Benefit costs are increasing at an unsustainable pace, according to a Conference Board of Canada report.
Benefit costs have increased by almost 10 per cent in the past year, found Benefits Benchmarking 2009: Balancing Competitiveness and Cost, based on a survey of 255 organizations.
With costs accelerating at a year-over-year rate of 9.7 per cent, organizations are finding it a challenge to offer an attractive benefits program while containing costs, stated the report.
“Last year was a challenging one for employers. Now that the economy has emerged from the recession, employers are looking to find the right balance between containing costs and ensuring that benefit programs are competitive in attracting and retaining key talent,” said Karla Thorpe, associate director of compensation and industrial relations at the Conference Board.
The average cost of employee benefits is 19.9 per cent of gross annual payroll. Costs are slightly higher in the public sector at 22.5 per cent of gross annual payroll, compared to average private sector costs of 18.8 per cent.
Although the economy has started to grow again, several issues are changing the employer-sponsored benefits landscape. These include an aging population, which is increasing utilization rates for benefits, as well as new and expensive drugs that are now on the market and an ongoing shift of costs from public health care to employers.
Legally-required payments — Canada Pension Plan/Quebec Pension Plan contributions, employment insurance premiums, workers’ compensation, and other expenses such as the Ontario Health Tax — make up about one-third of all spending on benefit programs.
Retiree benefits are offered by 45 per cent of respondents, and employers that offer these programs are looking at models that include greater employee cost sharing. The average annual cost of benefits for retirees was 1.9 per cent of gross annual payroll.
Most organizations (78 per cent) say they have well-developed benefits strategies but only 14 per cent believe their benefit programs are very effective at meeting the objectives of their strategies.
Areas where employers fall short include: enhancing employee health, containing costs and increasing the connection between benefit programs and employee engagement.
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