Albertans live and die by the price of crude oil. Whether you work for a company in the energy industry or not, oil prices impact the daily life of Albertans more so than in any other province in Canada. While most Canadians have been filling up their vehicles lately with smiles on their faces, we Albertans squeeze the gasoline nozzle with a little more trepidation. Low oil prices are a double-edged sword here—one edge may be cutting prices at the pumps, but the other is slashing jobs and corporate expenditures.

We’ve not seen all-out panic yet with the recent slide, but most Alberta-based energy companies are cinching their belts. Every corporate department is currently under scrutiny for ways to reduce expenses, including benefits programs.

Most energy companies are cautiously optimistic that oil prices have bottomed out and that the cycle will be short lived. There’s also reluctance to shed too many jobs, particularly top talent in key positions that just a few months ago was so hard to attract in a competitive job market. However, if you are being asked to show a reduction in your benefits budget, here are a few options for weathering the oil slump.

Increase employee cost sharing – Many surveys have shown that a noteworthy contingent of employees would rather pay more for benefits than have coverage reduced (33% in the 2014 Sanofi Aventis Healthcare Survey). If employees are already contributing to the cost of benefits, consider increasing their share. If employees aren’t paying any premium costs, think about having them pay for benefits such as disability, life, accidental death and dismemberment (AD&D) and critical illness (CI) insurance, which have tax advantages if they are employee paid. Both short- and long-term disability benefits are non-taxable if the employee pays the premium but taxable if the employer pays the premium. Employer-paid life, AD&D and CI premiums are taxable benefits, so the incremental increase of employees paying the premium instead of the tax may not be as significant a cost impact to the employee as you might think.

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Implement drug cost management solutions – Implementing drug cost management solutions such as mandatory generic substitution, step therapy and prior authorization for high-cost specialty drugs can save your plan money with little or no adverse effect on your employee’s out-of-pocket expenses.

Place more reliance on your health spending account (HSA) – If your benefits program includes an HSA, consider eliminating coverage for prescription eyewear, or reducing coverage for paramedical practitioners and have employees rely more heavily on their HSA to supplement these expenses.

Read: 3 choices to make your employee benefits more flexible

Make plan changes that increase consumerism – For programs that cover most expenses at 100% co-insurance levels, this may be an opportunity to introduce small changes to give your employees some skin in the game when purchasing health and dental services and supplies. Small adjustments like reducing co-insurance to 90% or introducing a dispensing fee cap or deductible on prescription drugs can have a significant financial impact on employer plan costs and influence your employees to be smarter consumers.

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Marketing – If it’s been more than a few years since you tested the competitiveness of your plan’s rates and fees, now may be the time to consider marketing your benefits. Whether you decide to move the plan to another carrier or not, you are likely to see some reductions to your current premium rates and fees.

Temporarily reduce or suspend employer contributions to a retirement savings plan – While this is not recommended as a long-term solution, it’s relatively easy to implement on a temporary basis in order to keep your business afloat during a proverbial storm.

One benefit I wouldn’t recommend eliminating is an employee assistance program (EAP). Times of instability are when employees need access to EAP resources the most. In fact, this is an excellent time to promote your EAP, particularly resources to deal with the stress of uncertainty, and financial counselling to help with any increased costs employees may need to bear.

Critical to implementing any of these considerations is communication. None of these program reductions will be popular with employees, but if they are framed in the context of preventing or reducing job losses, and or that they are only temporary measures until oil prices return to more profitable and sustainable levels, you may be able to implement them with minimal backlash.

Kenneth MacDonald is a senior consultant with Morneau Shepell in Calgary. These are the views of the author and not necessarily those of Benefits Canada.
Copyright © 2021 Transcontinental Media G.P. Originally published on

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