HR Tips and Best Practices with Kevin Kliman | E018

How to ensure success with your staff and your business.

In this episode of Financial Planning for Canadian Business Owners, Jason Pereira, award-winning financial planner, university lecturer, writer, talks with Kevin Kliman, Co-Founder and Co-CEO of Humi. Humi is an online platform for managing basically everything that has to do with people in your business. Kevin Kliman talks about HR advice, strategies, and pitfalls to avoid for human resources in its relationship to financial planning. 

Episode Highlights: 

● 01:32 – Kevin Kliman explains what Humi is and the work he does with them. 

● 03:24 – What does hiring people and turnover cost people aside from their salaries? 

● 11:09 – What are some best practices around onboarding that really work effectively and have an impact? 

● 13:21 – Kevin talks about the consequences of not having paperwork taken care of properly. 

● 15:14 – What should employees be doing to address onboarding concerns? 

● 17:22 – Kevin discusses firing people, dismissal and the risks surrounding that. 

● 21:29 – When it comes to payroll, remove all the friction. 

● 25:34 – What are some best practices for onboarding and maintenance of the plans in general? 

● 38:41 – Trust is earned. 

● 39:17 – Kevin Kliman shares his final thoughts 

3 Key Points 

1. When hiring, make sure you are filtering for company culture fit, use recruiting 

to signal to them what your expectations are, and be authentic. 

2. Build an emotional bond between new employees and the rest of the team. 

3. The Employment Standards Act (ESA) is the bare minimum for companies as 

to how they have to treat employees. 

Tweetable Quotes: 

● “Humi is a cloud-based employee system of record for Canadian businesses with 5 to 500 people. It’s kind of a fancy way of saying that we combine payroll, HR, health benefits into a single simple system, cloud-based system that can be accessed from any device.” – Kevin Kliman 

● (Humi) “We are really replacing paper contracts, Excel spreadsheets, all the multiple siloed systems that people use to manage the people side of their business.” – Kevin Kliman 

● (Humi) “The company is four and a half years old. There are now over 1000 companies that are on Humi and they employ over 30,000 people.” – Kevin Kliman 

Resources Mentioned: 

● Facebook – Jason Pereira’s Facebook 

● LinkedIn – Jason Pereira’s LinkedIn 

● FintechImpact.co – Website for Fintech Impact 

● jasonpereira.ca – Website 

● Linkedin – Kevin Kliman’s Linkedin 

● Twitter – Kevin Kliman’s Twitter 

● Humi.ca – Website for Humi 

● Kevin@Humi.ca – Email Kevin Kliman 

Full Transcript:

Speaker 1: Welcome to the Financial Planning for Canadian Business Owners podcast. You will hear about industry insights with award-winning financial planner and entrepreneur, Jason Pereira. Through the interviews with different experts, through their stories and advice, you will learn how you can navigate the challenges of being an entrepreneur, plan for success and make the most of your business and life. And now, your host, Jason Pereira. 

Jason Pereira: Welcome to the Financial Planning for Canadian Business Owners. Just a reminder, before we get started, to sign up for my newsletter at jasonpereira.ca, where you'll receive notification of all podcasts, television appearances, blog post et cetera. 

Jason Pereira: On today's show. Today's show I have Kevin Kliman, co-founder and co-CEO of Humi. Humi is an online platform for Basically managing everything to do with people in your business and I brought him on specifically to talk about some HR tricks, traps and other things you should be aware of. What's the tie into financial planning? Well, essentially people are typically your biggest expense and also your biggest liability if you're not careful. So, being able to better manage the HR side of your business and knowing what the peaks and perils are, is incredibly valuable. And with that, here's my interview with Kevin. 

Jason Pereira: Hello Kevin. 

Kevin Kliman: Hey Jason. It's great to be here. Big fan of the podcast. Big honor to be on. 

Jason Pereira: Well, thank you, Kev. So, long-time listener, long-time friend. Glad to have you on. So, Kevin Kliman, co- CEO of Humi. Tell us a little a bit about what it is you do and what your company does. 

Kevin Kliman: Sure. So Humi is a cloud-based employee system of record for Canadian businesses with five to 500 people. Kind of a fancy way of saying when you combine payroll, HR, health benefits into single simple system, cloud-based system that can be accessed from any device from laptop, tablet, and anywhere. So we're really replacing paper contracts, Excel spreadsheets, all of the siloed, multiple siloed systems that people use to manage the people side of their business. So if you think about what [inaudible 00:02:01] does for the [inaudible 00:02:01] of the customer side of a business. We do that for the people side and the company is four and a half years old. There's now over 1,000 companies who are on Humi and they employ over 30,000. 

