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The Complete Guide to Employee Benefits in Canada

Key Takeaways

1.  In Canada, it is the responsibility of the employer to ensure that they are complying with legislation and providing the necessary employee benefits that are expected by law.

2. The mandatory benefits that an employer must provide as a minimum to employees include annual leave or vacation time off, sick leave, critical illness leave, maternity, paternity, parental leave, Canadian Pension Plan contributions, and employment insurance contributions.

3. In addition to the mandatory benefits, additional non-mandatory benefits can be offered by employers. In order to stand out as an employer and attract loyal and high-quality employees, companies may wish to provide further benefits to attract and retain staff.

4. Offering mandatory benefits is a minimum for employers. Supplementary benefits may include dental treatment contributions, retirement planning, well-being benefits, eye checkups, membership contributions, spending accounts, mental health support services, and other perks.

5. Companies must be aware that each province has its own rules when it comes to specific employee benefits in Canada. They should therefore gain advice to ensure they are complying with the law.

Introduction to Employee Benefits in Canada

Doing business in Canada, means being compliant with employment laws, and understanding what entitlements an employee is supposed to receive. Some of those key entitlements in Canada include employee benefits. The particular benefits that employees should receive by law are dependent on the province.

Not only are some benefits actually mandatory by law, but they are a good way of attracting new talent and retaining good staff. Good quality employees are likely to stay in the company if they are receiving competitive benefit plans. It is therefore a good idea for companies to offer supplementary benefits beyond the mandatory requirement in order to compete with other companies. Furthermore, it is also in the employer’s best interests that their staff are happy and content in the workplace, which overall boosts team morale.

Employees may be disinclined to leave a company that provides them with additional benefits that they aren’t able to easily find elsewhere. For instance, gym memberships or paid away days. Providing such opportunities for employees is also a chance to build a positive and collaborative environment amongst teams, which helps the overall productivity of a business. It may be more difficult for smaller businesses to compete with larger companies and provide additional benefits. However, aside from the mandatory benefits, benefits do not have to be monetary. 

In some cases it is even hard to pin down whether an employee entitlement is a benefit at all, such as the ‘right to disconnect’ in Ontario

Some supplementary benefits are highly important in attracting long-term employees such as retirement planning as they can provide security and peace of mind. They are also key in demonstrating employer support which ultimately retains those staff members who are committed long term.

A huge proportion of employers in Canada offer extended healthcare benefits, such as healthcare insurance in Canada. Healthcare is another area that employees are likely to value and therefore, providing extra health benefits is also likely to attract and retain the right staff who are intending on working for a company long term. It is in the best interests of a company to retain good staff for a long period of time as it reduces staff turnover and means that a person is likely to work their hardest if they are content.

 

Which are the mandatory employee benefits in Canada?

Mandatory employee benefits or statutory benefits are those that employers are legally required to provide to employees. In Canada, this is governed primarily by the Employment Standards Act which establishes the right and responsibilities of employers and employees.

Mandatory employee benefits in Canada include having a pension plan in place whereby both employees, employers, and self-employed people must make contributions. Also, having statutory leave such as paid time off, sick leave, maternity, paternity, and parental leave. Generally in Canada, employees receive 10 days of public holidays and paid time off or vacation leave depending on the province. However, generally, often 2 weeks of paid leave is offered to employees.  Additionally, employees must receive insurance contributions known as employment insurance.

In summary, the mandatory benefits under Canadian law include the following:

Vacation leave, and compensatory leave (for some employees). 

Sick leave, critical illness

Maternity, paternity, and parental leave

Canadian Pension Plan contributions

Employment insurance contributions

In addition to the mandatory benefits that an employer must provide employees, they can also offer additional benefits to attract quality employees such as profit share opportunities, wellness programs like yoga classes, and other perks such as memberships and loyalty schemes. 

When providing benefits (whether mandatory or optional), employers need to ensure they are distributed fairly and consistent with Canada anti-discrimination laws

Employment Insurance and Health insurance in Canada

As part of the mandatory benefits, employers must set up employment insurance. Employment insurance is in place to help employees who lose their job or are unable to work as a result of illness or caring for another person. Employment insurance can give an individual up to 15 weeks of financial support. The amount that the employer contributes to the insurance varies among provinces, however, generally, the employer may contribute 1.4 times the amount that the employee does.

Generally, employees are not paid if they are off work on sick leave, however, some companies may offer a certain number of days of paid sick leave. Alternatively, the employee has the option to claim back for sick leave through their employment insurance. Similarly, employees may also be able to claim back on their employment insurance if they need to care for a child or adult who has a life-threatening illness.

As Canada has a publicly funded healthcare system, there is no compulsory employer-funded health insurance. However, private health insurance is often offered as perk by employers, depending on the industry. 

Read more about how health insurance plans at What is PEO Insurance? and plans for remote workers at The Expert Guide to Health Insurance for Remote Workers.

Pension contributions in Canada

A mandatory requirement in Canada is that an employer makes pension contributions to an employee’s pension. Contributions are made by both the employee and employer. Depending on the province, different percentage contributions to the Canada Pension Plan are required. The level of contribution made is dependant on the employee’s average earnings.

The Canada Pension Plan (CPP) is a mandatory pension plan and is essentially a monthly, taxable benefit that replaces part of an employee’s income.

The employee’s contribution is made by being deducted from the monthly wage and the employers pay a percentage. The amount that the employer must contribute changes from year to year. Employers may not be required to contribute to a pension plan in some cases such as if an employee is making less than $3500 annually. The amount that the employee receives from the pension once they retire is dependant on the number of years they have been contributing and the amount that they have ultimately contributed.

Conclusion

A company that hires employees should take into account how it will manage employee benefits. This includes putting together a benefits package which usually comprises what other competitors are offering their staff, legally required employee benefits in Canada, and the expectations within the market.

In Canada, the mandatory benefits are governed by the Employment Standards Act and cover a pension plan, insurance, and time off for specific reasons. Employers have opportunities to attract quality employees with their benefits packages by providing further benefits beyond the standard statutory requirements.

If you require further information regarding employee benefits, do not hesitate to contact us. At Horizons, our role as a Canada Professional Employer Organization or “Canada PEO” is to assist with administering benefits for employees in Canada. We are able to provide specialist advice and ongoing support.

Frequently Asked Questions (FAQ)

In Canada, labor laws require that companies must provide certain benefits to their employees. Employees are protected and as a result, employers can face penalties for not providing mandatory benefits. The rules vary between provinces and so it is important that employers are aware of which specific rules affect them.

In addition, there are other supplementary employee benefits that employers can choose to provide to employees. This can be a tactical decision based on the standard industry expectation and what competitor companies are offering their staff. In order to stand out as an employer and attract loyal employees, companies may wish to provide further benefits to attract and retain staff.

The mandatory benefits that a Canadian employer must provide as a minimum to employees include annual leave or vacation time off, sick leave, critical illness leave, maternity, paternity, parental leave, Canadian Pension Plan contributions, and employment insurance contributions. It must be noted that the specific requirements within each province vary. Employers may face penalties if they are not providing the required legal benefits.

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