What percentage of payroll do Canadian organizations typically pay for fringe benefits for their employees?

It's common for employers to provide full-time employees with a benefits package, known as employee benefits. Employee benefits generally include perks like health insurance, vacation days and paid sick leave. But the question that everyone wants to know is --  Are these benefits mandatory? In this blog, we’ll answer this question and give some recommendations about non-mandatory benefits that will help your business attract and retain employees.

Canadian Labour Laws specify certain minimum employment standards called statutory benefits, statutory meaning fixed or authorized. These benefits usually vary from province to province. 90% of Canadian workers are protected by these laws and the other 10% work in federally regulated places. This means that as an employer, you are responsible for knowing and following these standards. Failure to do so will result in a pretty hefty fine, so it’s important to keep track of the standards that are in place. 

Mandatory Benefits

Here is a list of benefits that are mandatory and protected by Canadian Federal Labour Standards.

Keep in mind that these are only minimum terms and conditions, so employers can decide to be more generous with these benefits if they want to. 

Vacation and General Holidays / Time off

This one depends on the Province you live in. In British Columbia, for example, employees are entitled to 2 weeks paid vacation after 1 year of employment, and 3 weeks vacation after 5 years of employment, not including the 10 national statutory holidays. The employer is responsible for making sure that the employee takes the minimum amount of vacation per year. 

A recent study revealed that Canadians have the lowest number of paid vacation days (10) compared to other developed countries (30), so if you really want to attract new talent, offer more vacation days than what’s required. Plus, employees that return to work after a vacation are more engaged and productive than usual, making it a win-win. 

In terms of the amount paid for vacation, salaried employees are given paid time off with full salary continuation, while hourly employees get 4% of all earnings. 

Leaves

The following are just some of the leaves employees working in federally regulated industries and workplaces. Please refer to the Government of Canada Leaves website for additional details.

• Maternity & Parental Leaves (unpaid by employer)

Pregnant employees are entitled up to 17 weeks of maternity leave that can be taken up to 13 weeks before the expected date or birth and ends 17 weeks after the actual birth.

Natural or adoptive parents are entitled up to 63 weeks of parental leave. One parent can take the entire leave or the time can be combined and/or shared. 

Quick Tip: Some employers supplement and/or top-up these government-paid leaves with private leave coverage that benefits employers and employees through improved attraction and retention.

Read more about Maternity Leave and Unpaid Leaves.

• Sick Leaves

Again, this varies slightly from province to province. In British Columbia, employees are entitled to 5 paid sick days and an additional 3 unpaid sick days for each 12-month period. The Canadian Labour Code also includes 3 paid days after an employee has been at the company for three consecutive months. Employees are also entitled to other leaves of absence which include:

• • 10 unpaid days/year domestic violence leave
  • 3 unpaid days/year personal injury or illness leave

For more information about leave allocations and workplace standards, visit Workplace.ca. 

• Critical Illness Leave (unpaid by employer)

Employees with a family member of a critically ill child or adult are eligible for up to 17 weeks or 37 weeks of unpaid leave depending on the family member. Read more about Leaves Related to Critical Illness.

Note: This is different from critical illness insurance, which is a benefit that provides a lump sum of money if an employee gets diagnosed with a life-threatening illness.

Critical illness leave is generally unpaid, but it ensures that the employee will get paid the same when they return. Critical Illness Leave is important because it means that the employee still has their job security while caring for their dependent.  

• Compassionate Care Leave (unpaid by employer)

In the event of an employee’s immediate family member has a serious medical condition, employees can take up to 28 weeks of unpaid leave to look after that family member. Read more about Compassionate Care Leaves.

In British Columbia, you get up to 27 weeks of unpaid leave to care for an ill family member which typically comes into effect after 90 days of employment. 

Canadian Pension Plan Contributions

Employees, employers, and self-employed individuals are required to contribute to the Canadian Pension Plan. Employers must contribute by deducting a certain percentage of an employee’s wage. Certain employees are exempt from this, like employees who make less than $3,500 a year. In return, employees get access to retirement pensions and survivors’ benefits for widows and children, as well as certain disability benefits.

Survivors’ benefits include either a one-time payment to the beneficiary or a monthly payment to the beneficiary. The amount an employee receives from their pension after they turn 65 depends on how much they made throughout their working years and how much they worked. To be eligible to receive survivor benefits, you have to have made contributions to the CPP for the lesser of one-third of the calendar years in their contributory period or 10 calendar years. 