Jason Pereira: Wow. Yeah, I think anyone who is a small business owner has had that experience of, HR is this thing you have to take care of. It's not necessarily the most structured approach to it. Spreadsheets, paper files, stuff everywhere. Maybe not even check lists. It can be pretty scatter-shot. So I brought you on today to specifically talk... Not specifically around financial planning, but around one of the biggest expenditures that people have in their business and the biggest liabilities people have, which is the people side of their business. And if you don't plan that out right, you have sub-optimal performance and you have sub-optimal financial performance and increased liabilities. So, hence the [inaudible 00:02:51] and the connection to financial planning. 

Jason Pereira: So, specifically, we're going to talk about a couple of things. Talking about... We'll start with HR, and then we'll talk about payroll and benefits and a bunch of solutions and advice that you have for people around that. So, when it comes to HR tricks and traps, let's talk about, basically, when someone comes on board. What stats do you have on cost of hiring people and what turnover costs people. What is the onboarding and maintenance or loss of people cost an employer beyond just the salaries? 

Kevin Kliman: So, thinking about this cost specifically, is a good analogy for the cost, and thinking about the charges in general. For most people intuitively... Most people's businesses rely on people. In one way, shape or another. It's really hard to measure that output as you invest in people in better systems for them. Managing them. Helping them have goals. Hard, versus, like you have Salesforce and you have better sales software. You can very accurate, very obviously see the increases or decrease in revenue because of that. There's a lot of interesting stats as it relates to turnover and a lot of it comes back to how you onboard and recruit employees. So, you think about... I like to break down HR into three different buckets. How you find people. How you bring them aboard and how you keep them at the company. 

Kevin Kliman: So, starting with recruiting, you really want to make sure that you're filtering for culture fit off the bat. So if you're a company who doesn't care about what people wear, or care very deeply about people wearing suits, not swearing, swearing. Make sure you find the people that are aligned with that, because it's going to cause friction right off the bat, if they don't. And then the next thing you want to do is use your recruiting process as like a signaling for the employee as to what their expectations should be as an employee. So it is very thorough and deep and takes a long time. That actually gives employees a good sense of how working at the company should be. As far as responsive, you want to show employees, by example, what their tenure might look like, in the form of their interview coming up. 

Jason Pereira: In a way it's almost like the first date, right? You're trying to establish the value to that member of your team, right. 

Kevin Kliman: Exactly. And Authenticity really matters. If you can show a side of the business, just like date... If you are not authentic about who you are, people will eventually find out and it's going to cause issues and you're going to break up. If you're honest up front, and allow people to self-filter themselves out. I think the best case scenario, for a lot of businesses is they go to interview somebody and they say, "This is a great process. I obviously would not enjoy working here. So I won't continue on with the job process." Better than having somebody take a job, onboard, spend tons of time and resources and eventually they don't work out. Because, to your point, the cost of losing an employee is much more than just the severance costs. It's the cost of your time to go find another person and train them up and get them embedded within the team. And also the potential that you run into some legal ramifications in terminating that employee from the company. 

Jason Pereira: Yeah. The second you pass three months, in Ontario... I'm not sure? Different provinces have different regulations. You're on the hook. You're on the hook, right. Those people have rights and yeah. So, the cost of turnover... We talked about statistics. You mentioned some interesting ones. Do you know what the cost of turnover is for people or what the equivalent is in terms of keeping them happy? 

Kevin Kliman: It's really company dependent. Based on how many people are in the company. How much money is for recruiting, et cetera, et cetera. So, putting an exact value on it is really tough. We do know, however that a huge percentage of people who turnover within the first, I think it's six or 18 months... Apologies. I really should have these stats off-hand. 

Jason Pereira: I don't expect you to have statistics right in front of you, but go one. Approximate 18 months. Go on. 

Kevin Kliman: It's for the people that turnover quickly, within the first two years, know within the first two weeks. 

Jason Pereira: Wow. Wow. 

Kevin Kliman: And so, it's an astonishing number. Something like 50%+ of those people. And that's why the onboarding experience is so important. 

Jason Pereira: Well that's interesting because I feel like most of us have probably had that experience. We took a job and we're like, "Okay, maybe this wasn't the best decision, but I'll give it a chance." Right? I feel like, yeah, the kind of mental, "I'll give it a year." Right? Or, "I don't want my resume to look like I'm changing jobs every six months." Right? So, I feel like there's probably a lot of practical reasoning that most of us can relate to, who've had similar situations. 

Kevin Kliman: Oh absolutely. And if you think about it, there's tons of uncertainty, excitement, nervousness when you come in. If that first experience is not a good one, it can have a very negative effect on that persons long-term trajectory with the company. So, you want to remove as much friction as possible from that first day and first week. Something I think Humi does really well is taking away the paper work side of things. So, for a lot of people, when they show up on day one, they're sat down at a desk with a stack of paper and take three hours to fill this out. "Let's sign you up on the Benefits Plan. Hopefully get you onboard to payroll. Sign all these paper contracts. Read them. Maybe you need a lawyer to check them out." 

