Ottawa, November 9, 2015—Despite cost containment efforts in recent years, employers spending on benefits programs for employees represents a significant cost. A new benchmarking survey conducted by The Conference Board of Canada shows that the average cost of providing benefits for employees is $8,330 per full-time equivalent.
“With the prevalence of chronic disease and incidence of mental health issues increasing, the costs of benefits have never been higher.” says Nicole Stewart, Senior Research Associate, Leadership and Human Resources Research for The Conference Board of Canada. “Employer-sponsored benefits are valued by employees, but in order to control costs, organizations are going to need to make tough decisions about where to best allocate funds.”
- With the prevalence of chronic disease and incidence of mental health issues increasing, the costs of benefits have never been higher. The average cost of providing benefits for employees is now $8,330 per full-time employee.
- Balancing cost containment to offer competitive benefits plans is a significant challenge for employers.
- Looking ahead, we expect employers will increasingly focus on health education, promotion and prevention to reduce benefits claims and manage costs.
For employers, providing benefits while containing costs is a constant priority. More than half of organizations (52 per cent) reported increases in benefits costs for active employees, averaging 6.2 per cent between 2013 and 2014. To manage these costs, some employers are looking to generic substitutions for prescription medicines or exclude certain drugs from coverage. Others seek to increase the employee share of premiums. However, these solutions only address part of the cost pressures facing employers. Organizations are increasingly turning to programs aimed at physical and mental health promotion and early assessment and intervention to help reduce the cost of claims.
Beyond preventative measures, employers are also keeping benefit costs lower by limiting certain long-term benefits to employees, for example, retiree benefits. More than half of the Canadian employers surveyed for Benefits Benchmarking 2015 offer benefits to employees after they retire, primarily covering prescription drugs, vision care, hospital stays, and dental and paramedical care. Between 2012 and 2015, the percentage of employers to limit retiree benefits only to “grandfathered” employees doubled among respondents.
Other trends revealed in the 2015 survey include:
- More than 90 per cent of employers provide full-time employees vision care coverage (92 per cent); private or semi-private hospital accommodation (96 per cent); out-of-country medical coverage (99 per cent); paramedical services like massage therapy, chiropractic coverage, and physiotherapy (99 per cent); major restorative dental services (98 per cent); accidental death and dismemberment (91 per cent); and long-term disability (99 per cent).
- The survey also found that nearly all organizations provide benefits for permanent part-time employees who work a minimum number of hours per week (on average 20 hours or more).
- Most organizations don’t have a set annual maximum for prescription drug coverage, but on average, reimbursement is limited to 89 per cent of the claim. Annual maximums are typically in place for dental work.
- Over the past three years, there has been a significant increase in the number of employers offering full-time employees critical illness insurance (from 26 per cent to 35 per cent)—though more as an optional benefit than a standard one.
Drawing from a survey of hundreds of Canadian employers, the Benefits Benchmarking 2015 report offers a full range of comparisons for mid- to large-sized employers across Canada. The findings the report will be presented at live webinar on January 12, 2016 at 2:00 p.m. EST.