The amount that employers have to contribute varies from year to year, but to give you an example, in 2021 the employee and employer contribution rate was a 5.45% deduction based on the employee’s salary. See CPP 2022 Maximum Pensionable Earnings.

Employment Insurance Contributions

Canadian Employment Insurance (aka EI) provides regular benefits to individuals who lose their jobs through “no fault of their own” and can’t find a job to replace it. Employees who receive EI of any amount are subject to tax for that amount and the amount can vary but is usually 55% of your average earnings up to around $55,000. You can receive these benefits from 14 to 45 weeks while you try to find another job. Overall, EI is an important safety net for employees and employers to have.

Employers must make contributions for Employment Insurance based on the earnings of all employees. Generally, employers deduct a certain percentage of their employee’s wage and also contribute to the employee’s premium. The employer’s contribution is deductible for income tax as a normal business expense. In return, employees may draw benefits in the event of unemployment. 

Recommended Benefits

Canada's Universal Health System

When it comes to health benefits, the Government of Canada provides basic health coverage through it's publicly-funded universal health care system. Coverage is for basic healthcare such as hospital and emergency room care, doctor visits, and various medical services like X-Rays or MRIs. 

Provinces and territories administer and deliver health care services according to the Canada Health Act.

Employer-Sponsored Benefits Plans

Government-funded health coverage is generally not included for prescription drugs (varies by Province), dental, paramedical services (massage therapy, chiropractor, or physical therapy), and vision (see more about Vision below).

This means that it's the responsibility of Canadian citizens to find insurance through a personally funded private insurance policy or through their employer. Employer-sponsored benefits plans are NOT mandatory but about 90% of large to mid-size employers provide a benefits package and about 70% of small businesses provide a benefits package to attract and retain employees plus:

• 83% of employees say that health insurance is very or extremely important in deciding whether to stay in or change jobs.
• When deciding to accept a job offer, 88% of employees said the quality and options of health benefits was important 
• 80% of employees believe that employers have a responsibility to keep employees mentally and physically well

Employer-sponsored benefits coverage can vary by employer but typically include some or all of these:

• Life Insurance and/or Dependent Life
• Accidental Death & Dismemberment (AD&D)
• Dental
• Extended Health Care (see below)
• Short Term Disability
• Long Term Disability
• Critical Illness

Below is a list of the most valued benefits for employers that want to stay competitive in this market. These typically fall under Group Extended Health and Dental Coverage.

Dental

Recent surveys have indicated that 22% of Canadians avoided going to the dentist at least once because of the cost. Canadians without insurance were also 3x more likely to skip out on dental treatment. On top of that, treatment costs continue to rise, which leaves uninsured Canadians at a large risk. That’s why 90% of large employers cover basic dental services, and 67% cover major restorative services. 

With all that in mind, it’s no surprise that dental is one of the most popular benefits among employees. Your employee’s dental hygiene is directly related to their overall well-being. So if you want healthy, happy employees, dental coverage should be in your benefits package. 

Extended Health Insurance

• Drugs

The overwhelming majority of Canadians have at least one drug prescription, with 86% reporting that they received a prescription in the last six months. There is publicly-funded drug coverage but, depending on a person's income, many aren’t eligible. This means that without coverage from an employer, many employees pay out-of-pocket for their drugs, which can get expensive.

Knowing this, it makes sense that drugs are the #1 most submitted claim type across plan in Canada which makes it extremely important among employees. If you want to appeal to potential employees, drug coverage should be on the top of your list.  

• Paramedical

Paramedical services include things like massage therapy, physical therapy, chiropractors, and are generally not covered under Canada’s public plan. But these services are expensive for employees to pay out-of-pocket, even if they desperately need them. That’s probably why paramedical services are ranked second behind drugs for the most amount of claims submitted, which means employees, especially younger employees, are using them and finding them valuable.

While this benefit seems like it’s more ‘nice to have’ than actually necessary, it’s still massively popular and can definitely give employers the edge over other companies’ benefit plans. Plus, if you extend coverage to include services like massage therapy, it’ll give you a huge advantage against other employers for a really affordable price. 

• Vision

We all know how important our eyeballs are, but strangely, eye health is often overlooked. One study found that half of Canadians over the age of 20 had some form of vision problem that required them to go to the optometrist. With older people, that rose to almost 80%. Despite that, coverage rates for vision are among the lowest of all health coverage types. Not to mention the fact that employees obviously need their vision in top shape to be doing a good job at work. 

