Mandatory Employee Benefits in Canada

In Canada, employers are required to provide certain benefits to their employees. These mandatory benefits, also known as statutory benefits, are designed to ensure that workers are provided with essential protections and support.

Understanding these mandatory benefits is crucial for business owners new to Canada, those opening affiliate companies, and individuals new to employee benefit plans. Additionally, while some benefits are not mandatory, they are still highly recommended for businesses to offer to remain competitive and allow employees to flourish.

Mandatory Employee Benefits in Canada

Workers Compensation: Workers' compensation provides employees with income in case of injury or illness at work while performing valid employment tasks. Each province and territory has independent Worker’s Compensation Boards.  Their duties include the collection of premiums from employers, the adjudication of workers’ claims, rehabilitation assistance, and the payment of disability benefits.  Employers remit the premiums that fund the coverage based on annual payroll amounts up to certain limits. All businesses must be registered with their respective provincial or territorial authorities.

Statutory Holidays: In Canada, there are five national statutory holidays annually: New Year's Day, Good Friday, Canada Day, Labour Day, and Christmas Day. In addition, workers are entitled to as many as six more holidays each year, which vary by province. Employers must grant employees a day off when the statutory holiday falls on a regularly scheduled working day or grant an additional day off in lieu if the holiday falls on a non-working day.  As well, in certain circumstances, workers required to work on a statutory holiday may be entitled to additional pay.

Leaves of Absence: Canada has a series of paid and unpaid leaves of absence, which vary by province and territory. Employers are required to grant the requested leave to their employees and hold their job open for the duration of the leave.   In the case of protected leaves such as maternity, paternity, and compassionate care leave, the employee is considered to be continuously employed and must be granted an opportunity to continue their health and dental benefits.

Vacation time and vacation pay: In Canada, vacation time and pay rules vary by province or territory. Generally, employees are entitled to at least two weeks of vacation after 12 months of employment, with vacation pay calculated as a percentage of their earnings. The amount of vacation time or percentage paid in lieu to an employee increases with years of service. Vacation pay is owed to full-time, part-time, or casual workers. Some provinces have additional rules or exceptions, so it's important to consult the specific regulations that apply to your location.

Canada Pension Plan (CPP): CPP provides retirement, disability, and survivor benefits to eligible workers and their families. Employers and employees are required to contribute equally to the CPP. As with EI, employers must deduct CPP contributions from employees' pay and contribute the same percentage, up to an annual maximum, on the employee’s behalf.

Quebec Pension Plan (QPP): Similar to the CPP, the QPP provides retirement, disability, and survivor benefits to eligible workers in Quebec. Employers and employees in Quebec are required to contribute to the QPP.

Employment Insurance (EI): EI provides temporary financial assistance to workers who are unemployed or unable to work due to illness, parental leave, or caregiving responsibilities. This form of insurance is funded by both companies and their employees. Employers are required to deduct EI premiums from each employee's pay and remit them to the government.  Employers remit an additional percentage of each employee’s monthly pay up to an annual maximum.  

Optional but Highly Recommended Benefits

Extended Health and Dental Coverage: While not mandatory, offering extended health and dental coverage can help attract and retain employees. Employers are not required to provide health insurance in Canada as the country's universal healthcare system covers basic medical services such as doctor visits and standard hospital services for all residents. Extended benefits cover expenses not covered through provincial health plans, such as prescription drugs, physiotherapy, dental care, and vision care.

Group Retirement and Savings Plans: While the Canada Pension Plan (CPP) provides a base level of retirement income, it is not sufficient by itself to provide a comfortable retirement.  Offering a group retirement savings plan, such as a Registered Retirement Savings Plan (RRSP) or a Pension Plan, can help employees save for retirement and provide peace of mind.  Employers generally choose to contribute to these plans through matching contributions.  Employees who join an employer-sponsored retirement or savings plan agree to have a flat amount or a fixed percentage of their income deducted from each pay. Employers then contribute an equal amount to the plan.

Healthcare Spending Accounts (HSA): Healthcare spending accounts, often offered as part of employee benefits packages, are generally funded by the employer through an annual per-employee allowance.  The HSA account can be used by employees for health-related expenses not covered, in whole or in part,  by the core extended health plan.  Provided the expenses are considered medically necessary, the amounts reimbursed to the employee are tax-free. 

Wellness Accounts: Wellness accounts, often offered in conjunction with Healthcare Spending Accounts are also funded by an employer through an annual allowance.  However, since the expenses reimbursed through a wellness account are not medically necessary, the benefits are taxable to the employee. These accounts can be used for a variety of wellness services, such as gym memberships and fitness classes, as well as childcare, transit passes and financial planning assistance. 

Employee Assistance Programs: Employee assistance programs (EAPs) are employer-sponsored programs designed to support employees and their families facing personal or work-related challenges. They typically offer confidential counselling, referral services, and resources to help employees manage stress, mental health issues, and other challenges affecting their well-being.

Conclusion

Navigating the world of employee benefits in Canada can be complex, but understanding the mandatory and optional benefits is essential for business owners and HR managers. While some benefits are required by law, others are not mandatory but are still important for attracting and retaining top talent. 

Stay tuned for our upcoming webinar, where we will delve deeper into navigating Canadian benefits and provide more in-depth information for business owners new to Canada, those opening affiliate companies, and individuals new to employee benefit plans.