More than half of employers are seeing an increase in costs associated with employee health, drug and disability costs, but only 15% have looked at strategies to address the increasing costs.
From an aging workforce to increasing mental health support, employers are watching their benefit and other associated health costs skyrocket.
According to The Banking on Productivity: Managing employee health costs study from Morneau Shepell health benefits were deemed the greatest cost-related concern by most respondents. Short-term disability was also on the radar of survey respondents concerned about cost.
"The survey indicates clearly that health benefits costs are rising due to various factors such as aging of the workforce. This trend will only increase as new and more expensive drugs arrive on the market," Paula Allen, vice president of research and integrative solutions at Morneau Shepell, said. "Companies need to be aware of the impact of mental health issues on their bottom line. One third of disability claims are mental health related and mental health disability claims are approximately one third more expensive than physical health claims."
So what can employers do to reduce costs, or develop a financial strategy for funding these increasing costs? The key first step is to analyse the current situation and to align the HR strategy with the business and financial strategy.
“In a smaller organization, the CFO and HR must work collaboratively, each bringing their respective expertise to the table to help a company understand and analyse the implications of rising employee costs,” Credential Financial SVP Rod Ancrum said. Credential had developed a close relationship between the financial and human resources departments, which helped predict future changes and meant both groups had a better understanding of each other’s challenges and goals.
However, consider the possible effect on employees before implementing changes or reducing plans. Sometimes what seems like a small change can have a bigger impact than planned. When Bill Cromb’s former employer tried to limit dental visits to every nine months, down from six, he saw the backlash immediately.
“People were in and out of my office complaining about it. At that time a lot of people had little kids and every time they went to the dentist, they had to shell out,” Cromb, now with Maha Energy, said. “They were just not prepared to go through that pain. People actually left over it, and for really insignificant savings to the company, we lost some good people.”