The Question of Incentive

The number of employers with workplace health programs and services is still less than 50%. Financial incentives might encourage more employers to get on board, either through the tax system, or through Workers’ Compensation (see The Bottom Line this issue). There is some $14 billion spent by employers each year on various taxes and entitlement benefits, providing a large pool from which a small but strategic investment could be made. In exchange, selected employers should be willing to prepare a business plan and meet certain minimum standards. One important question: which organization will step up to speak for employers?
Our new federal government just brought down its first budget, with no less than 28 different tax cuts. There was something for almost everyone, including small and medium sized businesses. However, there was a missed opportunity to help organizations that contribute to the good health of their employees and very often family members as well.
Groups in different parts of Canada working on healthy workplace strategy and programming are considering the need for financial incentives so more employers will invest in healthy workplaces. Most of the discussion has focused on the tax system, involving rebates on provincial premium taxes, or dedicated health taxes. However, as Mary-Lou MacDonald notes in her Bottom Line article this issue, the HealthWorks group in Nova Scotia also looked to its Workers’ Compensation Board.
Is there a case for incentives? We know many organizations support such programs without any external assistance. But many others could do more, and they might if there was some form of financial incentive to tip the balance. Any decision in this area should depend on need, affordability, and policy implications. It will also depend on finding and equipping a strong, persistent voice to approach our governments.
First then, is there a need? Based on the three surveys below, 35–40% of Canadian workplaces have some form of health promotion program.
  • A 2006 study by the International Foundation of Employee Benefit Plans indicated 43% of the 53 Canadian organizations responding provided some form of wellness education.
  • The most recent (2003) Buffett Taylor National Wellness Survey showed 34% of its 420 responding organizations had health management programs.
  • In the 2005 sanofi-aventis Healthcare Survey, 41% of 1,500 plan member respondents said they had access to wellness programs, and 46% of those with programs said they participated.
This is a good base, but the glass is still mostly empty. More companies with good quality programs are needed. Quality in this case means programs must be properly designed, have a formal link to strategy, and include a plan to promote, implement and evaluate them. Otherwise, dollars spent don’t often achieve the desired results, and plans then tend to get marginalized and often abandoned.
Now, let’s turn to the question of affordability. Looking at the financial contribution already made by employers, there ought to be room to invest some of those dollars in incentives. There are a number of health-related taxes and premiums contributed by employers in Canada.
  • Dedicated health/payroll taxes totalled $9.2 billion in four provinces.
  • The Canada Pension Plan paid $2.78 billion in disability benefits in 2002-03.
  • The Employment Insurance sickness benefit paid out $813 million in 2004-05.
  • Sales taxes on insurance premiums in ON and QC, totaled over $1 billion in 2002.
  • Insurance premium taxes amounted to $271 million in 2000.
These figures alone add to $14 billion in combined federal and provincial taxes or benefits focused health issues in the workplace.
The policy question would ask about changes in corporate behaviour if incentives were provided. Let’s propose just 0.1% ($14 million) of those expenditures is focused on promoting workplace health. While such an investment would help employers, it would also have a positive effect on people and the public healthcare system. For comparison, in this latest federal budget, the government returned $15 million to small and medium-sized vintners in reduced excise tax.
Incentives drive behaviour, and as such, they are likely to help increase the number of healthy organizations. For accountability, an incentive strategy could reasonably require that eligible plans meet a certain minimum standard in both quality and number of programs offered. Logistically, governments might also demand a business plan and periodic evaluation of how well the plans work. They might also supply funding to ensure enough capacity is available to assist interested organizations to plan, market, and evaluate. And while we’re on the topic, some research funding to assess what works and why would be a wise use of funds as well.
One last point. All this is unlikely to happen unless a strong, articulate, and representative voice for Canadian employers is heard in our capital cities. Some organizations have made steps to this podium, but more boldness is required.
1 MB $287 mm, ON $3.9 billion, QC $4.9 billion, NL $92 mm. Source: Most recent financial reports of the four provinces. In MB and NL, the tax is for both health and education.
2 Annual Report of the Canada Pension Plan, 2002-2003, available at CPP premiums are paid by both employers and individuals.
3 Source: Employment Insurance is paid by both employers and individuals.
4 CLHIA, Submission on the 2005 Federal Budget, November 2004. Available at
5 CLHIA, Submission to The Standing Senate Committee on Social Affairs, Science and Technology, November 2001. Available at:


Categories: Editorial