In the quest to boost employee satisfaction and retention, businesses often resort to traditional methods like salary raises or bonuses. Handing out more money may seem like the obvious choice. However, there's a compelling alternative —Health Spending Accounts (HSAs).

HSAs, offering an account for employees' healthcare expenses, provide many benefits that extend far beyond a simple bump in salary. Let's dive into why investing in an HSA might be the right choice for employers wanting to reward their team’s good work.

The facts

It’s been widely reported that aside from salary, benefits are the most important part of a compensation package when businesses are trying to attract and retain top talent.

In today’s workforce, your team may value benefits more when comparing a raise to an increase in benefits.

According to a BNN article reporting on the 2023 Blue Cross Small Business Benefits Study, 41% of employees surveyed said they would choose health benefits over a $25,000 raise, and half said they would choose benefits over a $10,000 raise!

In the same vein, according to the Benefits Canada 2021 Canada Healthcare Survey, 76% of Plan Members agreed that they wouldn’t move to a job that didn’t include health benefits.

The numbers don’t lie. They show the value of pay vs benefits, and that a robust benefits plan is a necessity to attract top talent. To keep said talent, you need to provide benefits that your team actually values.

HSA vs. a pay raise: The Truth

Giving a raise

Giving your team members a raise is the traditional thing to do when rewarding exceptional work and is a great way to show appreciation. However, it may not be as beneficial to your business or as substantial for your employees as it seems.

Let's look at what giving a raise really entails, starting with the taxes and deductions.

For every $1 per hour raise you give to an employee it will cost the business about $1.29 after paying the government. This is because paying an employee more results in higher payroll taxes for the business.

On the employee’s side, they only receive after-tax income. After government deductions, employees take home substantially less. For example, in Ontario, if you make $48,000 a year, you pay $9,624 in federal and provincial tax, meaning per dollar you take home around $0.80. That’s even before other deductions such as CPP and EI.

Finally, from a healthcare expenses point of view, there is no guarantee that your team will save for future expenses, even if that’s your intent when paying them more. This could result in issues such as increased absenteeism and for the employee in the form of less “take-home” pay.

Providing an HSA

Let’s flip things around and look at what happens when you give your team an HSA instead of a raise.

To start, an HSA is a tax-deductible benefits solution for your business. So, instead of paying the government like you do for a raise, you save money.

An HSA is also tax-efficient for your team too! Funds contributed to an HSA are tax-free for your team, so they realize 100% of the value. $1 contributed by the business is $1 in the pocket of the employee.

If you want your team to get even more bang for their buck, our HSA Rollover provides just that.

Lastly, an HSA gives the same flexible spending as out-of-pocket spending. With an HSA there are no limits or maximums the way there are with premium-based benefits. The only parameters are:

• Are there funds in the account for the period the expense was incurred?
• Is the expense eligible for the CRA Medical Expense Tax Credit?

This way, your team can choose how they manage their healthcare and spend their funds on the therapies that work for them.

As simple as it sounds, it could be a daunting task to communicate with your team how the benefits of an HSA outweigh that of a raise. Get in touch with our Growth Team to help that conversation go smoothly!

The other benefits of benefits

It’s not just dollars and cents when it comes to benefits. They can also provide intangible advantages that will set your business apart from the competition.

Attraction and Retention

In a recent article by Benefits Canada, they reported that 28% of employees are planning on leaving their jobs within a year. Of those planning on leaving, 28% reported that their benefits were the reason.

According to the 2023 Benefits Canada Healthcare Survey, 72% of plan members appreciate their benefits plan more today than before the pandemic. The hard-hitting effects of the pandemic have changed the work landscape forever. Employees don’t just expect coverage, they expect excellent coverage.

Establishing a wellness culture

74% of plan sponsors predicted they would dedicate funds and/or staff resources to support employee wellness. Additionally, according to the 2023 Benefits Canada Healthcare Survey 83% of plan members reported being satisfied with their job. Mental and physical health/wellness being supported ranked highly in their reasoning.

These two statistics showcase two things:

• A growing interest in establishing a wellness culture among Plan Sponsors (a.k.a. your competition); and
• The importance of wellness support as it pertains to retention.

So, how do you establish a wellness culture that’s braggable? With a Wellness Spending Account (WSA). Unlike an HSA, a WSA is a taxable benefit, so it’s similar to a raise. However, because you’re positioning these funds as specific to wellness, employees look at it differently. They’re more likely to share how awesome it is they got money to pay for fitness equipment, gym memberships, or ski passes, than they are to share their $1,000 raise.

So basically, provide great benefits.

That’s pretty much all we’re saying. We threw a bunch of numbers at you, but in the end, it’s as simple as providing good benefits. One-size-fits-all plans are costly and frankly, outdated. Your team wants value and flexibility when it comes to their compensation. In the end, that’s what the benefits are. They’re compensation.

Want to jump-start your benefits journey? Do you have a plan and want to see if you can do better (you can). Then give our growth team a shout! If you want more content to sink your teeth into before giving us a call, look at our Blog Content Hub, or our Twitter, Instagram, Facebook, or LinkedIn!