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Rewarding Employees Effectively An attractive overall compensation package plays an important role in preserving an employer's most valuable assets... the employees. With government cutbacks and increasing drug, hospital and paramedical costs, giving employees an increase in pay is not always the most cost-effective method of compensation. As the following charts illustrate, a raise in pay costs more than you think! Consider a 3% pay increase on a salary of $35,000 vs. an equivalent premium allocation:
The net impact: it costs the employer about $104.00 more to implement a raise in pay as opposed to group benefits. However, the real difference is found when comparing the benefits to the employee.
Due to increases in EI and CPP premium, plus personal income taxes, this example illustrates that it is more attractive for an employee to receive group benefits than it is to receive an increase in pay. In addition, depending on plan usage, a group benefits plan has the potential to pay out far more to the employee than the $1050 premium investment. Both the employer and the employee have more to gain by implementing a group benefits package as opposed to a raise in pay. We can speak to your employees about using group benefits as a viable form of compensation? The above example is a simplified approach towards comparing a raise in pay vs. introducing employee benefits. Results will vary depending on province and the benefits chosen. For a more detailed explanation, please consult your tax advisor. |
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Employee Benefits as an Alternative to Salary
Increases
