in the professional, scientific and technological services sector.
With that being noted, it’s important to not only be cognizant of the connection that offering benefits can have in attracting the most qualified employees to help getting small businesses off the ground but also in offering the most suitable and relevant benefits in attracting those workers. Different industries value different benefits as can be seen in a September 2023 study by one
of the industry leading Third Party Administrators (TPA’s), Benefits By Design. They interviewed 4,600 of their group benefits clients. What they found was the following;
- Employees in the finance and insurance
industry received the greatest coverage
concerning Long term disability (LTD 61%)
Employee assistance plans (EAP 19%) and
Health care spending accounts (HCSA 25%). - Companies in the construction industry lead
the way in offering dependant life coverage with
62% compared to 49% – 58% in a majority of the
other industries.
-Extended Health (98%) and Dental Care
(97%) were mostly offered by groups in the
Accommodation and food services however
other benefits being offered at lower percentages
dropped them lower in the overall ranking
- Short Term Disability coverage was offered
most frequently in the Educational services
industry at 12%. - 49% of groups offered Critical Illness in the
Educational services compared to 25% – 35% for
the majority of other groups - Diagnostic Specialist Access (DSAI) which
most industries only offer at 0-2% came in at
6% in Manufacturing.
The industries with the overall best employee
benefits ranked out of 5 stars in descending
order were; Finance and insurance, Educational
services, Construction, Professional, scientific and
technical services/Information technology (IT),
Retail trade, Health care and social assistance,
Manufacturing and finally Accommodation and
food services.
It’s no surprise these same industries also account for a significant percentage of HGF (high growth firms) which are companies that substantially increase in employment and revenue in a relatively short period of time.
According to the OECD (Organisation for Economic Co-operation and Development) HGF are firms with a minimum of 10 employees that have seen average annual growth of greater than 20% in employees or revenue over a consecutive
three year period. The most recent study conducted in 2017 by stats Canada shows us that HGF accounted for 41% of net employment changes from between 2009-2012.
How does all of this data concerning the current status of the Canadian job market and group benefits relate to what we are seeing now? Based on the most recent annual stats Canada survey from 2023, there were 1.22 million employer businesses in Canada. 97% of these were small and 1.95 were mid-sized with more than half of the small business made residing in Ontario and Quebec. 21.6% of theses business are in the goods producing sector with the remaining 78.4% in the service producing sector.
More than half of Canadian businesses are between 1-4 employees while businesses with
5-9 employees brings that number up to 73% meaning three quarters of Canadian business
have between 1-9 employees. Other key findings from the reports were as follows:
- More than half of Canadian business
are in – professional, scientific and technical
services, construction/retail trade, health care
and social assistance, other services industry.
- 17.2 million people were employed with
71.1% in the private sector and 28.9% in the public
sector. Of those employed in the private sector
63.8 % were employed by SME compared to
30.3% in the public. Of that 63.8% of the private
sector in the SME, 46.8% or 5.7 million worked
for small business 1-9 employees with 17% or 2.1
million in mid-sized business. - SME’s account for over 70% of
employment in at least 4 industries;
construction, accommodation and food services,
real estate and rental and leasing and professional,
scientific and technical services. - During the pandemic, there were many
small business closures specifically in the
service industry. In 2021 recovery began
eventually reaching an annual growth rate
of 7% in 2022 with the addition of 802,550
new jobs in the private sector. Small business
accounted for 329 491 (6.1% growth rate) with
mid-size business 146,570 (7.8 % growth rate). - From 2021-2022, 84% of total net
employment change was attributable to
business in the service-producing sector
specifically accommodation and food services
and professional scientific/technical services.
These industries accounted for 47% of the
change in the service producing sector. The
remaining 15% of the total net employment
change came from the goods-producing sector
specifically construction, manufacturing, and
natural resource extraction. - Over the last 5 years (2016-2020)
100,475 small businesses were established
annually with 96,548 closing. Between 2001
and 2020 the number of small business increased
every year except for 2013, 2016 and 2020.
This net result between an increase or decrease
in the number of businesses is described as
“creative destruction.”
- 2023 saw business insolvencies rise by
41% compared to 2022 which was the largest
increase in more than 3 decades. The 3 industries
with the largest increases were Accommodation
and food services (43.8%), Retail trade (53.2%),
Construction (31.2%). Despite this, the closure
and opening rate for businesses were equal with
both at 4.6%.
The most recent analysis on small business in
Canada, second quarter of 2024 by Stats Can
found that small businesses had less optimism
about their future, expected a decrease in
profitability, an increase in cost-related obstacles
and were unlikely to hire new employees.
It’s not all doom and gloom. Small businesses
were less expected to anticipate labour-related
hurdles and while the number of active
businesses dropped in 2023 on a monthly basis,
the monthly average was greater than in previous
years, indicating positive growth.
Canada’s overall economy and labour market has
shown signs of volatility creating turbulence for
small businesses. A small business’s infancy can
be characterised by meager earnings followed by
thin or negative profit margins. Sometimes just
withstanding the storm is of most importance
pertaining to long term viability. Providing a cost
efficient benefit plan that is suitable to you
employee’s most important needs, can help you retain your talent to
survive another day.
Republished with permission from CLU Institute
