Inflation, wage increases, an economic slowdown, and evolving labour market dynamics are all topics that have been making headlines recently, and their impact is felt across various sectors of the economy. Small businesses in particular are facing mounting challenges as they grapple with the repercussions. If your small business was a ship, you’d be heading into quite the storm!

We’re all battening down the hatches, doing our best to stay afloat. But small businesses are taking the brunt of it on multiple fronts. Let's explore why a robust Group Benefits plan, like a Health Spending Account (HSA), can serve as a lifeline during these challenging times.

The big waves rocking your boat

Inflation

Inflation is kind of like a riptide, you know it's around but it's hard to feel its presence until you’re in the middle of it. As prices rise, the cost of goods and services surges, which in turn puts pressure on the already thin profit margins of small enterprises.

Over the past year, we’ve seen inflation numbers from 3.5% all the way up to 6.5%. Recently, it has steadied around the 4% mark – a number still double the inflation rate pre-pandemic.

This means that not only do businesses need to deal with increased operational costs, but they also face difficulties in maintaining their competitiveness in the market.

Slowing economy

In tandem with inflation, the economy is showing signs of slowing down. Consumer spending, a crucial driver of economic growth, will be affected as people's purchasing power diminishes due to inflation.

This slowdown directly impacts small businesses, which often rely heavily on local consumer demand. As customers tighten their belts, small businesses can experience reduced revenue and increased financial strain.

What’s happening inside the ship?

Between patching up the damage done by the economic waves, keep an eye on what’s going on inside the ship.

Compensation

Wage increase requests could be on the horizon due to inflationary pressures on your team. For the second year in a row salary increase forecasts are clocking in at historic highs, with an average of 3.8% for 2023 excluding salary freezes. For context, in 2022 Canada reached 3.8%, exceeding the initial projections of 3.4% and 2.8% published in February 2022 and July 2021, respectively.

On one hand, a good and fair wage can help attract and retain your top talent. On the other hand, you’re taking a hit in your labour costs.

Group Benefits are front and centre

Your Group Benefits are under a microscope nowadays, so you’d better be offering a good plan!

What does a “good plan” look like? One that meets the diverse needs of your team! A one-size-fits-all plan is not going to cut it in a tough labour market. Team members are looking for a plan that includes everyone, providing flexibility for them to support their health as they see fit.

Benefits costs are increasing

While costs of goods and services affect the market your business operates in, rising costs also put pressure on your Group Benefits plan. As costs for services increase, the cost of a premium-based health and dental plan is going to skyrocket. Remember, at the end of the day these plans are still money-in, money-out, so insurers need premiums to cover costs.

How much are costs increasing? Let’s look at dental costs as one example. In Ontario, dentists typically set their fees based on the Ontario Dental Association Fee Guide. In the last two years, the fees in the Guide have increased 13.25%! Those costs will be passed along to your plan!

You can either:

• Shoulder these costs (not ideal for your business);
• Make Plan Members pay a portion (makes no sense);
• Impose caps on services (severely limits how Plan Members can support their health);

Or…

We're not making this up!

In the most recent Benefits Canada Survey, business owners validated all those factors that we’re seeing come together as a perfect storm. In fact, 85% of employers had a major concern about the future of their benefits plan.

Their top concerns?

• Inflation
• Competitiveness
• Sustainability

Get the wind back in your sails

We don’t have the power to calm the stormy seas. But we do have a solution that may ease the blows.

A solid Group Benefits plan, like one with a Health Spending Account (HSA), can be exactly the thing to get a business afloat. Why? We’re glad you asked!

Customization

HSAs allow businesses to tailor benefits packages to their unique needs and budget constraints. Unlike premium-based health and dental plans, HSAs offer flexibility in terms of what is covered and how much is allocated to each employee. Rising dental fees? No problem! Your team can budget for what they need so they’re not left spending out of pocket.

Cost Control

You as the Plan Sponsor decide exactly what you want to spend on your plan when funding the accounts. We also have another HSA option called our HSA Rollback, where unused funds get returned to the business. So instead of forever rising premiums (aka a black hole for your money), you’ll only pay for the healthcare expenses incurred by employees. During the uncertain storm we’re currently working our way through, cost control is a valuable thing to have.

Offering an HSA can also be an ample substitute for wage increases. Your team can receive tax-free dollars to spend towards their medical expenses, so they don’t have to dip into their own pockets the next time they visit the dentist. HSAs are also tax-deductible for your business, providing additional financial relief.

Competition

HSAs are all the rage now. But don’t just take our word for it, the 2022 Benefits Canada Survey showed that “among plan members surveyed without these accounts, 87% would like to have an HSA”.

For good reason too!

We touched on it a bit above, but HSAs allow your team to have full control over their benefits – which is a main part of their compensation. They are only limited by the amount in the account and are free to spend it on any eligible medical expense.

Land Ho!

We hope we’ve provided you with some insight into how a simple change to your Group Benefits plan can have a domino effect when it comes to helping your business stay afloat. A flexible Group Benefits plan may not be the only necessary solution, but it can save you on benefits costs, make your team happier and healthier, and keep your talented team around for longer!

We know it’s a ton of information to read over, so why not give our Growth team a shout? We’re experts at this and we’d love to talk more.

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