Though often referenced as if it is single entity—one form of “insurance”—Employee Group Benefits—is, in fact, a GROUP of individual insurance products, GROUPed together for a GROUP of employees LINKED through common employment.
Like building a home, benefits form a “foundation” of insurance for the average Canadian employee—sometimes their only access to coverage such as Life and Disability, not to mention reimbursement for expensive medications.
But there is a cost, obviously, both monetarily and legally to both the owner and employee. When the contracts are signed and the policy is placed, the employer is expected to act in the best interest of all employees. There are fiduciary expectations that the employer won’t arbitrarily change a set program which will then adversely impact those covered. In the same vein, what an employer offers to one, should be available to all.
There many totted reasons for implementing a program, but the favourite three are:
- Tax: Employee receive the benefit tax-free (outside Quebec) and the corporation receives a corporate tax-deduction for all premium paid on the employees behalf.
- Attraction & Retention: Benefits are a proven method of offering a work-life balance for valued employees.
- Insurance: Providing protection for unforeseen, unexpected risks like death, disability, or the diagnosis of a major illness or disease.
A good salary is certainly high on any employee’s list of reasons to stay with an employer. But staff are also concerned about what happens when they get sick or hurt, need dental work or perhaps die.
Creating a TOTAL COMPENSATION package through a well-developed, custom designed, Employee Group Benefits program might be the answer to control costly staff turnover. Generally both the employer and the employee share the overall cost. If an employee pays entirely for certain benefits, such as disability insurance, any benefits received as a claim are tax-free. Employee contributions to a retirement plan are tax-deductible.
By providing a group benefit plan, through the corporation, the costs are tax-deductible. The employees win by being provided with that cushion of coverage for the ‘just in case’ and the employer wins by retaining quality employees and taking advantage of the tax incentives.
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