Kevin Kliman: With Humi, you can fill a couple of fields in, have an email sent to that person days or a week in advance from their start, so when they begin that first day, they're doing things that really are impactful to getting them inbedded to the culture. You want them to meet everyone on the team and build emotional bonds with the people they work with, to really understand what their work is and why they're doing the work they're doing. You don't want them filling out paperwork. You don't want them frustrated looking at... Sat in a corner by themselves. 

Jason Pereira: No one's good at filling out insurance forms, right? That's almost a universal...You're not used to filling out tax forms. You're not used to filling out insurance forms. The frustration is you're typically putting in the same information in the same forms for different companies and all of this other stuff, so it takes far longer than it should. And frankly there's a lot to be said about digital onboarding as a real message to, "Hey. Not only are we modern as a company, because we're able to do this digitally, but we made it easy. We've taken the time to actually bother taking time to make it easy for you." So, besides the digital onboarding piece and making that first day of paperwork minimized, what are some of the best practices around onboarding that really work effectively and have an impact? 

Kevin Kliman: So, I briefly mentioned it. Building some sort of emotional bond between that person and the rest of the team, is incredibly importance, because one of the main drivers of keeping people happy and content in a job for a long time, is the way they feel about their co-workers and their managers specifically. So, at Humi, your first day at work, you go out to lunch with your entire department. You sit down with the leader of your department as well as do a one-on-one with leaders of every department. It doesn't have to be as formal as that, but helping people get introduced and start to build friendships, or at least a sense of familiarity with the people that you work with, is really important at the outset. 

Kevin Kliman: And then also, recognizing that it's a stressful, nerve-racking experience to have to make first impressions with so many people. So make that first week really easy for that person. Surprise them on the first day. Tell them that they're done at 2:00 or 3:00 P.M. Give them half the day off on Friday. Really help lighten their load and help them to focus on being around within in the company and getting them comfortable working alongside their co-workers. Really important things to think about when building an onboarding precess. 

Jason Pereira: Yeah. It's almost like the experience... I keep on finding simple analogies for everything. Almost like in the experience to having to switch schools when you're a kid, right? You go into a new environment, everybody's in their rhythm and their dynamics are all worked out and you're just looking from the outside in. In those cases, you don't get a guide, but if you think about it in that analogy, having a process of how you onboard these people and give them the best probability for success and entrenchment in your firm... I don't care if it's checklists, I don't care what it is, think of that as another experience. Just like a customer experience that you have to already work on in order to ensure success. 

Kevin Kliman: Absolutely. I think that's a great analogy. 

Jason Pereira: Yeah. So let's talk about what happens when you fail to do his. Besides the fact that you're going to have turnover, failure to get all the paperwork and everything else done early on, can have some legal implications and some implications for the insurance policy. Let's talk about what it looks like if you don't take care of that properly when you start. 

Kevin Kliman: Yeah. Absolutely. So, I think most people will know what the ESC is, employment standards act. And that's the bare minimum for companies as to how they have to treat employees, and if they don't, it creates real legal liabilities. So you can be sued for discriminating against people or not paying them the right amounts or not giving them the right structures in terms of their work hours. And these are liabilities that everyone faces and things that you just want to know are covered. Right? It's like it's one of the lowest... it's a high cost, a very high potential cost, but very low return, in terms of the work you do. It's just an expectation, but if you don't do it, it could cost you massively, monetarily, but also in hours if you have to go to court. If you have to go back and forth with somebody's employment lawyer at a certain point. 

Kevin Kliman: So really, it's important to have all those things sorted out from day one. Have employment contracts have good processes for termination, making sure everyone's on the Benefits Plan when they need to be. As you know, if you don't get somebody on the benefits plan in time, they're considered a late applicant and they might have to undergo medicals... 

Jason Pereira: And if they've got a history, they might not get the coverage, which is problematic, right? One of the things that people look for when they join a new employer, is they ask about, does this come with benefits, right? If the answer is yes, but then if they take the job and they can't get the coverage because they're only an applicant, the answer become no, right. They may be better off switching jobs to get those benefits if they're in a bad situation. 

Kevin Kliman: For sure. And consider if that person gets sick and they don't have the benefits that they were promised contractually, the business is on the hook for the cost of that [crosstalk 00:12:54] person's healthcare, life insurance. It just could turn into an absolutely terrible situation. 

Jason Pereira: In the liabilities side of group insurance to businesses is something that's not very well explained or very well understood quite honestly, but there's all kinds of tricks and traps. I've even seen Preston's cases where someone signs up as a single person, never gets checked in with on the group plan for a decade. In that time gets married, has children and the company's on the hook for those kids and that spouse, because, well, there should have been more diligence than asking them once in 10 years time. If you're saying that you're providing benefits for families and you fail to just look for changes in peoples lifestyle and do your diligence and make sure they sign up for that, you can be on the hook. 

Kevin Kliman: 100%. And this just another one of those high friction things with potentially huge cost that can be automated away. 

