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Employee benefits in Canada: The ultimate guide
Employee benefits are mandatory and optional services offered to all the workers of an organization. While mandatory benefits vary from one province to another, and are offered to every employee in that area, optional benefits add to an organization’s talent recruitment and retention strategy. Building a successful employee benefits package is one of the most important things an employer can do for their employees.
- What are employee benefits?
- Importance of employee benefits
- Are employee benefits necessary?
- Types of employee benefits
- Employment insurance
- Pension plan
- Worker's compensation insurance
- Vacation benefits in Canada
- Maternity and parental leave
- Sick leave in Canada
- Group health benefits
- Group registered retirement savings plan
- Group disability insurance
- Group critical illness plan
- Group life insurance
- Provincial variances in employee benefits
- Build an employee benefits package
- Frequently asked questions
In the fast-paced and high pressure business world, companies use employee benefits to nurture their employees and ensure their well-being.
This guide covers all you need to know about employee benefits (also known as group benefits and group health insurance). We’ve explained what they are, their types, structures and compliances, and how to build an employee benefits package.
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What are employee benefits?
Employee benefits are services and perks offered to employees over and above their salaries and wages. Employee benefits plans typically include a suite of benefits such as paid time off (PTO), health and dental insurance, disability and critical illness insurance, retirement benefits, and more. Certain benefits such as pension plans and employment insurance are mandatory by law to ensure a basic level of financial security and protection for employees. Other benefits are voluntary and are offered at the employer’s discretion to attract and retain talent, boost morale and differentiate themselves in the competitive job market.
Know more about employee benefits plans in Canada
Why are employee benefits important?
Employee benefits help boost employee well-being and morale, and can increase job satisfaction and build loyalty. Here’s why employee benefits are important:
Do employers have to provide employee benefits in Canada?
There are certain mandatory employee benefits that all employers are required to provide by law. These are:
Apart from the mandatory benefits, many employers offer supplemental benefits like health and dental plans, life insurance, disability insurance, etc. These are optional benefits that are part of an employee benefits package and are offered at the sole discretion of the employer.
Types of employee benefits
Mandatory employee benefits in Canada can be categorized into two types:
- Benefits mandated by law
- Benefits offered on an optional basis
Employment Insurance (EI)
Employment Insurance (EI), run by the Federal Government, is a program that offers temporary financial support to employees who are unable to work due to one of the following reasons:
Unemployed workers can receive up to 55% of their average weekly earnings as EI. As of January 1, 2024, the maximum yearly insurable earnings in Quebec and the rest of Canada is $63,200 which means an unemployed worker can get $668 per week.
Here are the key features of employment insurance:
The program is administered by Service Canada, a government agency, and individuals typically apply for benefits online or by phone. They must continue to meet eligibility requirements while receiving benefits, such as actively seeking employment and reporting any income earned during the benefit period.
Pension plan
The Canada Pension Plan (CPP) is a retirement savings plan that provides a stable income during retirement for individuals and their families.In addition to retirement benefits, the CPP also offers disability and survivor benefits.
The CPP makes pension contributions mandatory for most employees. The pension contributions are typically split equally between the employer and the employee. Employees can opt to receive a reduced pension amount as early as the age of 60, although the full benefits start to pay out, once they reach the age of 65 years. Any employee earning less than $3,500 per year is exempt from this contribution along with their employer. Similarly a self-employed individual may voluntarily opt-in to the program.
Under the CPP, employers and employees pay 5.95% of a worker’s salary in annual contributions which is capped at $3,867 per year.
While all of Canada follows the CPP, Quebec has its own pension plan called the Quebec Pension Plan (QPP), applicable only to the province of Quebec. It requires employers and employees to contribute 5.4% of a worker’s salary and caps it at $3,867 per year.
Workers’ compensation insurance
Workers compensation is a form of social insurance that provides financial and support services to employees who experience work-related injuries or illnesses. Every province has a Workers’ Compensation Board (WCB) that manages and regulates the compensation offered to employees. The WCBs also decide the premiums that employers need to pay.
