Attracting staff benefits and compensation

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Attracting Staff – Compensation & Benefits in Competitive Times

Chris Hylton

CG Hylton & Inc.

[email protected] Tel 800 449-5866

Travel Alberta, Camrose

March 31 3:30 - 4:30

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1. Creating a Compensation Plan

2. What is actually meant by "benefits and pension plans"

3. HR Strategies that work

4. RSP and pension plans

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Chris Hylton is a benefits broker and HR consultant. He will be talking about how to set up benefits and pension plans that will help attract and retain employees. How to deal with seasonal employees. New ways of introducing flexibility into your plans, and the advantages of RSP’s or pensions for staff and owners.

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He will also touch on HR strategies that you can use to make your organization an employer of choice, even if you don’t have the resources to pay top dollar in a hot job market.

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1. Creating a Compensation Plan

Compensation is an exchange of money or something of value for work delivered

There are many methods of compensation for staff

Regardless of the method used, customizing the Plan to fit your organization is a must

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How Do I Customize a Plan?To Customize you need to: Know what your mission is Know what is important to

your organization's success Know what kind of culture

you have or want to promote

Make sure the budget is capable & use the staff for this

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Without this link, you may have:

A conflict between you goals and compensation

No compensation for things that contribute to the organizations success and visa-versa

No compensation for desired behaviors and visa-versa

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Therefore, you need to develop a Compensation Philosophy

Compensation philosophy means :

• You can see a clear linkage between the organization’s mission, goals, and desired behaviours and the compensation system

• You know where you want your salaries to be in relation to the market?

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2. Developing a Consistent Scale of Wages

To do this you need:

Internal Equity - how jobs are paid in relation to other jobs within the organization

External Equity - how jobs are paid in relation to other companies

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To achieve Internal Equity…You need a job evaluation plan to ensure

all jobs are measured with the “same ruler”

A Factor Point System Is the Most Effective unless Your Organization Is Small( Under 10 People)

For organizations less than 10 people , a job ranking system is probably better. This assumes the organization is not going to grow

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A Factor Point System …Takes all the ingredients you want in your job

evaluation plan and gets information from the positions in place

It allows you to determine which factors you want to use and how much weight each factor is worth

Thus it is customized uniquely to your organization and it is applied consistently to all jobs now and in the future

It also allows you to determine if a change in job merits a change in pay

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A Ranking System …Ranks the positions according to how much

they contribute to the accomplishment of the organizations mission

It allows you to determine which is worth most

It is only effective if the organization is small (under 10 people)

Clear communication is vital

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To achieve External Equity…You need to define your market.

Market is defined as to who you compare to, it’s your choice. I.E. same department in Alberta, defined geographic area, similar band/company in an other province.

You need to define where you want to be in the market (plus or minus ?%)

Use your market for cost of living adjustments as well.

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Now you have consistency because….

Internal equity – all positions are measured with the same ruler (job evaluation plan)External equity – you use the same market for all jobs.Remember: in creating the above you used your organizations mission, success factors and culture.

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Role of Consultant?Assist with the identification of factorsLink the factors to the

mission,organizations success, culture and budget

Do salary surveyCreate the plan, assist with

implementation and provide ongoing support; at least a year after implementation

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Benefits Agenda

Overview of BenefitsPremiums vs ClaimsRetirement Plans

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What will you do when...An employee dies or becomes disabled? Will you feel a sense of financial obligation to the employee and his or her family?

Trying to attract and retain good employees?

You or your employees travel extensively for business or pleasure?

You or your employees are confronted with an expensive dentist bill?

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Concept of Group Insurance

Nobody expects to die, be injured, or become ill tomorrow

However, if this does occur it can cause a catastrophic financial loss

A benefits plan is a low cost solution that can provide protection for the employee &

employer from catastrophic financial losses due to death, injury or illness

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Typical Group BenefitsEmployee and

Dependent Life Insurance

Accidental Death and Dismemberment

Optional Term Life

Short Term Disability

Long Term Disability

Health

Vision

Dental

Health Spending Account

Employee Assistance Program

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Why Life Insurance?Life insurance "creates cash" for needs such as:

funeral & burial charges

probate fees

taxes at death

income replacement

mortgage

children's education

wealth & estate creation

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Why Accidental Death & Dismemberment?

At dismemberment...– for changes to one's lifestyle

At death...– extra income to deal with an

"unexpected" loss

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Why Disability Insurance?

Where would the money come from

if you became disabled?SavingsLoans Spousal income Sale of assets

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Why Disability Insurance?

Did you know that: Your chances of winning the Lotto 649 draw is 1 in 13.9 million

The odds of being disabled for >90 days during your working career are 8 x higher than the chances of dying during the same period

The average length of a disability which lasts over 90 days is almost 3 years

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The average disability which lasts over 90 days lasts an average of 2.9 years:

Source: 1985 Commissioner's Individual Disability Table A (Experience Table)

Why Disability Insurance?

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At Age

Women Men

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Advantages of STD or LTD vs Workers Compensation

STDWCB

24 hour coverage Y N

Covers an illness Y N

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EI Rate Reduction

Most STD plans are eligible for the EI Rate Reduction

Savings of $.30/$100 of payrollSavings applied to employer portion of

premium5/12 of savings must be re-distributed to the

employee in the way of:– cash rebate

– new employee benefits

– enhancement to existing employee benefits

– etc.

