Employee Benefits in Canada: A Guide for Employers

What Are Employee Benefits in Canada?

Employee benefits in Canada typically consist of mandatory and supplemental components, designed to support employees' health, financial stability, and work-life balance. Below is a summary of the typical benefits available in Canada:

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Who Is Entitled to Benefits in Canada?

‍‍In Canada, benefits vary depending on employment type. Full-time employees generally receive a more comprehensive package, including mandatory benefits, while part-time or temporary employees may have limited access to these benefits, depending on their status and the company's policies. Independent contractors typically do not receive employee benefits.

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Mandatory Employee Benefits in Canada

Mandatory benefits, also known as statutory benefits, are legally required benefits provided by Canadian employers. These include essential health, leave, and retirement contributions, ensuring a base level of support for employees.

Public Healthcare

Employees are entitled to medical care as part of Canada’s public healthcare system, known as Medicare, a universal, publicly funded program that provides essential medical services to Canadian residents. Funded through taxes and managed at the provincial level, Medicare covers a range of healthcare services, including doctor visits, hospital stays, and emergency medical care, with specific coverage varying slightly by province. 

Although employers in Canada don’t directly contribute to Medicare, it remains a critical component of Canada’s social benefits infrastructure, reducing the healthcare burden on employees and enabling employers to focus supplemental health benefits on areas not covered, such as dental, vision, or prescription medications.

Canada Pension Plan (CPP)

The CPP is a contributory retirement plan funded by both employers and employees, with mandatory contributions throughout an employee's working life. In 2024, the employee and employer contribution rate is 5.95%. These contributions are deducted from an employee’s earnings. Contributions are made on annual pensionable earnings. 

The CPP also includes the survivor's pension, which provides financial support to the family or dependents of an employee who passed away, ensuring some income continuity and stability. To qualify, they need to have been legally married to, or be the common-law partner, of a deceased CPP contributor. 

The Quebec Pension Plan (QPP)

The QPP is a mandatory public pension program for workers in Quebec, similar to the Canada Pension Plan (CPP) in the rest of Canada. Administered by Retraite Québec, the QPP provides retirement, disability, and survivor benefits to individuals who have contributed to the plan through payroll deductions. Both employees and employers contribute to the QPP, with rates set annually based on the employee's earnings up to a maximum limit.

Employment Insurance (EI)

EI provides temporary financial support for employees who lose their jobs or need to take time off due to illness, maternity or parental leave, or compassionate leave. Employers must deduct EI premiums from employees’ insurable earnings. They also contribute 1.4 times the amount of the EI premiums that they deduct from employees' remuneration and remit the total of both amounts. Quebec operates under its own set of EI premium rates. The summary of applicable rates can be found here.

Under Employment Insurance (EI), maternity leave benefits provide up to 15 weeks’ leave for the pregnant employee or employees that have recently given birth. They receive 55% of their earnings, up to a maximum of $668 a week. Employees can't receive these benefits more than 17 weeks after their due date or the date they gave birth.

In addition, employees can apply for parental benefits, which is split between standard and extended parental leave. Under standard parental leave, 40 weeks can be shared between parents, though one parent cannot take more than 35 weeks. Under extended parental leave, 69 weeks can be shared between parents, though one parent cannot take more than 61 weeks. Earnings vary between 33-55%, depending on which option the parent chooses.

In Quebec, parental leave falls within its own system called Quebec Parental Insurance Benefits.

As part of EI sickness benefits (or sick leave), employees can take up to 26 weeks’ leave, receiving 55% of their earnings. Caregiving benefits (which include compassionate care leave) provide between 15-35 weeks’ leave, which include time off to take care of a sick family member. Under these benefits, employees can receive 55% of their earnings.

Minimum Paid Time Off

In Canada, mandated paid time off includes a minimum of two weeks of annual vacation for employees after one year of service, with an increase to three weeks in some provinces after a specified period. Vacation pay is calculated as a percentage of gross wages, varying between 4-8%  of earnings. 

Additionally, most provinces recognize 5-10 public holidays, during which employees are entitled to paid leave. 

Workers' Compensation Insurance

Workers' compensation, funded by employers, offers coverage for employees who experience work-related injuries or illnesses, covering medical costs and providing wage replacement during recovery. 

The Federal Workers’ Compensation Service (FWCS) processes compensation claims. Employers in Canada need to be registered with the WCB (Workers' Compensation Insurance Board) in their province, and pay workers' compensation insurance premiums.These premiums vary by province. 

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Supplemental Employee Benefits in Canada

In addition to mandatory benefits, Canadian employers often provide supplemental perks to improve the work environment and enhance employee satisfaction. Here are some popular options:

Retirement Savings Plans (RRSP)

Many employers give their employees’ retirement savings a boost through their group Registered Retirement Savings Plans (RRSP). In these cases, an employer usually deducts the employee’s contribution from their pay, and matches this contribution amount (also called RSSP matching). 

Additional Health Insurance

Comprehensive health coverage, including virtual care and mental health support, is a valuable perk that helps employees access essential care beyond government-provided health services. This can take the form of contributing to a health care spending account (HCSA), to cover health, vision and dental care expenses.

Disability Insurance

Disability insurance in Canada can replace between 60% and 85% of an employee’s income if they become unable to work due to an unexpected injury or if they’re critically ill. This can include short-term and long-term disability insurance. If the employer funds part of all of the disability premium, these benefits will be subject to income taxes.

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Tax Implications of Employee Benefits in Canada

Benefits packages in Canada are made up of both taxable and non-taxable benefits. For example, mandatory CPP and EI benefits are taxable, while examples of non-taxable benefits include providing employees with a cellphone, overtime meals or allowances and relocation benefits.

The Canada Revenue Agency (CRA) provides comprehensive guidelines on taxable and non-taxable benefits here, which can help employers manage the tax implications of their benefits packages.

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Legal Considerations for Employee Benefits in Canada

To comply with Canadian labor laws, employers must ensure that mandatory benefits, such as CPP and EI contributions, are accurately calculated and reported. Non-compliance with these regulations can lead to penalties.

Canadian employers who fail to make required contributions to the Canada Pension Plan, Employment Insurance, or income tax face a 10% penalty from the CRA. Repeat offenses within the same year, particularly those involving gross negligence, could lead to a 20% penalty. If contributions are not withheld or remitted, the CRA may take legal actions.

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Additional Benefits to Offer in Canada to Attract Talent

For employers looking to gain a competitive edge in recruitment, additional perks can make a difference:

• Additional Paid Time Off (PTO): Extra vacation days that go beyond the legal minimum can go a long way to enhance employees’ work-life balance.
• Remote Work Options: Flexible working options, such as remote or hybrid roles, have boomed in popularity in recent years.
• Employee Wellness Programs: Initiatives that help boost employees’ mental and physical health include fitness programs, access to counseling services, relaxation rooms at the office, and preventative health screenings.  

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How Benefits Impact Employee Cost

In Canada, employee benefits can amount to approximately 15-30% of payroll, depending on the scope of benefits offered. Larger companies with more resources can typically afford to spend more on comprehensive benefits packages. 

Employers should consider these costs when budgeting for new hires. 

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Calculate The Cost Of A New Hire

Estimate the cost of a new hire in Canada, with our free cost calculator. Get a complete view on the taxes, fees, and benefits you can expect to pay.

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