Employee Layoffs? Here’s How Your Benefits Plan Is Affected

If you've had to make the difficult decision to lay off employees, you probably have a laundry list of to-dos to make sure you do it correctly, one of those things being "find out how this affects the employee benefits plan".

Our benefits team has received hundreds of questions about what companies need to do in the case of a lay-off. Here are the answers to the most frequently asked questions: 

Do I need to notify our insurance carrier about temporary layoffs?‍

Yes. If you have access to your carrier's Plan Administration portal, you can most likely process the temporary layoffs yourself online. If you don't have access to a portal, or you're unsure of how to process the layoffs, please reach out to our benefits team. 

You'll need to have the following information handy: a list of the laid-off employees, the effective date of the termination and their expected return to work date, and which benefits are being continued for them if any. 

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‍Are we obligated to continue benefits for those on a temporary layoff?

Legally, you are not obligated to continue benefits for laid-off employees. However, during these unprecedented times, this may be the time when it is needed most, especially if your plan includes an EFAP (Employee & Family Assistance Plan) or a virtual healthcare component. If you’re interested in learning more about this, feel free to email benefits@humi.ca. 

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How long can we extend benefits for those on a temporary layoff?‍

This varies on the insurance carrier and the extended benefits. Please reach out to your benefits advisor to provide you with the most up to date information for your group benefits plan. 

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‍What if the insurance carrier maximum is shorter than the length of time an employee has been laid off? 

At this moment in time, insurance carriers are firm on their maximums. However, these are unprecedented times, and things are changing weekly, if not daily. If the global pandemic is still occurring in 3/4/5 months, insurance carriers may revisit their limits.

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How do laid-off employees pay their share of the premiums if they aren’t on payroll?

The most common method we see is employees providing their employers with post-dated cheques for their share of the premiums.

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If laid-off employees aren't on payroll, how do we record benefit premiums that are classified as taxable income?

Employers can make a one-time adjustment once the employees are back on payroll. If you need assistance on how to process this, please contact your payroll provider, and they will be able to assist you.

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