Some provinces cover the cost of eye exams (see Eye Exams and Eye Care Coverage in Canada: A Guide to Eye Care in Every Province) but rarely is the cost of corrective eye wear covered.

Offering vision coverage shouldn’t be overlooked, because regular eye checkups are preventative meaning health conditions and diseases can be identified early (and potentially be treated) before a crisis.

Employers may choose to cover eye exams only or eyeglasses and contact lenses too (or provide reimbursement through a Spending Account).

Additional Employee Benefits

Going above and beyond with benefit offerings can absolutely be worth an employer’s while. Employers with enhanced benefits plans see more retention and engagement with their employees.

Here is a list of optional benefits that can take your company above and beyond your competitors and keep your employee’s best interests in mind. 

Spending Accounts

These are gaining popularity, especially with younger generations. There are two kinds of spending accounts:

1. Health Spending Accounts (HSA), and
2. Taxable Lifestyle Spending Accounts (LSA).

These are pooled accounts in which an employee can use pre-allocated funds (typically employer-funded) on whatever their employer has approved. HSAs are often used to top-up expenses not covered under a traditional benefits plan (e.g. dental/orthodontics, drugs). LSAs are typically for wellness activities like gym memberships or vitamins, and 

Not only do spending accounts offer lots of flexibility, but they’re also a really great cost-effective option for small businesses since they use a pay-as-you-use model. With spending accounts, you can also offer it as a standalone plan instead of a complement to a traditional plan.

Overall, spending accounts are a really great optional benefit you can use in your benefits plan to boost your employee’s satisfaction and retention. 

Also, read Health Spending Accounts for Canadians Explained.

Simply Benefits enables employers to easily add health spending accounts and/or lifestyle spending accounts to your benefits plan. 

Employee Assistance Programs 

Employee Assistance Programs (EAPs) are an important addition to any benefits plan. They offer a wide variety of services from short-term counseling to general mental health support. Employees value when their employers care about their mental health, and these services help employees who are going through a rough time.

Studies have shown that after users participate in an EAP, their productivity at work increases by 36% during the weeks after using the program. This makes EAPs worth the financial investment and a great option for employers that want to be there for their employees. Simply Benefits partners with EAP provider HumanaCare.

Virtual Healthcare

With modern health care solutions on the rise as well as the global pandemic comes a new push for access to virtual care. Virtual health care provides services like doctors’ appointments, including prescription refills from an online platform. Employees can simply access a health care provider through video calls without having to drive anywhere. Providing virtual health care is an easy and cost-effective way to make your benefits plan modern and appeal to employees of all kinds. Simply Benefits partners with virtual healthcare provider Wello.

In addition to the benefits mentioned here, CloudAdvisors also suggests Retirement Savings Plans, Flexible Work & Remote Options and Financial Planning Resources in their blog Top 10 Basic Benefits Every HR Professional Should Know.

Final Thoughts

Hopefully, you now have a better understanding of which Employee Benefits are required of employers across the country. It’s important to keep in mind that offering these mandatory benefits should be seen as an absolute minimum. Offering recommended and optional benefits is going to be extremely useful when you are looking to expand your team. 

Simply Benefits offers flexible plans that you can customize to suit your organization’s needs. Reach out to our sales team to learn more.

Disclaimer: Please note that the information provided, while authoritative, is not guaranteed for accuracy and legality. If you are a Simply Benefits plan member, you can look up more information on your specific plan coverage under the “Plan Coverage” section on your account, or speak to your administrator for more information.

Additional Resources for Employers

You may also be interested in these resources:

• Comprehensive List of Benefits Brokers, Advisors & Consultants in Canada
• What Does 'Opting Out' of Employee Benefits Mean to You?
• Top 10 Tasks of a Benefits Plan Administrator

About Simply Benefits

Simply Benefits is a Third Party Payor (TPP) that provides Employee Health Benefits 100% digitally through our Canadian Advisor partners. Our all-in-one digital solution provides three portals that enable Benefits Advisors to digitally manage all client plans online, Employers to efficiently administer employee coverage, and Employees to view, update and use their benefits 24/7 via desktop or smartphone app.

We help ENGAGE Employees Anytime, Anywhere, SIMPLIFY the Benefits Experience, and EVOLVE an Advisors’ Benefits Business.

Connect with us at simplybenefits.ca or on LinkedIn, Twitter, Facebook, Instagram, and YouTube.

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