In the group benefits world, the first rumblings of the effects of the coronavirus pandemic came when plan sponsors started asking, as early as January, about their travel insurance provisions.
“Clients were worried about their business travellers and expatriate employees, in China mostly, and afterwards for their employees travelling for their winter vacations,” said Daniel Drolet, partner in group benefits at Normandin Beaudry, in a webinar hosted by the firm on Thursday.
But it wasn’t long before other areas of the market had to spring into action, he noted. “When [the coronavirus] started emerging in March here in North America, the questions started to shift toward disability benefits. Carriers were really quick to respond with a simplified process. They removed the waiting period to be able to receive short-term disability claims for employees. . . . They also added a simplified form to be able to claim for disability benefits without having the need to see a doctor in person.”
As the situation worsened, many employers had to quickly implement temporary layoffs. Drolet observed that the vast majority of employers he worked with made every effort to maintain all benefits provisions for laid-off plan members. “This needed some negotiations with the carriers though because disability benefits were a bit harder to maintain. Most of the employers decided to continue to pay their share of the premium. Some of them even decided to pay 100 per cent.”
As for compensation, employers have had to navigate tricky territory as government announcements change the landscape of what’s practical on a daily basis, said Diane White, principal in compensation at Normandin Beaudry, also speaking on the webinar. In the first few weeks, employers pulled different levers, with some implementing temporary layoffs, applying to the supplemental unemployment benefit program, reducing employee hours and imposing wage cuts to their executives and professionals – some voluntary, some not.
“Then, with the announcement of government programs came daily disruptions to decisions made by company leaders, especially following the adoption of the Canada Emergency Response Benefit, the 75 per cent wage subsidy for employers and the pandemic-pay premium.”
Some of these government initiatives have sparked debate around pay equity issues, said White. “Many workers who provide essential services are now earning less than those who’ve been laid off. Pandemic pay for frontline workers, which doesn’t consider the relativity of all job levels within a company, may also cause turmoil around external and internal equity, especially if a program like this is adopted permanently.”
Some employers have also been changing their minds in relatively short periods, she added. “In a press release, on April 8, Air Canada advised that they used the 75 per cent wage subsidy to rehire employers to provide them with earnings higher than that of the CERB, knowing there wasn’t work for the majority of employees at that time. Then, on May 21, just six weeks later, it was announced it would not continue to use the federal emergency wage subsidy and planned to cut up to 20,000 jobs or up to 60 per cent of its workforce due to the profound effects of COVID-19 on the business.”
She also noted employers that have laid off workers temporarily won’t be dealing with a normal return-to-work scenario once they begin to bring employees back. “There are three key criteria in deciding to gradually resume operations. In order of priority, they include the operational needs of the business, the decision to maintain employment ties in the context of labour shortages and acknowledgement of equity, especially between those who are working and those who are out of work.”
It’s also unclear when employers will be able to conduct traditional annual salary reviews, added White. “Many companies that review their annual salaries in April or May have postponed the process with no decision yet of a new date or whether increases will be retroactive.”
However, she also noted there’s plenty of salary freezing going on and, based on the firm’s predictive analysis, freezes should be around 30 per cent in 2021, similar in number to just after the 2008/09 financial crisis.
Looking to pension considerations, both market volatility and temporary layoffs have affected plan members, said Marianne Assaf, principal in pension and savings at Normandin Beaudry, also speaking during the webinar.
In a survey of plan sponsors in Quebec and Ontario, the firm found 90 per cent of respondents said they don’t anticipate reducing or eliminating contributions to their defined contribution or group registered retirement savings plans. Some 70 per cent also said they anticipate a reduction in revenue, but only 10 per cent of those that do said they expect it to be more than 60 per cent. “So maintaining the contribution level . . . is great news for plan members, knowing that they’re going through uncertain periods in terms of their investment returns,” she said.
Plan members may be concerned, noted Assaf, so it’s key for communications with them to stress the long-term nature of the investment strategies used by most capital accumulation plans. However, plan members who were intending to retire this year will need particular consideration.
“If one of your employees was thinking about going into retirement in the next month, it means he needs to transfer the savings he accumulated in his group plan into an individual plan, which basically means he needs to sell his investments to buy news ones. So one option you could provide to your employees could be to maintain their savings in your group plans, in the DC plan or group RRSP, until age 71 or until age 68, if they want to. It would help them to better prepare for retirement and to help prevent them from selling at a bad time.”
The process of allowing plan members to remain in the plan is straightforward, noted Assaf. “If you offer a DC plan, you might need to amend your plan text. You’ll then need to co-ordinate with your service provider . . . and finally communication with your employee will be key. The message is simple, ‘Go ahead and retire, but take your time.'”