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What can you do to attract, retain and motivate staff? How to reduce costs? Defined pension plans are not dead for your high earners, find out how.
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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?
2.4
2.2
2.82.7
3.23.1
3.4 3.4 3.5 3.53.3 3.3
2.8 2.9
2.1 2.2
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
Ye
ars
25 30 35 40 45 50 55 60
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
0
1
2
3
4
Age20
Age30
Age40
Age50
Age60
Age Group
Basi
c M
onth
ly R
ate
Males Females
Basic Monthly Life Rates Per $1000
0
0.4
0.8
1.2
Age 20 Age 30 Age 40 Age 50 Age 60
Age Group
Basic
Mon
thly R
ate
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