Flexible Benefits


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Adressing the topic of Flexible Benefis from it\'s definition to emergind trends that will affect compensation in the workplace

-Presented at the HRPA of Peel Compensation Dinner on 21st January 2009.

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  • Flexible Benefits

    1. 1. Flexible Benefits Navraj Singh – University of Toronto, Hons B.A Nathalie Dobson- University of Toronto, Hons B.A Saima Ramzan –University of Toronto, Hons B.A Khadine Chatoor- University of Toronto, BBA Specialist
    2. 2. Agenda 1. Flexible Benefits – What is it? 2. Employer Compensation Objectives and Costs 3. Employee Needs and Costs 4. Tax Implications 5. Cost Savings 6. New and Emerging Trends 7. Challenges
    3. 3. What are Flexible Benefits? <ul><li>Benefits that allow individual employees to choose the benefits that are best suited for their particular needs </li></ul><ul><li>Types include: </li></ul><ul><li>A. Cafeteria Plan </li></ul><ul><li>B. Module Approach </li></ul><ul><li>C. Core-Plus-Options Plan </li></ul>
    4. 4. Company Examples <ul><li>Insurance company </li></ul><ul><li>Core-plus-option plan </li></ul><ul><li>Audit, tax and advisory services </li></ul><ul><li>Cafeteria style flex plan </li></ul><ul><li>Financial banking and insurance </li></ul><ul><li>Offers cafeteria style flex benefits including credits </li></ul><ul><li>Manufacturing and distributing </li></ul><ul><li>Uses a modular flex plan </li></ul>The Co-operators KPMG Royal Bank of Canada PEPSI Bottling Group
    5. 5. Employer Compensation Objectives <ul><li>Cost control </li></ul><ul><li>Attract employees (“war of talent”) </li></ul><ul><li>Motivate employees </li></ul><ul><li>Employer as a “big brother” </li></ul><ul><li>Adapt to constantly changing work force needs </li></ul>
    6. 6. Cost to the employer <ul><li>Health benefits </li></ul><ul><li>Communication </li></ul><ul><li>Administration </li></ul><ul><li>Negotiations </li></ul><ul><li>IT and online tools </li></ul>
    7. 7. “ Several sizes fits most” <ul><li>Shift from one size fits all to several sizes fits most </li></ul><ul><li>Flex benefits addresses individual preferences </li></ul><ul><li>BenefitsCanada.ca </li></ul><ul><li>Diversity in the workforce </li></ul><ul><li>Generational and cultural challenges  creative solutions. Part of that creative solution is including flexibility in their benefits to reflect the diversity. </li></ul>
    8. 8. Linking Flex benefits with employee satisfaction
    9. 9. Cost to the employee <ul><li>Putting the onus on the employee to choose their own benefit plan </li></ul><ul><li>Limited choice </li></ul><ul><li>Lower waged employees may be disadvantaged </li></ul><ul><li>Shifting larger portion of the total cost from the employer to the employee </li></ul>
    10. 10. Tax Implications <ul><li>Employer </li></ul><ul><li>Government Sponsored Plans (Shared cost) </li></ul><ul><li>Employment Insurance (E.I.) </li></ul><ul><li>Canada/Quebec Pension Plans </li></ul><ul><li>Employee </li></ul><ul><li>If the pension plan is registered, employee contributions are tax deductible </li></ul><ul><li>Provincial Health Care </li></ul><ul><li>(Company-paid) </li></ul><ul><li>If an employee lives in Alberta or British Columbia, the Company pays your provincial health insurance premium in full </li></ul><ul><li>Payment of this premium is considered a taxable benefit to the employee </li></ul><ul><li>Payroll and income taxes cover the cost of these premiums in all other provinces </li></ul><ul><li>If the employee opts to take cash vs. benefits it’s taxable, means the employee has to pay the tax </li></ul><ul><li>If you put the cash into your spending account, the company pays the tax </li></ul>
    11. 11. Cost savings on all benefits <ul><li>Employers can set limits on benefits cost by allowing employees to “buy” benefits up to maximum defined limits </li></ul><ul><li>Employer reduces benefit cost by allowing employees to share cost of buying benefits (with shared contribution plans) </li></ul>
    12. 12. New and emerging trends <ul><li>Current use: </li></ul><ul><li>By 2007- 52 % of companies surveyed plan to use flex plans or were already using </li></ul><ul><li>33 % anticipate offering them in the future. </li></ul><ul><li>Results of those currently using flex plans: </li></ul><ul><li>Meeting or exceeding their expectations in addressing employees' needs. </li></ul><ul><li>Improving employee recruitment and retention </li></ul><ul><li>Containing rising benefit costs.   </li></ul>
    13. 13. Main Trends <ul><li>28% sabattical leave </li></ul><ul><li>>50% plan to offer fitness membership </li></ul><ul><li>- 21% of companies plan to offer lifestyle and wellness accounts by 2008 </li></ul><ul><li>30% plan to offer critical illness coverage in the future </li></ul>-38% of companies offered them in 2005, up from 10% in 2002 -36% offer flex benefit options to retirees -Most popular option -85% of companies offer health spending accounts Medical and Dental RRSP’s Upcoming
    14. 14. Challenges <ul><li>As more companies plan to implement flex benefits, their biggest challenges are: </li></ul><ul><ul><li>Administration (33%) </li></ul></ul><ul><ul><li>Communication(21%) </li></ul></ul><ul><li>Third-party administrators or insurance carriers for record keeping </li></ul>
    15. 15. Conclusion <ul><li>Flexible benefits come in three forms and is unique to an organization and employee preferences </li></ul><ul><li>Flexible benefits serve to satisfy employee needs from basic to recognition levels </li></ul><ul><li>Employers use flexible benefits to contain cost and attract and retain employees </li></ul>
    16. 16. QUESTION 1 <ul><li>What flex plan do The Co-operators use (as given in our company example) ? </li></ul>
    17. 17. Answer: <ul><li>-Core plus </li></ul><ul><li>Discussion: </li></ul>
    18. 18. Question 2 <ul><li>What is the most popular trend in flex plans? </li></ul>