Employee benefits and YOU

By Finbar GarciaLUTCF, FSS, MFA

What exactly are employee benefits, and does it really benefit you? Some persons say it’s a waste of time because they never use them, more so the Group Health. Employee benefits started over 150 years ago to maintain employee commitment to working harder and encourage female employees to the workforce. These benefits were anything other than your wages that was agreed upon. Some of these back then were paid sick leave, paid vacation leave, baby-sitting benefits and medical assistance.

As time went by, other benefits were added and some were removed. In today’s working environment you are either classified as a Full-Time Permanent Employee, Temporary Employee or Contract Employee. Private companies and government-controlled agencies sometimes sit with trade unions to negotiate benefits for employees. In so doing, some benefits are mandatory as you become permanently employed. Being a full-time employee, you would be entitled to enrol in whatever benefit programmes the company may offer. This would be after your probationary period. On the other hand, being a temporary employee, you may not be entitled to any benefits. Those who are on Contract Employment are not entitled to the basic benefits.

However, their salary and gratuity are negotiated upwards to allow them to purchase these benefits externally. Let us look at some of these basic benefits.Group Health: This is where the employer engages with an insurer to offer some medical benefits to its employees and possibly extended to their immediate family like spouse and children. This cost can be fully funded by the employer or paid by an employer/employee ratio. These benefits at times can be small in relation to medical cost. It must be noted that to get fully covered for all medical expenses, the cost of these benefits can be out of reach for both employer and employee.  Group health policies are based on the participation of all or minimum percentage of employees, to allow the premiums to be small and manageable for both sides. The risk is spread as not all employees would claim at once. Both spouses can have an employee group health plan at their place of employment and have both policies cover the cost.

This is known as Coordination of Benefits (CoB), whereby the two insurers would coordinate to pay the cost of the medical in conjunction with their respective insurer/employer policy contract. While both spouses would be paying separate premiums, they tend to recover almost the total cost of medical bills. Persons on Contract Employment would have to purchase an individual plan with an insurer. These can be expensive, as the risk is only on them and the insurer can sustain a loss early in the policy. Regardless of the policy type, group or individual, the premiums are reviewed annually based on the loss ratio—premiums received to claims paid.

Three main factors you need to know are Deductibles, Co-Insurance and CoB. While they may be confusing, deductibles are the first part that you are responsible for. Co-Insurance is the ratio used to reimburse, 80-20 or 70-30. CoB deals with two insurers coming together to pay the claim. Group health policies carry three base parts, they are Medical, Dental and Vision, some also carry Preventative Care, and at times a small Death Coverage. You can convert the group health plan to an individual policy within 30 days of your leaving the job. Group Life: This is another way of securing some life coverage. This type of policy is relatively cheap as the coverage is either a fixed sum assured or a number of  times your annual income. Additional benefits can be added to the base policy like Accidental Death and Dismemberment, Loss of Income and even Critical Illness.

This is another sum assured payable if death was accidental or if you became permanently disabled, lose a limb or became critically ill. The insurer cannot be anti-selective so some coverage can be obtained. With most group life policies, there is an option to convert to an individual policy for the same or lesser coverage if the employee leaves the job. This must be done within 30 days of termination of employment. The premiums are then calculated at your current age and can be expensive. If this is the only coverage you had, I suggest you try and maintain it if you can, group or individual. These policies cannot be assigned as security, while under the group, you can have a beneficiary named to avoid any delays in the payment of benefits by the insurer if you die.

Group life is a term policy that ends when you leave your employment if not converted.Group Pension: This is another great benefit, but it should not be the only source of retirement income for you when that time comes. These types of plans operate on a contribution system, where based on your contributions and interest earned over the years, your pension would be calculated. Some employers offer this benefit over the group health as it’s easier to oversee and allows the employee to fund their own retirement. There are various types of retirement programmes for employers that are designed to allow them to reduce their taxes. Our current tax laws allow companies to contribute to Deferred Compensation Plans for employees.

This is a process where the employer contributes towards the programme as deferred compensation, meaning the amount contributed is part of your salary not paid to you now, but invested in your retirement. Having a personal pension plan, the employer may contribute towards it. However, this would be added as a salary increase and then taken out as a deduction on your payslip.There are many more benefits we can discuss but these are the basic ones. It’s better to have some benefits than none.“David’s brothers saw a shepherd; God saw a king. Let God define you and not others.” — Unknown.

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