What’s driving benefits decisions for employers?

Just over a year ago, the turnover rate at Spring Activator stood around 46 per cent.

Today, it sits closer to 18 per cent at the small incubator firm, with a “huge shift” in retention and reductions in non-voluntary exits, says Avary Kent, chief people officer.

“We have more stability now than I think we’ve ever had.”

That’s good news considering many Canadian employers say their top two challenges – when it comes to benefit decisions – are employee attraction (64 per cent) and retention (57 per cent).

Those are each up five points over 2022, according to a recent Gallagher report.

“There is still a ‘war for talent’.... of key individuals for key roles across multiple businesses and multiple industries,” says Sarah Beech, CEO of Gallagher's Benefits and HR Consulting division in Canada.

“There’s still not enough people. And so then, you tie that to turnover where people are ‘stealing’ candidates… with more lucrative offers.”

The compensation conundrum

More than one in three (36 per cent of) Canadian employers experienced turnover rates of 15 per cent or more in 2022; a further nine per cent had a turnover rate of 30 per cent more, according to Gallagher.

And when it comes to the biggest driver of turnover, compensation easily comes out on top, according to three in five (60 per cent of) employers.

Top factors impacting turnover

^{Source: Organizational Wellbeing, Gallagher}

But competing on compensation alone is no easy task, and not the most advisable strategy.

“If someone's attracted by larger compensation, then what happens to their progression over time, once they get to where they are?” says Beech.

“If you pay that much more to someone coming new into the organization, what happens to everyone else that have been loyal, hardworking employees, who maybe are at a different pay level, for years and years?”

Overall, many employers are looking at benefits more from a total rewards perspective, says Beech.

“Pay is one component, but the value of your retirement and employee benefits can be huge and worth so much… many retirement programs are also trying to be a bit more flexible and helping people take advantage of first-time homebuyers through the RSP governmental program; some are even doing the employer match in a retirement program, but paying off student debt,” she says.

“[It’s about] looking for how can we encourage people to participate and save and benefit at multi points in an employee's journey through their career?”

Total rewards include PTO, professional development

In looking at which total rewards have been enhanced to meet recruitment and retention objectives, the Gallagher report found base salary (69 per cent) came out on top, followed by wellbeing initiatives (42 per cent).

Total rewards enhanced for recruitment/retention objectives

^{Source: Organizational Wellbeing, Gallagher}

At Spring Activator, the small company has seen success with retention in focusing on culture, new policies and a different hiring strategy that focuses less on people with entrepreneurial spirit, says Kent.

“We're actually sometimes a little less concerned about perfect skill set match,” they say. “I subscribe to the good-to-great philosophy — get the right people on the bus, and then you can get them on the right seats on the bus. And so we've had a lot of folks who actually entered by interviewing for one position, but actually ended up in a completely different position, either through the interview process or after we hired them and just learned more about their skills or what they do.”

The company has been in a high period of growth, which has meant corporate bonuses and raises entirely across the board, says Kent — but it has also been rethinking its paid time off (PTO) accrual process and professional development budget.

Instead of people being rewarded with extra time off after three or five years, that’s changed to an annual bump “to keep the team motivated,” says Jitender Banga, people operations and finance manager at Spring Activator.

On the development side, the company used to subscribe to a model where everybody got the same amount, she says.

“In doing so, it doesn't take into account a lot of the additional things that we're doing with the entirety of the team — so, DEI training, training that's specific to roles that people are having, and then just also being able to empower the team to go out and find the things that they think they need… and being able to use that information to help support them in their career journey.”

A couple of years back, people were allotted $1,500 for professional development each year, but nobody was using it, says Kent, “because culturally the systems were not in place.”

“People never felt like they could take the time, they never felt like they could ask… it was just like this thing that was in their employment agreement, but it was never talked about it, was never visible. And we've done a lot to really shift that narrative and ship the investment.”

After joining the company, Kent developed a KPI that became the percentage usage of these benefits.

“That's another element of the total comp is not just having it on paper, but making sure you have the cultural and structural support for folks to actually use the benefit. And now we're up to 50% usage, and actually, with the plan for this slight new shift, we anticipate 100% usage next year.”

Benefit costs less of priority

Interestingly, an “intensified focus on attraction and retention has effectively demoted control of employee benefit costs as a top priority,” says the Gallagher report. Only 29 per cent of employers list it as one of their greatest challenges — down from 37 per cent in 2022 and 52 per cent a year earlier.

Generally, challenges that strain financial management the most include the high costs of specialty drugs (51%), non-specialty drugs (43%) and medical services (43%).

There are several ways to manage costs, says Beech, but employers should begin by asking some tough questions, such as: What is your business strategy? Who are you as a business? Where are you headed? What kind of talent do you need today? And for tomorrow? Do you have succession issues?

“Then, use their own data about their current employees, and the production of their business to build a strategic value proposition for what they need to support,” she says.

It’s about doing the analysis to understand what’s offered today, what’s the strategy for the future, where are the gaps, says Beech. It’s also about surveying employees about what they value today — and giving them options.

“One of the things we talk about with to employers is ‘How do you look at the whole continuum and look at the whole person, as opposed to just the claims cost and the numbers on a page?’ [For example] by providing more benefits and access to care from a mental health practitioner perspective, it will cost more upfront, but the likelihood and the hope and desire is that if someone is cared for upfront, they will not be go on disability, they will not have to go off work, which are large costs — let alone the pain and suffering from it for an individual that could lag for years.”

One big upcoming project at Spring Activator will be a review of the benefits plan which hasn’t been updated in several years, says Kent.

The plan includes bereavement leave, parental leave and personal health leave, plus a basic stipend of $1,000. But a lot of people aren’t quite clear on how to use the stipend, says Banga.

“In looking at the next phase of benefits for the company, it’s thinking about things from a place of something traditional, where people understand how the medical, the dental, the mental health coverage works; maybe something in the realm of figuring out how retirement planning works, something that helps to empower our team…. putting together a piece relating to the healthcare side that is a little bit more intuitive for the team to be able to access.”

Two-thirds (66 per cent) of working Canadians who have access to employer-provided benefits rate their overall wellbeing as good or excellent, compared to 49 per cent of those without these benefits, according to a separate report.

Communicating your benefits

Of course, actually educating employees about their benefits plan, with the support of communications, helps to increase the perceived value of this investment. However, about half of employers (52%) have not yet taken advantage of this opportunity or their efforts are either infrequent or limited to new hires, finds Gallagher. The other half reach out to employees regularly — typically at annual intervals (29%), while others connect either every two years (5%), semi-annually (6%), quarterly (6%) or monthly (2%).

“There's a huge focus on communication of the employee value proposition. Because if you're not letting people know what they have, then they will leave just for the compensation component,” says Beech.

“So we're really seeing a lot of discussion about a ‘What is the employment value proposition? What is our strategic value to our employees? And then how do we deliver on that through all of the programs that we design and offer?’”

“Because having a laundry list that you don't communicate and you don't connect the dots as to the why you offer them, then it won't resonate with people.”