Jason Pereira: Absolutely. 

Kevin Kliman: If you have good processes... I don't want to show to much for Humi or having a good HRES, but even just building up. If you're starting small, build up some processes through Google Doc and Zapier and a few other things. Also, a system like Humi and a couple of there are a couple of other good ones out there, it's five, $10 per person, per month. If you consider the potential cost for a business if you don't ge those things done, and how many things there are to do, it makes back it's money day one. 

Jason Pereira: Yeah. I'll let you plug your product, it's fine. It's far more attractive than the alternative than building your own Google Doc, in addition to that, creating your own checklist. It's far better than the alternative of building your own stuff in Google Forms and checklist maybe in ProcessStreet or whatever it is. You can still do it, but for 10 bucks a month, I'll take that deal. 

Kevin Kliman: Similar to most other really good SAS products, like Shopify, you pay a company to expend all their resources in building really good tools so that you don't have to. If you we're to build a good HR system or record for your company, you would need 30, 40 developers full-time versus five, $10 a person- 

Jason Pereira: Preaching to the choir here. There's nothing I won't automate. Anyway, so next question, or next point. Let's go on. So what are some best practices for ongoing HR concerns? So, person's onboarded. Person's hired. What are the things that employers should be doing and how does that protect them, both from turnover and liability? 

Kevin Kliman: Cool, so there's obviously a lot of things that can and should be done to keep people looking to be employed and productive. Feedback is a really important thing that people tend to miss or are stuck in... The traditional expectation was that you do an annual review or twice a year review, where you give somebody a salary bump or not and you give them feedback as to how they're doing. And the truth is that it's a wasted opportunity, if you give people feedback once a year. People thrive on feedback. And they want it. So, if you can check in with people on a weekly or monthly basis, to give them feedback that is applicable at the time of your meeting, that becomes hugely valuable for people for keeping a line between management and employees. 

Kevin Kliman: And the same goes for having some sort of transparency around peoples job functions. Why are they doing? What are they doing? And how does that contribute to the company's overall goals? If people understand their purpose better, they're going to do a better job, versus if you ask them to screw in bolts and nuts and they have no idea what they're building towards- 

Jason Pereira: They don't know if it's a car or a plane coming out the other end of the assembly line, right? It's a bit of a ridiculous example because if you're going to Boeing, you know what's going to happen, but there's plenty of people who go, maybe, to a major bank or an insurance company, and process a document who really have no idea of the actual impact on peoples lives that that document is having, right? Totally agree with you. And it's interesting because it's a challenge, because when you start off a business, you start off small and you hire a bunch of people and you're in constant communication with them. So, formal feedback sessions are less important there, because you're constantly feedback, because the boss is always talking to everybody. But as you scale and you're the boss and the boss is not talking to everybody on a daily basis anymore, it becomes a lot more important to have more formal structures around that. Because they're losing that connection to understanding just how it is they're doing, or what they can do to improve, unless they have that. 

Jason Pereira: Good. So, before we leave HR alone, one other question for you. So, dismissing people, okay? The unfortunate act of firing people. Let's talk about what are best practice surrounding dismissal and what the risks are surrounding that. 

Kevin Kliman: So, the first thing I would say is treat people well. People are human. It's really emotional thing to lose a job and be as considerate as possible. Part of that is being prepared, because it can get really tough and when people get emotional, you can run into difficult situations. So have a release ready to go. Make sure that you have a proper off-boarding checklist and this is another great thing that you can put into a good HR system or record. Make sure that the equipment that you need to take back, there's a process for that. Now that people have accounts in six different SAS tools or their POS and their accounting system and HR. Make sure there's a good accountability to make sure that people are out of those systems in a very concise an effective way. And then really understand if there has to be a negotiation, what they're asks could and what your gives could go up to. 

Kevin Kliman: The truth is, if you have give employees a little bit more to get them to sign a release, it is almost always going to be much less expensive than having to go back and forth with lawyers, because that just becomes a massive time suck and resource suck. Alternately like everybody says. 

Jason Pereira: Yeah, and it's interesting, because there's a couple of pieces of advice I've always given business owners surrounding this entire process is... Part of it goes back to your comment about being kind, and even in my own firings in the past, one of the things that I've always told people, and sincerely I believe it is, we're all put on this earth to do something and we can all find something that we are passionate about doing. And the honest truth is, I think the other person knows, this wasn't it for them. And I often think to myself one of the crueler things that I've... Sorry I read this part out... I can't remember which book I read it in, but one of the books I read on this basically said, think about the cruelty of keeping someone in a job that they don't like or aren't good at, right? 

Jason Pereira: Yeah, they're getting paid. Yeah, you're keeping them employed, but you're also preventing them from the opportunity to find something better and I think on some level, we almost have to look at that as a kindness. As much as that may sound a little bit frivolous, it sometimes can be as to say, "Enough of this. This is not a good fit for anyone. You deserve to find something better in your life." And that conversation has always been very well received. And then the second piece is around severance. Especially because it can be a pretty emotional thing sometimes to want to fire someone because if you feel like, "That's it. I'm done with this person." Sometimes you're not happy with their performance and the thought of having to cut them the cheque grinds you a certain way. 