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Why Health & Dental?A "Maintenance Contract" for the organization's

most valuable resource

Peace of mind for employees

A better standard of living

Tax free

Owners & Execs

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Dentalcare Options– Deductibles

– Calendar Year Maximums• $750 to unlimited

– Periodontal Scaling Units• 6, 10, or 14 units per 12 months

– Recall Examinations• 2 per 12, 1 per 9, or 1 per 12 months

– Oral Hygiene Instruction

– Adult Orthodontics

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How Much Does a Plan Cost?

The cost is based on:– Demographics of the group– Level of coverage for each of the

benefits– The volume of benefits– Prior experience of your group– Group size

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Employee data is the most critical part of pricing

Basic Monthly LTD Rates Per $100

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Age20

Age30

Age40

Age50

Age60

Age Group

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Basic Monthly Life Rates Per $1000

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Age Group

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Males Females

Source Great-West Life

Demographics and Rates

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2. Claims vs PremiumsYour plan is priced on the basis of your

demographics and your usageIf you are old and heavy users you will

pay more than if you are young and a light user

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Advantages to EmployerEstablished corporate policy in the

event of death or disability

Attract and retain key employees

Increased morale

Reduced absenteeism and increased productivity among employees

Tax incentives

Hassle-free administration

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Advantages to the EmployeeBasic protection for the employee and

family

Less expensive than individual insurance

Higher standard of healthcare than otherwise possible

Tax free compensation

Coverage for “uninsurables”

Hassle free administration

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Common MistakesLife Ins & provincial medicare

premiums taxableLTD benefit Plan that encourages employees to

spendNo cost sharingNo flexibility

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Solutions

Have ees pay for Life, medicare and LTD

Introduce a Health Spending Account (funded by hi deductible)

Have employees share in paying cost of claims

- 20% of Rx

- 20 – 50% of Dental

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Have an EAPCost is smallGives ees access to professionals for free

(to them) and quicklyWhat are you paying to fix employees

teeth a month? $100 $200 or more ?

The EAP can fix ees heads at a fraction of the cost

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Employee as smart shopper

Traditional plans paternalistic

Best plans today encourage employees to become smart shopperstake ownership of plan

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Benefit Trends - Healthgeneric drugs & drug cardmay reduce drug costsno claims forms, paperworkInternet based administrationFlex plans for small employersHealth Spending Account

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Benefit Trends - Dental

Cutbacks, cutbacks, cutbacksUnits of scaling

– limit to 4 - 6 max per yearFreq of checkups (account

for 40% of claims)– 9 months or 12 mo checkups

Fee Schedule– Reasonable and customary

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New Benefits

Critical CareConvalescent CareNew AD&D benefitsEAP

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Benefit Trends - Flex

Traditional flex plans are a pain

Health Spending Account is gaining favour

Tax effective

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Health Spending Account Health Spending

Account Funded by savings $ sit in ee name until

spent (18 mos max) used for medical

dental expenses, not covered by plan

dental 20% of basic and 50% of major restorative

50% of ortho, or over max

vision over $200 many other

applications tax free to ee

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ASO PlansGood for employers of 80 employees

or moreFree up your reservesKeep premiums in your hands

earning interest until accessedSurplus keep in your hands

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Role of Consultant?

Look at plan design & RatesLook at plans that ensure that owners

never pay anything out of pocket that may be run thru the company

Obtain quotes from other carriersConsultant is “free” as our fees are

paid by commission by the carriers in the rates

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What we need to commence a Benefits ReviewBookletEmployee dataExperienceLetter of

authorityPremium

History

Idea of any plan design or administration changes you would like to make

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3. Retirement PlansRSP plan, employer and employee

fundedDefined Benefit Pension, employer

funded

Pros and cons

We would be pleased to provide you with a range of options

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RSP or DC PlanMoney contributed by employer, say 5%

of salaryMatched by employeeInvestedGrows over timeEmployee gets monthly income at

retirement

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Money for freeCCRA gives employees back most of their

pension or RSP contributions!!!For Owners pensions are a great way to get

surplus money held in the Corporation out of the Corporation tax free

Set up an IPP and recapture the difference between what the owner paid to his/her RSP and the increased cost of the IPP

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Get up to 65% more into your retirement assets than RRSP

The IPP is like an RRSP in that it uses an investment account that accumulates over time to provide retirement benefits.

Unlike the RRSP, the IPP guarantees monthly pension income.

The amounts are locked-in and may be used only for retirement purposes.

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IPP Contributions

Contributions by employer (and employee) are tax deductible

Benefits are taxed when receivedInvestment income tax exempt

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IPP Max Contribution

Age in 2013 Past Service

from 1991

Current Service

40 $61,700 $24,600

45 $104,900 $27,000

50 $161,100 $29,700

55 $222,900 $32,600

60 $290,800 $35,800

65 $553,600 $38,700

Maximum earnings $134,834

Service commenced 1991 or earlier

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RSP vs. IPP Current/Past Serv

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IPP Advantages

Greater tax deductible contributionsCreditor protectionExpenses tax deductiblePlan surplus belongs to ParticipantsInvestment returns balanced by

contributions

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HR StrategiesEmployee satisfaction

survey Job description

reviewCareer developmentTrainingFlextime

Let employees determine how to do their job

Performance management

Rewards for successful behaviour

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Thank you!

Questions?

[email protected]

Tel 800 449-5866