This post was written by Chris Gory, an employee benefits advisor who works with many well-known Toronto tech companies and start-ups.
For the last decade, I’ve specialized in helping start-ups and fast-growing companies get the right benefits coverage for their employees.
The benefits plans themselves are as unique as each of the organizations implementing them. But as I’ve worked with these employers to evaluate their workforce’s needs and review their company’s requirements, there are common topics and themes that come up quite frequently in our conversations.
The following are a sampling of the most common questions I’ve been hearing lately from founders who are interested in setting up employee benefits at their start-up.
1. “How many employees do I need to have to start offering benefits?”
Many start-ups want to know what the right time is to buy employee benefits. Or in other words, how big does a company need to be in order to start providing its employees with benefits? My answer: three is the magic number.
I’ll tell you why. It’s often said that your first hires are your most important hires. Most business founders know this intuitively, and they know that being able to bring on top talent early is critical. Benefits can be an important part of the conversation when trying to recruit the right people.
There’s no doubt that offering employee benefits will help you to attract and retain the kind of high-calibre candidates that you need on your team in order for your start-up to succeed. But as your company grows, your benefits needs will also evolve. That’s why it’s always important to talk with your advisor about the long-term sustainability of your benefits plan.
Just know that if you’re a small company starting out with only a handful of employees, the group benefits options that are available to you and that will suit your needs will vary drastically from the group benefits plan of a start-up with steady revenue and several dozen employees. Again, an advisor will help you evaluate your options and choose the right plan.
2. “What should my employee benefits cover?”
This is a decision, or more accurately a series of decisions, that every company must make as they implement a group benefits plan for their employees. There are a couple factors to take into consideration. For most, it will come down to finding the right balance between the desire to offer a competitive benefits plan, and the need to manage costs.
Assessing the age distribution of your workforce can certainly help point you in the right direction. As a general rule of thumb, the higher your average employee age, the more likely that you’ll need to focus on offering good comprehensive drug and dental coverage, the cornerstones of a traditional plan.
With a younger workforce, basic coverage for those drug and dental expenses is still important, but there will be more interest and perceived value in things like paramedical coverage, for expenses such as massage therapy and mental health services.
Of course, more and more we are seeing multigenerational workforces where younger and older employees work side by side. It should be expected that your employees will have unique needs based on their life stage, which is why flexibility within a benefits plan is always valuable. Health Spending Accounts (HSAs) are popular for this reason—more on these later.
One recommendation I make to all my start-up clients is to never forego life insurance. Many start-ups have the mentality that they’re young and invincible and that nothing will happen to them. Unfortunately, I’ve seen enough companies be rocked by unexpected and tragic events to know that this is not the case. If the worst should happen, you will sleep better at night knowing that you provide your employees with this coverage.
3. “What employee benefits are other Toronto start-ups of my size offering?”
Although comparing yourself to others isn’t always the right move, when it comes to employee benefits it’s smart to be aware of the market around you. Unless you’re hiring new graduates right out of school, when you bring new people onto your team they will be comparing your benefits plan to their previous plan.
Safe to say, start-ups are absolutely right to think that they need to be competitive. You don’t want to be embarrassed by your coverage. In order to ensure that your business stacks up to the competition, there’s a basic level of employee benefits coverage that I recommend all my clients offer. For a single employee, that is:
- Dental: $1,000 with coinsurance of 80% or higher
- Medical: No deductible, a minimum of $500 combined paramedical
- Life Insurance: I recommend $50,000 (though some do opt for less)
The above can be considered a respectable, competitive package that will meet the basic needs of your employees. It’s worth noting though that some benefits providers, like Honeybee, offer more flexibility in their benefits plans by allowing each individual employee to customize the coverage that they receive. This lets you offer each of your employees a truly personalized plan fitting their health needs.
Keep in mind that if you have employees joining your start-up from a larger company, or even another start-up with more funding, they could be used to having more comprehensive benefits coverage than what I’ve outlined above. While this may not be an issue, but it can be a good idea to manage employee expectations while providing insight into your intention to start with a sustainable plan and work upwards from there.