Jason Pereira: Every lawyer I've ever spoken to said the exact same thing, "Do not even think about giving less. Give a little bit more, because if you do that, it shows that you did nothing wrong, in fact, you were more generous than you had to be." And if someone makes a complaint or tries to cause a problem with you, you're already in a position of strength and a lot of employment lawyers will say, "Well, they followed procedure. They not only gave you what you were entitled to, they gave you more than what you were entitled to. What exactly do you think we're going to go after here?" 

Kevin Kliman: Actually, I got one more thing for you, that's starts before you terminate the person. How you start the time off, can meaningfully impact the severance that you owe an employee when you terminate them. Having a well-structured time-off policy makes... Let me give you an example. 

Jason Pereira: Yeah, please. 

Kevin Kliman: There's a number of different ways to accrue the time off an employee takes during the year. So, when you start on January 1st, somebody accrues the entirety of their vacation for that year, you fire them a week later, you owe them the value of all those days, versus if you have a good time off tracking system, and they accrue on a monthly basis, and they're allowed to hold negative balances, you're never going to owe somebody much more than you should. So having a well-structured time off policy that is communicated well to an employee at the beginning and also in the employment contract, can really help when it comes to terminations. 

Jason Pereira: Good to know. Excellent. So, let's move onto payroll. Let's talk about some best practices regarding payroll. This is a pretty dull subject for most people unfortunately, but besides getting off of... I'm going to make fun of the big ones, Ceridian and... What's the other one? ADP, who everyone always complains about. What are the best practices regarding payroll that people should contemplate. 

Kevin Kliman: Removal of risk, because it is more like the lowest margin, highest cost things a business will do, right? Reconciling payroll with your time off balances, with your benefits deductions, with terminations, et cetera, et cetera, et cetera. The expectation from the employees side is that you get it right 100% of the time. 

Jason Pereira: Well, the obligation of the employer is to get it right 100% of the time, right? 

Kevin Kliman: Absolutely. If you get payroll wrong, could have massive cost implications in terms of your time, in terms of actual cost to employees and for the business. So, get rid of that friction by finding ways to integrate it with your processes. Maybe you create notifications once a month. Maybe you have a standard lit of things that have to happen before you run a payroll. Maybe you just use a system that hasn't integrated with all those other systems. Whatever it is, make sure you have a repeatable, very clear process for running payroll, so that nothing is missed, because a small mistake in Payroll can cause massive headaches to people running the business and the business itself. 

Jason Pereira: Excellent. It's, again, liability is completely one way in that role. Can't think that there's anything that the payroll obligation that is going to land the employee in hot water, right? 

Kevin Kliman: Hey listen, if you input an employees banking details for direct debit, and you do it wrong, and you pay somebody else... 

Jason Pereira: That's on you. 

Kevin Kliman: Right? Yeah. And you're still going to owe the employee money and they're going to want to know where it is. It's going to have a negative impression on your business and has just cascading effects. The expectation is to just get it right every time. 

Jason Pereira: Now they're inputting their own payroll information for the banking, then we have a different story, but nevertheless, it's still not a good position to be in. I guess this is another plug for your company. It keeps on happening. Usually these things are very silent, and integrating them wherever possible is definitely of value, that's for sure. 

Kevin Kliman: Yeah. The common theme is, people should spend time on their business, not on the things that make the business work that can just happen naturally. 

Jason Pereira: Yeah. Very true. And every business owner I think will relate to that, is that you spend so much time building the widget or selling the widget, make sure the two functions are necessary that everything else becomes secondary. And there's just a bunch of liability lying around that you might trip over one day. It doesn't have to be a giant time suck, it can be automated away. It can be minimized. It can be improved upon. So, payroll... Anything else to add for payroll? Any other things people should be aware of or think of or best practices there? 

Kevin Kliman: Payroll can be very industry specific. So I won't go too deep, but if you have time and attendance employees, clock in, clock out, really think about business processes and how they ultimately tie into payroll. If you're a restaurant owner, you look at seven shifts, because it ties into the POS, and there's a simple export that can be uploaded to your payroll [inaudible 00:24:23]. I just want to boil I down to think of the unique aspects to your business and how they apply to payroll and make sure that the systems you have in place really accommodate those. 

Jason Pereira: Yeah. At the risk of slamming the two big ones, again, everybody tends to default to the bigger ones. Some of the banks even promote them specifically, but there is a serious number of smaller players that are out there in the payroll space that have far superior experiences and far easier to use consumer- friendly interfaces. Largely because the bigger ones are really servicing the Fortune 500 and larger scale companies. And they'll take on any business because, hey, it's profitable. Because they have it scaled. But, they don't necessarily make it friendly, right? It's definitely more of an enterprise solution than a consumer-based solution and it's just not the easiest thing to navigate sometimes. It's also an easy thing to trip up on sometimes. We've had some issues wit payroll providers in the past ourselves, luckily shaking out. 

