| Dan Eisner, Advisor, ZLC Employee Benefits Solutions
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For many years now, we have all been in an incredibly challenging labour market with near record low unemployment rates in spite of the challenges of a pandemic, the pressures of inflation and the fears of a recession. The labour market challenges have impacted small businesses, in particular, as they have had to fight for key talent with much larger organizations.
As part of that fight, employee benefits plans have become even more critical. Employees continue to see these plans as being very important, typically ranking behind only salaries when choosing to join or stay with an organization. Beyond employee metrics and job satisfaction scores, many employees simply have an “entitlement mentality” around employee benefits and expect them to be part of their total compensation package with any employer, large or small.
The ZLC Small Business Employee Benefits Solution has been in existence for decades and is designed to specifically address many of the challenges smaller businesses have when it comes to employee benefits plans.
Here are some of the things to consider when deciding on the employee benefits plan and the advisor you work with to implement and manage a plan:
Plan Costs – Based on our experience, employee benefits for small businesses can often range from $3,000 to $4,500 (on average) per employee per year, depending on the type of plan and the employee demographics. A big part of this cost is the expenses charged by the insurer, the administrator, the advisor, and sometimes the association sponsor. That’s a lot of mouths to feed. If disclosed (unfortunately most don’t), these costs typically represent 25-30% of the premiums paid. Essentially, for every dollar of premium paid, only 70 to 75 cents is ultimately going to pay employee claims and the rest is overhead.
ZLC Advantage: Our solution is a “buying consortium”, which means that we are essentially buying benefits “in bulk” and thereby achieving lower expenses by way of economies of scale and the purchasing power of hundreds of small businesses. We typically generate 10% to 15% savings when employers join our solution and these savings are not simply up-front “marketing discounts”. These savings are sustainable as they are driven by lower overall expense charges year over year.
Volatility – Also, known as “bait and switch. Too often small businesses get a rude awakening at their first, and possibly also their second, renewals with significant rate increases. If “marketing discounts” were provided to attract the plan sponsor, they will undoubtedly unwind, and the insurers will also apply overly aggressive inflation trend assumptions.
ZLC Advantage: Our renewal methodology for our small business employee benefits solution effectively puts “more insurance back into insurance”. Our clients are protected from premium rate volatility from year to year by offsetting the claims experience of all participating clients, which results in a smoother ride for all clients over the long term. As well, our clients benefit from the underwriting strength of the group as historically the ZLC annual inflation rates have been approximately 4% below industry trends and even further below the “trend factors” used by insurers in their underwriting.
Limited Plan Design Options – Not surprisingly, most insurers limit their exposure to high claims relative to low premiums from smaller plans by limiting the plan design options available to small businesses. For example, we often see insurers require lower reimbursement levels, or annual or lifetime plan maximums.
ZLC Advantage: Given that our clients are part of a buying consortium with over $12 Million in annual premium, they have more leverage with the insurers. As such, they have much more flexibility in their plan design so that it meets the needs of their employees rather than the needs of the insurer. At the end of the day, our solution delivers “better benefits” for all employees.
Service and Support – Based on our experience, small businesses need more support for their employee benefits program. They typically have limited resources as they are trying to grow their business and most do not look to hire an internal benefits or broader HR specialist until they become much larger.
ZLC Advantage: Regardless of size, all ZLC clients receive comprehensive service from their own dedicated service team of 3 service professionals at ZLC. We look for our clients to see us as an extension of their administration team. Simply said, we tell our clients to send us their employee benefits problems (i.e., claims issues, administration problems, and/or insurer service concerns) and we will send them solutions in a timely manner.
ZLC Employee Benefits Solutions has a distinct advantage working with small businesses. We have been building our solution for over 20 years and the reality is that you need the solution to get the business volumes, but you need the business volumes to get the solution. Yes, there is a circular relationship here, which is why many of our competitors have failed to develop a comparable solution for small businesses.
We would be pleased to discuss your specific situation with you to identify the best strategy for your employee benefits plans. Should you have any questions on the above, please do not hesitate to contact any member of our team.
ZLC Employee Benefits Solutions is one of the fastest growing advisors for employee benefits and group retirement programs in Vancouver and we are fortunate to have the best people, resources, and clients. We provide value by leveraging one of the most skilled benefits teams – collectively over 400 years of experience within our team of 20 employee benefits specialists. We have been working with businesses ranging from 3 to over 75,000 plan members for over 35 years.