One final thought: people will often ask specifically about whether coverage for vision expenses is offered at other start-ups and will be expected from them. In general, I’ve found that vision coverage is considered more optional at companies just starting out. With a small start-up I suggest checking in with your team. If you have eight employees and five of them wear glasses or contacts, vision coverage should be a no-brainer. However, you can also choose to provide enough funding within a flexible Health Spending Account to cover vision expenses for those that may have them.
7 Benefits Top Canadian Tech Companies Offer Employees
Learn what top Canadian tech companies are offering to attract and retain top talent.
4. “Should I offer my employees a Health Spending Account?”
I’ve alluded to Health Spending Accounts (HSAs) a few times now. An HSA is a way for employers to provide their employees with flexible funds to be used for a wide variety of medical and dental claims. The list of eligible expenses is determined by the Canadian Revenue Agency (CRA) and varies by province.
Some highlights of HSAs from the employer perspective: the costs are predictable, the funds you put in these accounts are tax-deductible for your business, and you’re offering employees a tax-free benefit that allows them to be quickly, easily reimbursed on eligible medical expenses.
What’s more, health spending accounts offer exceptional flexibility within a benefits plan, something nearly all employees appreciate. Depending on your province, HSAs can be used to cover common health care expenses such as prescription drugs, vision care, and paramedical services like massage therapy and chiropody—without any per practitioner or per visit limits.
An HSA can also be used to reimburse many out-of-pocket expenses that may not be covered by group insurance. This coverage goes above and beyond most traditional benefits plan, including expenses such as braces and other orthodontic needs, elective procedures such as laser eye surgery, and even long-term care for aging parents. For these reasons, HSAs can be an appealing option for employees and employers alike.
People will often ask me if health spending accounts can be used as a primary form of benefits coverage, or if they should they be considered complementary to insured plans, as a way to supplement health and dental coverage. When I look at my clients, those who have more than 10 employees are typically offering health spending accounts as a complement to an insured plan, providing some additional flexibility to their employees. However, a health spending account can also be a good “starter” benefits plan for some smaller companies who want to ensure cost containment and don’t want to bite off more than they can chew.
It’s important to remember, however, that HSAs must conform to the rules set out by the Income Tax Act. This means that the person administering the plan needs to understand the CRA rules and regulations surrounding these accounts, and needs to be able to communicate the basics to employees so they understand how the accounts work too. It’s critical to speak with knowledgeable professionals who can help you properly introduce HSAs to your organization.
5. “Should we provide coverage for medical marijuana?”
Although it is more rare for companies to implement a benefits plan that explicitly calls out medical marijuana coverage within the plan design, it is possible and it does happen. That said, there are many benefits plans that will cover medical marijuana claims, either as part of core coverage or through a health spending account. Many companies may have a benefits plan that supports medical marijuana claims without even realizing it!
Ever since the Government of Canada legalized recreational cannabis at the end of 2018, questions around coverage for medical marijuana are coming up with increasing frequency. Although access to marijuana for medical purposes isn’t new, the legalization of recreational use seems to have removed some of the taboo that may previously have prevented employees from discussing cannabis coverage with their employer.
As a result, employees themselves are starting to ask more about medical marijuana coverage, both in conversation with the person who administers their company’s benefits and even openly during company gatherings like lunch & learns. That’s why it’s important to have a good understanding of how your benefits plan will handle medical marijuana claims.
For those benefits plans that explicitly cover medical marijuana, you should be aware that this coverage may only extend to specific types of medical conditions. Which medical conditions are covered will vary by plan. If you are considering offering specific medical marijuana coverage within your plan, it could be a good idea to give employees the chance to anonymously share what conditions they’d anticipate using this coverage for, so you can help ensure that your plan will provide the intended benefits.
Hopefully the above information is a helpful starting point for you in your quest to implement an employee benefits plan at your company. If you have follow-up questions or want more tailored advice on how to go about finding the right employee benefits plan for your start-up team, don’t hesitate to get in touch!
Chris Gory is a Toronto-based employee benefits advisor for tech start-ups. He can be reached anytime at 416-754-3910. For more of Chris’s advice and insights into employee benefits, visit his website.