Jason Pereira: So, now we're leaving payroll, let's go to benefits. And we talked about a couple of best practices, but lets talk about best practices for onboarding and maintenance of the plans in general. We'll talk about it from the employees standpoint and let's talk about it from the employers standpoint in terms of managing the plan themselves. 

Kevin Kliman: So, from the employees standpoint, it is really important to set expectations off the bat. So, when you recruit somebody and onboard them, then that should be part of the discussion, because it's part of the compensation and you want people to really understand what you're giving them can cover them and also, you want them to understand what tools they have at their disposal. Because ultimately, what a benefits plan is supposed to do, is to keep people healthy, so that they can be productive at work. It's interesting to think of why employers-supported benefit plans work so well, that the common shared incentive between the government and the small businesses in this country, is the same in keeping people healthy and productive. And by giving them... Would you call it a tax shelter or tax scheme? 

Jason Pereira: A tax break. I would say it's a tax break. It's from background, health and dental benefits are deductible to the employer and non-taxable to the employee, which basically means great for the business, great for the employee. Certain benefits like life, is a taxable benefit to the employee. Disability depends on how structured. Can be tax-free or taxable, depending on it. For those of you who want more of deep dive into this, there was the interview with Keith Foot. I suggest you go back to that. We go over benefit by benefit by benefit and explain all of that. But yeah, it's definitely... The government is giving a tax break because, hey, it helps keep people healthy. 

Kevin Kliman: And it helps relieve some pressure from our national healthcare system. 

Jason Pereira: Absolutely. 

Kevin Kliman: You think about... I believe it's $15,000 a year is the average spend per person on healthcare across the country. About 50% of that is covered by the government. The other 50% is covered by a mixture of private employers and people's personal savings. And the truth is that if somebody is going to preempt their healthcare by going to the dentist, by seeing the physio or getting a massage, there's reduced chance that they're going to the hospital for a massive procedure or gets really sick and has to really lean on our national healthcare system. So, people don't really talk about it a lot, but it is a massive, really important part of maintaining our healthcare system in Canada. 

Jason Pereira: Yeah, there's a couple of moral hazards at play here. The first one is when... Every Canadian is a little bit lax about the entire healthcare issue. Everybody just assumes that basically, hey, healthcare's paid for. Healthcare's paid for, end of story. Well, there's, as you described, a substantial amount of out-of- pocket cost that happen on an annual basis, whether it's paying for your own prescriptions or God forbid, you have something serious happen to you, you're going to have out-of-pocket costs. There's been case studies done that show that the cost of having cancer or a heart attack in Canada, when you start adding up all the auxiliary costs from parking at the hospital to things like crutches, things that are not covered, that can be upwards of $50,000 over the course of two to three years, right? That's not a small sum, nevermind a loss of work and productivity from work. 

Jason Pereira: And then, you throw on top of that, the problem that people, when it comes to benefits, and this is so common it's, oh, they have benefits. Check box, right? Well, you can have benefits, but benefits can be very different depending on the structure. We know there's almost an infinite number of ways you can assemble these things and some of what we do is just basically go through under risk management with our clients and explain like, "Okay, you have benefits. Here's what you're covered for. Here's what you're not." And they're just like, "I'm no covered for that?" They sometimes, by saying you have something, you assume it means everything that people think it means. But not necessarily, right? 

Kevin Kliman: It's interesting. A lot of companies, and rightfully so, don't structure plans based on what they believe people need as much as they do based on benchmarks for the industry. 

Jason Pereira: What people want. Think what they think people want. Right? That's the other thing. 

Kevin Kliman: And to be fair, people who manage these plans internally, aren't experts in health and wellness, nor should they be. And that's probably one of the most interesting shortfalls of our current system. There's no reason why a head of HR or CFO should be picking the appropriate amount of dental and drug coverage and physio for their employee base of- 

Jason Pereira: Whether or not they have disability or not, because employees maybe don't want to pay for it. 

Kevin Kliman: Yeah, it's one of the clear shortfalls of our system, is that you have to pick a single bucket size that everybody has to fit into. There's a lot of good stuff and there's some shortfalls and that's one of my pet peeves when I look at the industry as it is today. 

Jason Pereira: Well, it's also a thankless job at some degree, right? So, employees expect and you don't get the, "Oh my God, thank you so much for having this policy in place." You don't get feedback that's reinforcing. You get complaints, right? You get like, "Oh, you know. I don't necessarily want to pay for this. I'm not using it. Can I just take the money instead?" Or, "Why is there a portion that I have to cover?" It's just, it's a very thankless job in a lot of ways, right? But, it's an expectation. And- 

Kevin Kliman: Still a good segue into how you make benefits more sustainable. When you give everything and anything to your entire employee base from day one, it is almost impossible to take things away. 

