benefits
Revolving Doors
HOW EMPLOYEE TURNOVER CAN INCREASE GROUP BENEFITS COSTS
By Yafa Sakkejha
Employee turnover is certainly costly to companies, but it can
surface in hidden places. Aside from the time and money it
takes to recruit, train and transition employees, it can often
hit the group benefits piece of the P&L. This silent cost can
drive up premiums if a company does not have strategies in place
to mitigate the impact.
It is first important to recognize the direct link that claims have
on employee benefits premiums. Health and dental benefits are
priced on an “experience-rated” basis, meaning that premiums are
largely driven by the volume of claims submitted by employees.
Here are the most common ways that churn can drive up ben-efits
claims.
SHORT-TERM CONTRACT EMPLOYEES
An independent day care and primary school in western
Ontario often has to hire substitute caregivers to fill in for
parental leaves. As these employees were hired, they were of-fered
participation in the benefit plan although they were on a
one-year contract. The employees would not know if they were
to stay on full-time until 10 months into their contract, so they
naturally took full advantage of the benefit plan. The compa-ny
saw a 20 per cent increase in their health and dental claims,
and, as a result, an increase in premiums. They were faced with
having to make cuts to the plan coverage in order to minimize
the cost impact.
Solution: Short-term contract employees are normally exclud-ed
from benefit plans for this reason. However, if an employer
wants to offer something, a limited plan in the first year is a good
way to put in a “speed bump” against cost escalations. One ex-ample
of this is an overall maximum of $1,000 for health and
dental, and no offer of short- or long-term disability until they
become permanent.
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HRPATODAY.CA ❚ JULY/AUGUST 2016 ❚ 29
