Cutting benefits is cutting compensation – HR leaders push back

Group benefits costs in Canada are rising at roughly six to seven per cent annually while wage budgets hold at around three per cent, according to the 2026 Global Benefits Forecast by MBWL International and Normandin Beaudry. Despite that widening gap, only two per cent of Canadian employers are seriously considering cutting coverage outright – a figure that reflects a deliberate strategic calculation, not inertia, according to two senior HR leaders in a conversation about employee benefits at an Oct. 13 HRD Canada Leaders Network roundtable.

Holding the line on benefits requires a clear rationale when finance teams are scrutinizing every cost centre, and cutting coverage in response to rising costs misreads both the problem and the organizational risk – and the more defensible path is redesign, not retreat, said Isioma Coker, HR Director at SaskTel in Regina.

The framing of benefits as a standalone cost item is where many organizations make their first strategic error, according to Coker. Reducing them is making a compensation decision without calling it one, she said.

"The reality is, benefits are also a part of your total compensation," said Coker. "So you can't really say you want to cut benefits because, technically, you would be cutting your offering to your employees as well – and then there's the ripple effect because we know we're in the hunt for talent."

Flexibility within the benefits budget

SaskTel is a unionized telecommunications company competing in one of Canada's most difficult talent markets. Coker said the organization has responded to cost pressure not by reducing coverage but by building more flexibility into the plan – working alongside their benefits manager, their provider, and a joint union-management committee to redesign coverage creatively within existing budget parameters. The aim is to give employees what they need at their current life stage without increasing the overall cost to the organization, she said.

The economics of cutting benefits are also more complicated than a premium invoice suggests. Understanding the organizational cost of employee turnover and disengagement typically reveals that recruitment, re-onboarding, and productivity losses can rapidly outpace any savings generated by rolling back health or wellness coverage.

Coker believes that approaching cost pressure from the angle of cutting benefits isn’t the right move. “What we should be looking to is how do we redesign, how do we stay within the lines, and how do we allow people to choose differently within what we have?”

Canada’s life and health insurance industry paid out $157 billion in benefits to Canadians in 2025, a 10-per-cent increase over the previous year, while mental health support spending reached nearly $1.1 billion in 2025, up 160 per cent in five years, according to the Canadian Life and Health Insurance Association’s Canadian Life and Health Insurance Facts 2026.

Making every dollar meaningful

The first task for assessing benefits under cost pressure is auditing whether existing spending is actually producing value where it matters, according to Aman Malhi, Director of People and Culture at Refrigerative Supply Limited (RSL) in Burnaby, BC.

"The goal isn't to spend the least," said Malhi. "I think the goal should be to make every dollar meaningful."

Malhi drew on a specific decision from her early time at RSL to illustrate the principle.

"When I first started at RSL in my role, our business used to pay a premium on getting our disability claims adjudicated," said Malhi. "And so I looked at it, and our short-term disability is self-funded, so I thought it makes no sense if it's self-funded, why are we paying an external party to adjudicate the claims? I immediately cancelled that service and now we adjudicate them in-house."

Malhi said the move produced genuine cost savings without removing a single benefit employees could see or feel. The exercise reinforced a broader habit of mind that she said every HR team should bring to their benefits review.

"Instead of cutting, we need to look at, are we spending in the right areas?" said Malhi.

Sound benefits plan management in Canada increasingly means treating the portfolio like any other strategic investment – examining it with rigour, not defending it wholesale or cutting it bluntly. Scrutinizing administration costs, vendor contracts, and adjudication processes can surface meaningful savings that never require an employee to give anything up.

Redesigning for flexibility, not adding complexity

Both Coker and Malhi arrived at the same underlying principle: build a strong core benefits offering and layer flexibility on top of it, rather than attempting to maintain a static plan or add new programs indefinitely.

At SaskTel, that approach includes a health spending account layered over the core health plan, allowing employees to direct funds toward what matters most at their current life stage, according to Coker. When a component of the plan is working well and employee satisfaction is high, she said the team deliberately stops tinkering and redirects focus to the elements still requiring attention.

"We can probably still play within the same sandbox without necessarily needing to build a bigger sandbox if we actually lead with that curiosity and are more creative and flexible with what we offer," said Coker. "And that's going to be a big differentiator, in my opinion, from a talent retention perspective going forward."

Understand the people behind the numbers

Malhi agreed on the framework and added that the quality of insight behind benefits decisions matters as much as plan design.

"The best HR decisions, the best people and culture decisions, combine evidence with genuine curiosity about people's lives," said Malhi. "And so if you take the same approach to your benefits – I mean, you need the numbers to make a responsible decision – but if you really understand the people behind the numbers, I think the decisions are much easier to make than just sitting in a room with your benchmark reports."

Coker offered a final reminder about who ultimately judges whether a benefits strategy is working. Employees don’t evaluate their plan in isolation. They assess it as part of everything their employer offers – which is precisely the lens organizations need to apply when making decisions about plan design as the costs of benefits plans excee wage budget growth as outlined in Normandin Beaudry's 2026 Global Benefits Forecast, she said.

"I think it's important for us to remember that benefits are a part of total rewards and that we can't necessarily just look at them in isolation," said Coker. "Employees are looking at that as part of the whole offering that the company gives to them."

As employee benefits strategy becomes a growing competitive differentiator in Canada's talent market, the direction from both leaders points the same way. The answer to rising costs isn’t a smaller plan. It’s a smarter one – redesigned with flexibility, audited for waste, and communicated with enough clarity that employees understand the full value of what they already have.