Jason Pereira: 100% reimbursement is... Yeah, and that's one of the things I coach people on all the time is, look. The thing that matters is sustainability, even if 100% reimbursement looks affordable to you now, It won't take many bad claims years to make this thing super expensive, right? 

Kevin Kliman: And as you know, it's rough, because not only do you have to be an expert in health and dental and picking the programs, you also have to become a underwriter and understand loss ratios and all these other remuneral factors that factor into the price increasing every year. The average benefits plan costs... I think it went up 7% last year and has been going up at an average of that for the last, I don't know, how many years? It's completely unsustainable. 

Jason Pereira: Well it's largely pushed by the drug cost, right? Those are growing by double digits every year. Population's aging, so you have that as well, right? The other thing too is that, unfortunately... One of the things I like about the life and health world is that the price is the price. It doesn't matter, there's no negotiation, right? If you are unhealthy or you have a problem, then it can cost more, but then you an also shop around and you can get competitive quotes. The base price, there's no mystery to I, where as, you get these renewals from insurance companies and sometimes they're completely unfounded. I kid you not. We've seen double digit, as a request for 15, 20% increases and we look at the data and go back and say, "Are you kidding me? Look at this. This makes no sense. We think you should be at 4." And then they come back and give us 6. And it's like, "How did you go from 15, 16, 17, to 6? You're clearly just trying to gouge this." 

Jason Pereira: Unfortunately, and I will say this and this is a criticism of the entire industry, is there is definite gouging of the lazier or laxer agents or people who don't know enough to fight back. And that's something that you have to have someone manage this who is diligent and understands the industry to fight back against that. And, unfortunately- 

Kevin Kliman: The initial way that these plans are setup, really accommodates for situations like that. You break down what people are paying for, a portion of it is insurance products where there can be some huge loss and you need to insure that, but a much bigger portion of that are known costs that people can plan and save for that you shouldn't be paying an insurance cost. Or because, there's a huge premium on that. If you think about most loss ratios are 70% as an average. I think that's pretty fair. There's a margin of 30% of... It's like a black box and nobody knows the costs that go into it or why it's like that. And the truth is, for those expenditures, closer to 100% of the dollars you put in, should be going towards them, not 70c of every dollar. 

Kevin Kliman: And today, that's just the way it is in Canada. I bet you 99% of plans are structured that way. 

Jason Pereira: No small business. There's just a because of distribution in the small business side, plus the compensation. Unfortunately advisors are compensated based on the premium [inaudible 00:33:33]. Fortunately and unfortunately. But then they are incentivized to have you paying as much as possible before you quit, right? 

Kevin Kliman: It's the principal agent problem. 

Jason Pereira: Yeah, totally. 

Kevin Kliman: Jason, you are who I consider to be one of the best advisors in Canada, bar none, but your incentives are still poorly structured, because trust that you're going to give the right advice, but whether you give... Your incentive is to get people to pay more, which results in you making more. And the truth is, it should be a flat fee across the board, per person or for company guys. 

Jason Pereira: Whatever it should be. I believe that there should be optionality in the structure, because letting people dictate how it has to work, right? Again, I've done a lot in my business to try and eliminate as many conflicts as possible. Some of them I just can't get away from. When that's the case, all you do is... The other part of this is transparency, right? So it's like, "Hey, I'm doing this. This is what's going to make me. Here's why I think it makes sense. If you want to disagree, let's have a conversation." No matter what business you're in, you can't fully get away from the conflicts of interest. And frankly, the reality is, is that, I'll be honest. I could've made substantially more money off of lots of clients, for doing the wrong thing, but I just have a simple rule. Which is, I just believe the clients aren't stupid and sooner or later, they're going to find out that I did something that was benefiting me, not them, right? 

Jason Pereira: And I often also say that if you're not disclosing compensation and stuff to clients, you're just leaving yourself susceptible to someone like me who's going to come along and explain that to them and explain the fact that you didn't do that and maybe there's a reason for it and sometimes that reason's very transparent unfortunately. So, it is what it is. I just think there's more money to be made long-term by being honest and forthright. But, that's my diatribe. Anyway, and we mentioned, so again we were back on benefits programs. So yeah, I think you're absolutely right. When we designed these things to star, I always focus specifically on sustainability and some cost sharing and as a means of preventing people from going crazy with it. I also, even in the onboarding, tell all the employees when we do the onboarding, do not treat this like a blank cheque. 

