HR Professional - June/July 2008 - (Page 20)

C OM P E N S AT ION TRENDS IN FLEXIBLE BENEFITS B Y B O B M C K AY I ‘‘ n the mid-1990s, only 17 per cent of Canadian employers offered flex benefits programs. When Hewitt Associates’ last polled organizations in 2005, flex plans had increased to 41 per cent. Now, some employers are on their third plan design to meet changing needs. Flexible beneﬁts will continue to increase in popularity because they contribute to the resolution of many talent management issues, including aiding in employee attraction and retention, accommodating the needs of a diverse workforce and containing health care costs. The Canada Revenue Agency has recently ruled that employees can redirect a certain portion of their bonus into ﬂex credits on a tax-effective basis as long as certain conditions are met. Offering more—and less—flexibility Flexible beneﬁt plan choices have expanded over the last decade. The broadest programs—more appropriately termed “ﬂexible compensation plans”—allow employees to make beneﬁt choices in health care, disability, life insurance, retirement savings and vacation. Recently, some employers have introduced Flexible benefit plan choices have expanded over the last decade. simpliﬁed plans that provide employees with meaningful choices, while avoiding the complexities of broader, full ﬂex plans. These simpliﬁed plans are popular with smaller organizations. One simpliﬁed approach is to limit choice to the health-care area. These plans offer choice in medical and dental coverage, frequently supplemented by a health spending account. Another simpliﬁed structure is known as the modular approach. Employees choose a core, moderate or rich package, each of which includes speciﬁc coverage in beneﬁt areas such as medical, dental, long-term disability and life insurance. The core module generates a contribution to a health spending account or is available at no cost to employees, but the rich module frequently requires payroll deductions. ’’ Wellness initiatives Flexible benefit programs can be designed to support wellness initiatives by providing additional credits for healthy activities. For example, additional flex credits can be earned when employees take a health-risk assessment, don’t smoke and exercise for three hours a week. Generally speaking, employers aren’t going to monitor employees to ensure they are following through, although some are considering requiring proof before allocating additional credits. Wellness accounts are expected to be offered by 55 per cent of Canadian employers by 2009. Funded through unspent credits or direct employer contributions, these accounts often cover fitness memberships, exercise equipment, smoking cessation programs, and a personal trainer. While penalizing employees for unhealthy behaviours is not common in Canada, there is precedent. In the United States, smokers and the obese often pay higher rates for life insurance. Pushing boundaries The question for employers today is no longer whether to introduce ﬂexibility, but how ﬂexible their plans should be. Some Alberta employers are considering a “ﬂexible rewards” approach, whereby the employee’s entire compensation package becomes part of the fund—salary, beneﬁts, pension, vacation—and the employee has full choice in how they are compensated. While organizations in Australia and the U.K. have adopted ﬂex rewards, no Canadian organization has done so yet. As the labour shortage becomes more critical and workforces are increasingly diverse, expect to see ﬂexible beneﬁts evolve into ﬂexible reward programs for some Canadian employers shortly. Bob McKay (bob.mckay@hewitt.com) is a principal and senior benefits consultant at Hewitt Associates and is the editor of the Canadian Handbook of Flexible Benefits (www.wiley.com). HR P R OF E S S I ON A L 20 J u n e / J u l y 2 0 0 8 http://www.wiley.com

Table of Contents Feed for the Digital Edition of HR Professional - June/July 2008

HR Professional - June/July 2008 Contents Editor's Letter Contributors Leadership Matters Upfront Legal Compensation The Broad Perspective Leading by Example On Message Strategy Talent Management HR 101 Case Study Interview with J.P. Pawliw-Fry Off the Shelf The Last Word HR Suppliers Guide 2008 Calendar of Events

HR Professional - June/July 2008

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