Benefits vs. a Raise
Posted 06 Jun 2014 by Melissa Allan
Many studies have shown that an employee benefit plan is actually more valuable to employees compared to a raise. If given the option, employees indicate extreme value in their health benefits.
The Sanofi-Aventis Health Survey1 in 2011 indicated when a group of employees were offered a $10,000 raise vs. health benefits 59% voted to keep benefits, 31% to take the money and 10% didn’t know what to do. All generations took place in these studies, not just those with current health issues. Sun Life Financial proprietary research2 conducted a study in 2011 (made up of employees in their 20s and early 30s) and it revealed this group values group benefits with focus on health and wellness benefits that could prevent health issues down the road.
A healthcare benefit plan is tax effective for both the employee and employer. Traditional benefit plans are set up where the employee pays at least the life insurance and disability cost so these benefits are paid out tax free if a claim were to occur but most provinces allow health and dental benefits as a non-taxable benefit to the employee. A salary raise of $2,000 will net the employee much less based on their income tax rate, CPP and EI premium deductions. An example is shown above.
The employer saves too! If the employer paid 100% of the cost of health & dental benefits, they are subject to provincial tax but for a business owner giving an employee a $10,000 raise is also subject to additional Canada Pension Plan and Employment Insurance Premiums that is mandatory on employee salary by the employer. In addition, if the employer is kind enough to offer their employees a Group RRSP/pension plan, increased salary means increased employer contributions into such pension plans as these limits are normally income based.
At the end of the day, you won’t make everyone happy but the cost of health care is certainly increasing with government benefits being lowered, inflation to health care costs, and long waiting lists.
If you are a small business owner and you value your employees, which I’m sure you do, I urge you to do a similar survey with your employees to find out what they value the most. If you want to keep and/or attract long term, loyal employees, it’s a given that benefits and pensions need to be offered eventually.
If you are reading this as an employee, I urge you to print this article and bring it to your employer for their consideration!
As an insurance broker, I can offer clients a market analysis based on their group needs. I go to several companies for quotes and compare the results to ensure that you’re getting the best price and plan design based on your needs.
Let me know if you have any questions or are interested in more information.
1Sanofi. (2014). The Sanofi Canada Healthcare Survey. Retrieved from http://www.sanofi.ca/l/ca/en/layout.jsp?scat=C3588838-0978-4F25-9A92-6F37FA912C05
2Jones, David. (2011). Group Benefits and Generation Y. Sunlife: Brighter Life.. Retrieved from http://www.sunlife.ca/Canada/smallbusiness/Focus+news/Past+issues/2011/Benefits+Canada+article+on+