Jason Pereira: This is here to help you and your needs. You want to go and get every last paramedical practitioner under the sun with things you don't need, then you are basically sow the seeds of your own destruction. This plan is going to be cut back. This plan is going to become more expensive. This plan is going to start coming out of your pay check. So, be responsible to the community and it will be responsible to you. Some of them listen, some of them don't. And sometimes the employers don't know. I've literally had employers who literally... When first renewal came back and I'm like, "Oh my God. How is there so much massage therapy in this?" I talked to the administrator, like "Oh, we bring in a massage therapist every Friday." I was like, "Well, should we stop?" And I'm like, "Yes, you should stop. This was not meant to be a blank check. It was meant to be there to support people who need massage therapy because it's a medical reason. Not just because, hey, it's convenient and it feels good." 

Kevin Kliman: Yeah. It's so interesting the way these things work. A lot of people don't understand that when you first [inaudible 00:36:35] for a benefits plan, people will under-price that plan significantly to win the business, with the expectation that they jack up the price in the next year or two to make up for that. And most insurers will not accept or quote on business that's been insured for one year. And it's all these funny things happening and there's a lot of good that comes from the way benefits are structured in Canada. But again, what you've just described, and [inaudible 00:37:02] people, that's not even fraud, but just be responsible with their usage? You shouldn't have to deal with that at all. You should say, "Here's your bucket, do whatever the hell you want with it." 

Jason Pereira: True. I'll look at it this way. I always say, in that perfect world, what would happen is that insurance companies would travel forward in the future one year. See everything that your people spent. Travel back in time with number. Add on taxes and fees to administer the entire plan and then they would get the renewal right 100% of the time. Without time travel, we can't do that. The reality is, is that if you go in and you go nuts... Back to your point about they won't quote you on one year. They won't quote you on one year because if you're the kind of company that's going to literally competitor shop every year, they know if they get it wrong in the first year, they're going to take a bath and never recover, right? No one wants that. They accept that there's risk to this and they know that... Maybe it's a year or two they get this wrong, but sooner or later they'll get it right and they'll finally start to make what they were supposed to be making [inaudible 00:37:57]. 

Jason Pereira: But if you're going to jump around every year, you're going to get blacklisted or black-balled very quickly. 

Kevin Kliman: Yeah, and then good luck is a player who can offer a health benefits plan when you're in an industry where that is the expectation. 

Jason Pereira: Yeah, and who wants to be filling out new forms for insurance every year or two years anyway? I'll tell you, I've literally come across countless cases I've taken over where it's like, "So, the insurance agent had us here and then two years ago we were there ad three years ago we were there." And literally, every time there was a window to change them, because the claims got bad, it basically was moved. And it was moved because the agent had them at 100% reimbursement and everybody was taking every penny they could out if it. So, clearly he or she wasn't looking out for the best interest of the client. So, I guess one of the tips we're going to give you is make sure you have someone on the benefits side who's working collaboratively with you for sustainable solutions. And we're go from there- 

Kevin Kliman: And that you trust. I think trust is such a massive- 

Jason Pereira: Huge. 

Kevin Kliman: ... piece there that doesn't get- 

Jason Pereira: Trust is earned though. You have to give them the opportunity to earn that, right? You'll have to judge for yourself on that one. 

Kevin Kliman: If your advisor is not telling you how much money they're making by working for you, that is the biggest red flag. 

Jason Pereira: First red flag. First red flag right there. Actually I would say not even basically telling you, showing you. Showing you what that's actually... Because, you can say one thing, proving it's another. Anyway, so this has been great. Any final thoughts before we wrap up on this. 

Kevin Kliman: Yeah. Crazy times right now. The world could change. Business world could change in a meaningful way, it's the way we work, but it's always proven to focus on the things that won't change. Treating people well, being empathetic, being very considerate and if you have no technology in your people management stack, but you have those things as principles, I think you're going to do okay. And so, I think that's a good note to end on. 

Jason Pereira: Great. So where can people find you? 

Kevin Kliman: Yeah, so Humi. humi.ca is our company. I'm on Twitter quite a bit. Or if people feel compelled, you can shoot me an email, kevin@humi.ca. Happy to connect with anybody. Help people out. Debate anything I may have said here that you took the wrong way. But yeah, those are generally the best places to find me. 

Jason Pereira: Fantastic. Thank you yet again. Take care of yourself. 

Kevin Kliman: Thanks Jason. 

Jason Pereira: So that was my interview with Kevin Kliman of Humi. I hope you enjoyed that. And I hope you take the time to check out his platform. I do highly endorse it. As always, this has been Jason Pereira and this is the Financial Planning for Canadian Business Owners podcast. If you enjoy this podcast, please leave a review on iTunes [inaudible 00:40:20] your podcast. It really does help people find us. Thank you and until next time, take care. 

Speaker 1: This podcast was brought to you by Woodgate Financial. An award winning financial planning firm catering to high-networth individuals, business owners and their families. To learn more, go to woodgate.com. You can subscribe to this podcast on Apple Podcast, Stitcher, Google Play, Spotify and SoundCloud. For more episodes, go to jasonpereira.ca. You can even ask Siri, Alexa or Google Home to subscribe for you.