In the fall of 2015, Lynn and I announced that we would no longer be publishing our quarterly newsletter however we still wanted to bring to you, our clients and colleagues, periodic communiqués reflecting our combined insights and views on HR trends and practices.  As well, we wanted to provide you with timely employment updates  announcing  upcoming changes in legislation, which may necessitate amendments to your current employment policies and/or practices.  

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BELT TIGHTENING 101

It's mid-February, and for organizational leaders across the public sector it represents the winding down of one fiscal year and the start of another.   With an economy that has yet to fully rebound following the 2008 financial crisis, organizations continue to struggle with the rising cost of doing business and/or living within a funding framework which may often fall short of what is required to make it all work.   Within the context of this financial reality life goes on; unions continue to seek increases in wages and benefits for their members, and employers still need to maintain the talent to ensure quality service and products for their clients and/or customers.  So as you roll up your sleeves and begin the process of “blue-sky'ing" your 2016-2017 budgets, here are a few ideas which may assist you.

For those organizations contemplating increases, the following projections from some of the leading HR firms in the country may help to inform your decision-making.   According to Morneau Shepell's Trends in Human Resources survey, employers in Canada are expecting salaries to rise by an average of 2.5% in 2016, down from the average 2.8% salary increase reportedin their 2015 survey.   This is slightly lower thanMercer's 2015/ 2016 Canada Compensation Planning Survey for non-unionized personnel which projected that in 2016, Canadian organizations were planning on giving average salary increases in the order of 2.8%.   The Hay Group projected average base salary increases of 2.4% in 2016.   Based on the projections of these 3 firms, it would appear that average increases for 2016 are forecasted to fall somewhere between 2.4-2.8 per cent.

Conversely, organizations who find themselves unable to consider increases for the 2016-2017 fiscal year and in fact, are contemplating cost containment measures, may want to consider the findings of a 2015 benchmarking survey conducted by The Conference Board of Canada.  The survey found that the average cost of providing benefits for employees has increased to $8,330 per full-time equivalent, representing a notable increase from previous years.   The escalating cost of benefits is attributed to the increasing prevalence of chronic disease and the incidence of mental health issues in the workplace.

With the escalating cost of employer sponsored benefits, tough decisions about where to allocate benefit dollars will need to be made.   If you are currently exploring ways to trim costs in your current plan, here are a few ideas for keeping benefit costs in check:

  • ODA Fee Guide:  Basing your plan on the previous year or two year ODA fee schedule is an option which may incentivize the dentist to lower his/her fee for particular procedures.

  • Mandatory Generic:  To manage the rising costs of prescription medicines, some employers are looking to generic substitutions.  Where the generic drug proves ineffectual, the ability to challenge is built into the plan

  • Two-Tiered Drug Formulary:  There may be a number of drugs designed for the same illness, while achieving the same result may be priced differently.   In a two-tiered system an individual would be penalized for the higher priced drug.

  • Co-Share:  Increase the employee share of premiums.

  • Retiree- Benefits:  Legacy costs have an enormous impact on the overall cost of benefits.   Restricting retiree benefits only to "grandfathered" employees is an option

  •  Dispensing Fees:  There are significant variances in dispensing fees.   Employers may choose to cap dispensing fees at $5.00 or elect another amount, or not cover dispensing fees at all.

  • Drug Cost: There are significant variances in how much drugs are sold for between pharmacies.  Drug costs are much lower in general in some pharmacy outlets such as in Costco, Walmart and other chains.  Depending on the geographic area, Employers may choose to limit where prescriptions can be filled or at very least, educate and campaign for employees to use the less costly pharmacies.

  • Flexible Benefit Programs include health-care spending accounts are an excellent way for organizations to effectively  manage health-care spending.

  • Physical and Mental Health Promotion (Employee Assistance Programs):  Aimed at early assessment and intervention help reduce the cost of claims.  Programs that focus on mental health, alcohol and drug use, family and financial problems, are likely to impact absenteeism.  While mental health care costs, may initially rise due to early intervention, proponents suggest that overall medical costs generally decrease.

  • Wellness Programs &:  While the benefits are not always obvious, programs such as smoking cessation, weight control programs, cholesterol screening and stress management programs have longer term benefits for employers in terms of reducing absenteeism

 While the above noted solutions may assist in addressing benefit cost pressures, the following list represents some other ideas that employers may want to consider:

  • Explore alternative work arrangements:  part-time work, job-shares, reduced hours and shorter work weeks.

  • Implementvoluntary unpaid days off - rotated by department

  • Reduce positions through attrition

  • Examine processes:  increase efficiency by eliminating steps that fail to add value

  • Consolidate functions

  • Introduce liberal leave provisions

  • Reduce travel and discretionary spending

  • Manage performance:  ensure retention of high performers and consistently address individuals who fail to meet performance expectations

  • Manage attendance and disability:  track and manage sick leave. 

  • Negotiate concessions on salary and benefits

It is typically out of these challenges that the greatest opportunities emerge to reinvent your organization and transition to the next level.

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