Recession and Your Group Benefits Plan: Should You Cut Employee Benefits to Save Money?
The impending Canadian recession has many business owners thinking creatively to reduce costs and stay afloat. Some companies have determined that employee benefits plans are the first expenses to go. But is it wise to cut group benefits to save money?
In short, probably not. Read on to learn why reducing employee benefits can lead to harsh consequences for your business and learn other measures you can take to reduce your business expenses.
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Why You Shouldn’t Cut Group Health Benefits in a Recession
Many employees don’t view benefits as optional. When you eliminate them, employees may be apt to switch companies. Here are a few reasons to avoid cutting group health benefits as part of your recession strategy.
Employee Benefits Improve Retention
A Canadian study found that benefits are the second-most crucial element employees consider when choosing a job. Additionally, 70% of younger Canadians reported that they would switch jobs for better benefits.
Benefits are valuable to your employees, and without them, you risk losing the workforce you have strategically built since you started your company. While benefits may seem like an add-on, they’re non-negotiable for many workers. Reducing your benefits package is enough to drive away your employees.
Employee turnover is also costly for your company. One study found that replacing an entry-level employee costs around 50% of their annual salary, while replacing a high-level worker can cost upwards of 400% of their annual salary.
Employee Benefits Help Workers Feel Valued
Employees may not think twice about their employee benefits until you cut them. But when you do, your employees will assume that you don’t care about their well-being.
Offering employee incentives and rewards outside of a regular paycheck can show your workers that you value the time, effort, and skills they bring to your company each day. Offering top-tier benefits to your employees is one of the many ways you can help them feel valued, which can improve their loyalty to your business.
Employee Benefits Reduce Burnout
When your company goes through stressful periods — like recessions — you risk burning employees out with excessive responsibilities, exhaustion, and mental distress. The health benefits and employee wellness programs you offer can reduce employee burnout.
Group health benefits give employees access to the mental health resources and financial resources they need to:
- Cope well with stress
- Navigate health concerns effectively
- Avoid worrying about how they will pay for medical treatments
- Pay for services like counseling, massage therapy, physiotherapy, and chiropractic care to enhance mental and physical wellness
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Other Ways to Prepare Employee Benefits For Recession
Completely eliminating employee group benefits isn’t the only way to reduce costs and prepare for a recession. Here are a few other tips to keep in mind if the time is coming to renew your group benefits plan:
Budget Employee Benefits Appropriately
Before you begin cutting any expenses in preparation for a recession, you should create an in-depth budget detailing what you can currently afford. Calculate exactly how much your employee benefits cost per employee. Then, compare this figure to the amount you could lose if employees left your company.
You might realize that your existing group benefits plan doesn’t cost as much as you thought. If yours is breaking your budget, move to the next steps before cutting benefits entirely.
Consider Cost Control Measures for Benefits
Many insurance solutions and benefits plans include cost-control measures that can reduce some of the expenses in your existing package. For instance, if your insurance plan includes prescription coverage, you may be able to opt for generic drugs instead of name-brand to reduce your plan costs.
We recommend conducting a group benefits plan review or contacting your benefits provider to learn which cost-control measures are available.
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Understand Your Benefits Options
Your company may see no other option than to cut employee benefits. If this is the case, first consider restructuring benefits so that they offer comparable advantages for employees and save your business money.
For instance, if you use a third-party administrator, you may be able to switch insurance providers for no additional fee and without requiring re-enrollment. Switching your employees to a new insurance company could save you money without too much hassle.
You could also conduct a survey about which benefits your employees value most (life insurance, dental benefits, long-term disability, etc.) and which you could potentially alter.
At Advantage Pacific, we’re dedicated to enhancing group benefits for employers and employees. Call us today at 778-349-8774 for a no-fee, no-obligation review of your benefits plan to ensure that it is prepared for a mild to moderate recession.