Benefits Costs Rise 6-7%, Yet Only 2% of Canadian Employers Cut Coverage

Group benefits costs in Canada are rising at roughly six to seven per cent annually while wage budgets hold near 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 deliberate strategy, not inertia, according to two senior HR leaders speaking at an Oct. 13 HRD Canada Leaders Network roundtable.

For benefits decision-makers, the message from the roundtable was blunt: reducing coverage is a compensation decision made without calling it one, and in a tight talent market it carries costs that a premium invoice never shows.

Why cutting coverage misreads the problem

Isioma Coker, HR Director at SaskTel in Regina, said the first strategic error many organizations make is framing benefits as a standalone cost item.

"The reality is, benefits are also a part of your total compensation," Coker said. "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."

The economics cut against retreat. Recruitment, re-onboarding and productivity losses from turnover and disengagement can rapidly outpace any savings from rolling back health or wellness coverage. Coker's alternative is redesign: "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?"

What redesign looks like in practice

SaskTel is a unionized telecommunications company competing in one of Canada's most difficult talent markets. Rather than trimming coverage, the organization built flexibility into the plan — working with its benefits manager, its provider and a joint union-management committee to redesign coverage within existing budget parameters. A health spending account layered over the core health plan lets employees direct funds toward what matters at their current life stage. When a plan component works and satisfaction runs high, the team deliberately stops tinkering and redirects attention elsewhere.

"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," Coker said. "And that's going to be a big differentiator, in my opinion, from a talent retention perspective going forward."

Where the savings actually are

Aman Malhi, Director of People and Culture at Refrigerative Supply Limited (RSL) in Burnaby, BC, said the first task under cost pressure is auditing whether existing spending produces value.

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

She cited a concrete example from her early tenure. RSL paid a premium to have disability claims adjudicated externally — despite self-funding its short-term disability (meaning the company, not an insurer, carries the claim cost). She cancelled the service and moved adjudication in-house, producing genuine savings without removing a single benefit employees could see or feel.

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

The same logic applies to administration costs, vendor contracts and adjudication processes across any plan — sources of savings that never require an employee to give something up.

The numbers behind the pressure

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, according to the Canadian Life and Health Insurance Association's Canadian Life and Health Insurance Facts 2026. Mental health support spending reached nearly $1.1 billion in 2025, up 160 per cent in five years.

Malhi added that plan design is only as good as the insight behind it: "The best HR decisions, the best people and culture decisions, combine evidence with genuine curiosity about people's lives. 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's closing point: employees never evaluate benefits in isolation. "Benefits are a part of total rewards and we can't necessarily just look at them in isolation," she said. "Employees are looking at that as part of the whole offering that the company gives to them."

As benefits strategy becomes a competitive differentiator in Canada's talent market, the direction from both leaders is the same. The answer to costs rising at more than double the pace of wage budgets is not a smaller plan — it is a smarter one: redesigned with flexibility, audited for waste, and communicated clearly enough that employees see the full value of what they already have.