Tempting Cuts

As organizations look to identify cost savings that will avert layoffs during tough times, employee benefits will likey come under review. While cuts to benefits may be tempting, employers are urged to keep longterm goals and outcomes in mind.

“You shouldn’t impose a short-term solution that, in the end, might bite you,” says Brian Lindenberg, leader of Mercer’s health and benefits business for Western Canada. “This economic environment will pass, and we’re still going to have a shortage of skilled labour in this market. You don’t want to do anything to drive people away in the short term.”

Sean Maxwell, an associate with Bennett Jones LLP, points out that changes to benefits plans are slow to realize any cost savings, making them a bad interim choice. “There are significant costs associated with introducing a new benefit [plan] design,” he says. “So even if the cost of the new plan to the employer has been reduced, significant cash flow improvements will not be apparent in the short term.”

As an alternative to benefits cuts, Lindenberg suggests the introduction of healthcare spending accounts, preferred provider arrangements, and the utilization of free or valueadded services from insurers and government agencies. Bundling these together, he says, will maintain a decent level of benefits for employees.

According to an independent consultant, Jane Petruniak, while these are all viable options, it’s time that employers addressed the elephant in the room and considered increased employee contributions. “The last sanofi-aventis survey I read tells me that Canadians are abundantly aware that the costs are increasing. Workers don’t want benefits reduced, so they’d rather share in the costs. Wouldn’t this be a great opportunity for employers to get back to that mode of thinking?”

Petruniak adds that organizations can avoid increasing insurance premiums if they capitalize on their strengths, particularly as a group. Small and mid-size companies should consider forming or joining existing boards of trade and chambers of commerce. “If 10 local employers go to an insurance company to seek a better deal, they’re much more likely to respond than if they were approached one at a time,” she says.

Much of the battle for cost savings is fought on the internal communications front, according to Lindenberg—which, in turn, requires strong leadership. He explains that effective communications, even if the news is bad, engender a “we’re-all-in-this-together” spirit—an idea supported by François Poirier, a senior consultant with Watson Wyatt Worldwide.

“Leadership is critical in a time of crisis, both in managing the bottom line of your company as well as keeping employees engaged and motivated,” he says. “In order to do this, the plan has to be well accepted by senior leadership and communicated down through the organization.” While advice abounds on what employers should do to cut benefits costs, Petruniak’s suggestion on what they shouldn’t do is simple. “Don’t do anything you can’t undo next year.”

Jody White is Associate Editor of Benefits Canada.com.


> click here for a PDF version of this article

© Copyright 2008 Rogers Publishing Ltd. This article first appeared in the December 2008 edition of BENEFITS CANADA magazine.

Copyright © 2018 Transcontinental Media G.P. This article first appeared in Benefits Canada.

Join us on Twitter