Employee benefits: A way for startups to enhance employee compensation
Startups that are strapped for revenue should consider a strategy of offering benefits to enhance compensation and attract and retain employees.
Benefits represent a form of compensation in addition to an employee’s remuneration. Some types of benefits are mandated by the government, while others are provided voluntarily by the company. Offering company-sponsored benefits can prove an effective method of attracting and retaining employees.
Legislated benefits are mandatory — all employers must provide these employee benefits. They include:
- Employment Insurance: both employer and employee contributions are required
- Canada Pension Plan: both employer and employee contributions are required
- Workers’ Compensation: the rate paid by the employer depends upon the industry; in Ontario, coverage is mandatory for some industries and optional for others
While a significant cost, many start-ups have discovered that they must offer competitive employee benefits to attract and retain quality employees in spite of the significant costs. Defining the benefits package is a crucial business decision—it should not be a “one-size-fits-all” proposition. As costs continue to rise, any decision to provide benefits should consider a startup’s financial situation, the ability to contain costs and your employees’ demographics.
Non-legislated employee benefits come in many different forms and can range from basic to deluxe, with costs being very little to none, or high. They include, among others:
- health insurance (for example, prescription drugs, paramedical coverage, out-of-province emergency)
- vision care
- dental insurance
- life insurance
- paid sick days
- short-term disability insurance
- long-term disability insurance
- retirement/pension plans (separate from Canada Pension Plan)
- educational assistance
- wellness programs
- employee assistance programs
- flexible work arrangements
Setting up your benefits package
Do your research when developing a benefits package. A suitable and affordable plan must meet the unique needs of both your startup and your employees. Before making any decisions, investigate the following resources:
- insurance brokers that specialize in small groups
- insurance agencies
- boards of trade/chambers of commerce
- professional and trade associations
In general, the cost of employer-sponsored benefits is regularly estimated to add at least 15% to a company’s total compensation costs. To contain costs, many employers implement some or all of the following strategies:
- sharing the cost of premiums between the company and employee
- annual and/or dispensing fee deductibles
- yearly or lifetime maximums
- coinsurance—the ratio of coverage shared between the insurer and the insurance company for covered benefits
Butteriss, M. (1999). Help Wanted: The Complete Guide to Human Resources for Canadian Entrepreneurs. Toronto: John Wiley & Sons. pp. 121-127.