For many years, Canada has been in a challenging labour market with nearly record-low unemployment rates due to the challenges of the COVID-19 pandemic, the pressures of inflation and the fears of a recession. The labour market challenges have impacted small businesses, in particular, as they have had to fight for key talent with much larger organizations.

As part of that fight, employee benefits plans have become even more critical. Employees continue to see these plans as being very important, typically ranking behind only salaries when choosing to join or stay with an organization. Beyond employee metrics and job satisfaction scores, many employees simply have an “entitlement mentality” around employee benefits and expect them to be part of their total compensation package with any employer, large or small.

Here are some of the considerations to make when deciding on an employee benefits plan and the advisor who will implement and manage the plan:

Too often, small businesses get a rude awakening at their first, and possibly their second, renewal with significant rate increases.

Plan costs

Based on ZLC data, employee benefits for small businesses can often range from $3,000 to $4,500 (on average) per employee per year, depending on the type of plan and the employee demographics.

A big part of this cost are the expenses charged by the insurer, the administrator, the advisor and sometimes the association sponsor. That’s a lot of mouths to feed. If disclosed (unfortunately most don’t), these costs typically represent 25 to 30 per cent of the premiums paid. Essentially, for every dollar of premium paid, only 70 to 75 cents is ultimately going to pay employee claims and the rest is overhead.

ZLC’s solution is a “buying consortium,” which means that ZLC essentially buys benefits “in bulk” and thereby achieves lower expenses by way of economies of scale and the purchasing power of hundreds of small businesses. ZLC typically generates 10 to 15 per cent savings when employers join their solution and these savings are not simply up-front “marketing discounts.” These savings are sustainable as they are driven by lower overall expense charges year over year.

Volatility

Too often, small businesses get a rude awakening at their first, and possibly their second, renewal with significant rate increases. If “marketing discounts” were provided to attract the plan sponsor, they would undoubtedly unwind and the insurers would apply overly aggressive inflation trend assumptions.

ZLC’s renewal methodology for the small business employee benefits solution effectively puts “more insurance back into insurance.” ZLC’s clients are protected from premium rate volatility from year to year by offsetting the claims experience of all participating clients, which results in a smoother ride for all clients over the long term. As well, ZLC clients benefit from the underwriting strength of the group as historically the ZLC annual inflation rates are approximately four per cent below industry trends and even further below the “trend factors” used by insurers in underwriting.

Small businesses should feel like their advisor is an extension of their administration team so that they can receive solutions in a timely manner.

Limited plan design options

Not surprisingly, most insurers limit their exposure to high claims relative to low premiums from smaller plans by limiting the plan design options available to small businesses. For example, ZLC often sees insurers require lower reimbursement levels, or annual or lifetime plan maximums.

Given that ZLC clients are part of a buying consortium with over $12 million in annual premiums, they have more leverage with the insurers. As such, they have more flexibility in their plan design so that it meets the needs of their employees rather than the needs of the insurer.

Service and support

Based on ZLC’s experience, small businesses need more support for their employee benefits program. They typically have limited resources as they are trying to grow their business, and most do not look to hire an internal benefits or broader HR specialist until they become much larger.

Regardless of size, all ZLC clients receive comprehensive service from their own dedicated service team of three service professionals at ZLC. Small businesses should feel like their advisor is an extension of their administration team so that they can receive solutions to their problems in a timely manner. 

ZLC Employee Benefits Solutions is one of the fastest growing advisors for employee benefits and group retirement programs in Vancouver. They provide value by leveraging a skilled benefits team – collectively over 400 years of experience within their team of 20 employee benefits specialists. They have been working with businesses ranging from three to over 75,000 plan members for over 35 years.