Employee benefits still significant cost for employers

Average employee cost per year $8,330: Survey
|payroll-reporter.com|Last Updated: 11/09/2015

Despite cost-containment efforts, employer spending on benefits programs for employees represents a significant cost. The average cost of providing benefits for employees is $8,330 annually per full-time employee, according to a survey by the Conference Board of Canada.

“With the prevalence of chronic disease and incidence of mental health issues increasing, the costs of benefits have never been higher,” said Nicole Stewart, senior research associate at 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.”

More than one-half of organizations — 52 per cent — have 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, said the Conference Board.

Beyond preventative measures, employers are also keeping benefit costs lower by limiting certain long-term benefits to employees, for example, retiree benefits.

More than one-half of the 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 limiting retiree benefits to “grandfathered” employees doubled among respondents.

Other 2015 survey trends:

• 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).

• 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.

• A significant increase in the number of employers offering full-time employees an optional critical illness insurance (from 26 per cent to 35 per cent).

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