While most organizations need to register with their provincial WCBs, there are certain categories that are exempt from paying workers’ compensation insurance. The province-based exemptions are listed below:
Vacation benefits
Based on where an individual is working in Canada, their vacation entitlement will vary. They can be accrued in one go or prorated for an employee. The following table gives an overview of the provincial vacation entitlement in Canada:
| Province | Years of service | Minimum Vacation Entitlement |
| Alberta | Up to 5 years
At 5 years |
2 weeks
3 weeks |
| British Columbia | Up to 5 years
At 5 years |
2 weeks
3 weeks |
| Manitoba | Up to 5 years
At 5 years |
2 weeks
3 weeks |
| New Brunswick | Up to 8 years
At 8 years |
2 weeks
3 weeks |
| Newfoundland and Labrador | Up to 15 years
At 15 years |
2 weeks
3 weeks |
| Nova Scotia | Up to 9 years
At 9 years |
2 weeks
3 weeks |
| Ontario | Up to 5 years
At 5 years |
2 weeks
3 weeks |
| Prince Edward Island | Up to 8 years
At 8 years |
2 weeks
3 weeks |
| Saskatchewan | Up to 10 years
At 10 years |
3 weeks
4 weeks |
| Québec | Up to 3 years
At 3 years |
2 weeks
3 weeks |
Maternity and parental leave
Employees are entitled to 17 weeks of maternity leave that can be taken up to 13 weeks before the expected date of delivery. Employees who adopt a child are entitled to 63 weeks of parental leave. The leave can be taken by one parent or shared between both parents.
Sick leave
Different provinces have varying rules when it comes to sick leave. Some of the key features of sick leave as an employee benefit are:
- Sick leave is not pro-rated. A set number of sick leave days are given to the employees at the beginning of each year
- Employees who join in the middle of a year are entitled to the entire number of sick leave for that whole year
- Sick leave cannot be cashed out and is not carried over to the next year
The following table has the sick leave entitlement for each province in Canada:
| Province | Eligibility | Number of sick leaves in a year |
| Alberta | NA | No provincial requirement to provide sick leave |
| British Columbia | After 90 days of employment | 5 paid and 3 unpaid days in a year |
| Manitoba | NA | No provincial requirement to provide sick leave |
| New Brunswick | No waiting period | 5 unpaid days in a year |
| Newfoundland and Labrador | After 30 days of employment | 7 unpaid days in a year |
| Nova Scotia | No waiting period | 3 unpaid days in a year |
| Ontario | After 2 weeks of employment | 3 unpaid days in a year |
| Prince Edward Island | After 3 months of employment
After 5 years of continuous employment |
3 unpaid days in a year
1 paid day in a year |
| Saskatchewan | After 13 weeks of employment | 12 unpaid days in a year |
| Québec | After 3 months of employment | 2 paid days a year |
Group health benefits
Canada has provincial health insurance that is offered to every citizen. So the question is—why should an employer offer health insurance at all? It’s because provincial health insurance only covers some essential medical services while group health benefits are more comprehensive in nature.
Group health benefits are cheaper than individual health insurance. They’re purchased by an employer and offered to all full-time and/or contractual workers.
Group health benefits typically include:
Learn more about why group health insurance matters
Group Registered Retirement Savings Plans (RRSP)
Group Registered Retirement Savings Plans (GRRSPs) are offered in addition to the mandatory pension plan that most employees are entitled to. RRSPs help employees build additional wealth for when they retire and also give immediate tax benefits to the contributor.
RRSPs are regulated by the Canada Revenue Agency and the contributions yield returns since they can invested in one of the following options:
Disability Insurance (DI)
There are two types of disability insurance that an employer can choose to offer: short-term disability insurance and long-term disability insurance. Short-term disability insurance typically covers a shorter duration, from a few weeks up to six months. Long-term disability insurance is for employees who are unable to work for longer periods and usually begins after the expiration of short-term disability benefits or after a waiting period.
Disability insurance covers any medical condition that prevents the employee from working such as mental health issues, fractures, back injuries, carpal tunnel, seizures, and hearing or vision loss. Short term disability benefits can be paid out as weekly benefits while long term disability benefits are typically paid out on a monthly basis to an eligible employee.
Critical illness coverage
An employee benefits package can also include critical illness coverage that is offered to workers who suffer a heart attack, cancer, stroke, kidney failure, Parkinson’s disease, aplastic anemia, and 26+ common conditions as listed by the Canadian Life and Health Insurance Association (CLHIA).
It is easy to confuse critical illness with a disability. For instance, blindness and paralysis are critical illnesses and disabilities.
Learn more about the differences between critical illness and disability insurance
Life Insurance
Life insurance provides financial support to family members in the event of the individual’s passing away. Life insurance as an employee benefit is important to help manage the financial impact from an earning member’s demise. It can be used to:
- Pay for funeral expenses
- Pay off debts
- Replace lost income
- Make charitable donations
Employers can pay the entire premium or split the cost with the employees for life insurance benefits.
Provincial Variances in Employee Benefits
Canada’s labour and employment laws fall under provincial jurisdiction. This means that based on the province an employee is working in, the benefits that an employer offers can vary.
Some of the employee benefits that are different in each province are:
Quebec Pension Plan (QPP) vs. Canada Pension Plan (QPP)
As previously mentioned, pension plans are a mandatory employee benefit in Canada and the cost is split equally between an employer and employee. However, there is a difference between the pension plans in Quebec and the rest of Canada. Let’s take a look at some of the key differences and similarities between the two:
| Canada Pension Plan (CPP) | Quebec Pension Plan (QPP) | |
| Percentage of earnings to be contributed | 5.95% | 5.4% |
| Withdrawal age | 60 (can be deferred
to 70) |
60 |
The maximum annual contribution for both the CPP and QPP is $3,867.
Legal Requirements and Compliance
Canada has very high standards when it comes to employees’ well-being and safety at their workplace. While mandatory employee benefits packages will include employment insurance, workers compensation insurance, and pension plans, providing health, disability, life, and critical illness insurance is also highly recommended.
For instance, in Canada, disability-based discrimination is prohibited and is a human rights violation under the Canadian Charter of Rights and Freedoms. In fact, even drug addiction and alcoholism is legally recognized as a disability in Canada.
Employers have to accommodate their employees’ disability to a reasonable extent. Including disability insurance in an employee benefits package ensures that an employer is able to aid an employee with disability and adhere to legal requirements in the country.
Structuring an employee benefits package
Employee benefits packages can include one or all of the optional benefits we’ve mentioned above. And while the choices are many and can seem overwhelming, employers should ask themselves the following questions to build a benefits package that will suit their organization and employees:
- What benefits match the roles we are hiring for?
- What benefits will work most for our existing employees?
- Can I add a benefit that beats my competitor’s package?
- How can I make the benefits package more cost-effective?
Address diverse employee needs with a comprehensive benefits package
Any company will have a mixed workforce in terms of age, gender, race, and socio-economic status. This means that a one-size-fits-all employee benefits package does not exist. A benefits package needs to address the diverse needs of all employees. After all, a 40-year-old married woman with a child and a sick parent she looks after will have completely different requirements from a 23-year-old man with student debt who is looking to build his credit score.
Speak to our licensed, expert advisors to build a benefits package that will suit your organization’s unique requirements.
Frequently Asked Questions
Who pays for employee benefits?
Employers primarily pay for employee benefits. Mandatory benefits like CPP/QPP are shared between employer and employee, while optional benefits may be fully covered by the employer, shared between employer and employee, or fully paid by the employee depending on the benefit and the employer policies.
Are employee benefits taxable in Canada?
Whether or not a group benefit is taxable in Canada depends on its type and funding source. Generally speaking, employer-paid premiums for group life insurance, critical illness insurance, and accident insurance are taxable benefits. Short-term and long-term disability insurance may not be a taxable benefit if you pay the premium.
How do employee benefits impact job satisfaction?
Employee benefits go beyond provincial offerings and give employees and their families access to healthcare, better retirement savings, and even life insurance. A good benefits package can make all the difference for an employee since it reduces out-of-pocket costs.
What employee benefits are required by law?
Mandatory employee benefits include the Canada and Quebec Pension Plan contributions, employment insurance, workers’ compensation insurance, vacation benefits, and sick leave.
- In Canada, employers have to ensure they comply with federal and provincial legislation by providing necessary employee benefits
- Mandatory employee benefits that an employer is required to provide by law include employment insurance, Canada Pension Plan and Quebec Pension Plan, vacation benefits, employment insurance, maternity and parental benefits, and sick leave
- In addition to the mandatory benefits, employers can offer supplemental group benefits such as health, dental and vision, disability insurance, critical illness coverage, life insurance, and more
- Since every province in Canada has different legislation related to employee benefits, it is wise for employers to stay informed and comply with provincial rules and regulations
