Providing competitive and legally compliant employee benefits packages is a crucial consideration for all employers in Canada. While voluntary or ‘supplementary’ benefits help attract and retain talent, there are also a range of mandatory benefits that organizations must provide under both federal and provincial/territorial legislation.
Our article will provide a guide to mandatory benefits in Canada, including the essential legal requirements for mandatory benefits in Canada, compliance considerations, and best practices for employers in 2025 and beyond.
What are Mandatory Employee Benefits in Canada?
Mandatory benefits in Canada, also known as ‘Legislated mandatory benefits for Canadian workers,’ refer to the minimum benefits and employment standards organizations are legally required to provide employees under Canadian law.
Five mandatory benefits in Canada that employers must provide include:
- Paid vacation and general (statutory) holidays
- Leaves of absence (sick leave, maternity/parental leave etc.)
- Pension plan contributions
- Employment insurance contributions
- Workplace safety insurance
These benefits form the backbone of legal obligations for employers when managing their human resources and compensation packages.
Paid Vacation and General Holidays
Every province and territory requires that eligible employees receive a minimum standard of paid vacation time after completing a year of continuous service.
For example, the minimum required vacation entitlement ranges from 2 weeks (10 working days) in Nova Scotia to 4 weeks (20 working days) in Saskatchewan.
In addition to vacation time, there are between 5 and 13 paid general holidays per year, depending on the province or territory. Examples include Christmas, New Year’s, and Labour Day.
Leaves of Absence
There are a range of different job-protected leaves that employers must provide eligible staff, enabling them to take extended absences for reasons such as:
- Sickness/Short-term disability
- Long-term disability
- Maternity and parental leave
- Compassionate care leave
- Bereavement leave
- Domestic violence leave
While many leaves are unpaid, they still require employers to hold jobs open for a legally mandated minimum period. Some categories, such as maternity/parental leave, allow for partial wage replacement through federal employment insurance programs.
Pension Plan Contributions
The Canada Pension Plan (CPP) requires mandatory contributions from the employer and employee based on earnings. CPP aims to replace about 25% of pre-retirement income and contributions to help fund benefits for retirement, disability, death, and survivors.
Employment Insurance Premiums
Employment Insurance provides partial income replacement for employed Canadians who lose their jobs. The employer and employee pay EI premiums, with employers contributing 1.4 times the employee’s premium up to an upper annual insurable earnings limit.
Workplace Safety Insurance
Provincial and territorial workers’ compensation boards require employers to carry workplace safety insurance to cover occupational injuries and illnesses costs. Premiums vary across jurisdictions based on industry risk, employer payroll size, and past claims experience.
Importance of Mandatory Benefits in Canada
Legislated benefits provide several protections and entitlements that benefit both employees and employers:
- Help ensure employee rights to mandatory benefits in Canada, such as income security and health/wellness standards.
- Provide income stability and continuity for sickness, job loss, and family needs.
- Enable longer job tenures and career progression by allowing extended absences when required.
- Support families, parenting, and work-life balance through leaves.
- Contribute to a culture of compliance, strong HR management, and risk mitigation for employers.
- Reflect broader public policy goals for retirement income adequacy, skills development, and workforce productivity.
In summary, mandatory benefits in Canada form an essential baseline of rights and protections for employees and obligations for organizations.
Both employers and workers benefit when compensation policies adhere to Canadian employment standards for mandatory benefits and support employee well-being over the long term.
Key Employer Obligations for Providing Mandatory Benefits in Canada
Once employers understand the range of legally required benefits, they must take steps to provide them effectively. Some of the critical areas for employers to focus on include:
Providing Paid Vacations and Holidays
It is accurately tracking employee eligibility for vacation entitlements based on length of continuous service. This includes appropriately administering vacation pay rates for hourly or non-salaried employees.
Employers have to ensure time off requests comply with vacation allowance minimums and statutory holiday entitlements.
Employers can establish clear policies and procedures for vacation scheduling, pay processes, and handling unused vacation carry-over.
Administering Different Types of Legislated Leaves
Understanding criteria for employee eligibility and entitlement for different leave types based on factors like job tenure, family status, and medical need.
Employers should provide employees with documentation and self-service tools to submit leave requests easily.
It is also important to develop policies and systems that ensure benefits, accruals, and service time during approved leaves of absence.
Clear procedures should be in place for obtaining necessary medical documentation to validate leave requests. Additionally, tracking leave duration and maintaining employee status until reinstatement after leave is essential for smooth workforce management.
Making Mandatory Pension Contributions
Employers must enroll eligible employees in the Canada Pension Plan (CPP) and make their share of payments each pay period.
They also need to deduct the right amount from employees’ paychecks. When employees join or leave, the right paperwork must be completed.
Employers should give employees CPP receipts for tax filing and keep clear records of all payments for future reference.
Remitting Employment Insurance Premiums
Employers must register with Service Canada to make regular Employment Insurance (EI) payments.
They need to deduct the correct EI amount from employees’ pay each period and match it with their own contribution.
Payroll reports and EI payments must be sent to Service Canada on time. When employees leave, employers must provide employment records to confirm their EI eligibility.
Carrying Mandated Workplace Safety Insurance
Employers must sign up for workplace insurance with the right provincial or territorial safety board.
They need to report payroll details correctly and classify their business to set insurance costs. Payments for insurance must be made on time.
Employers should also inform employees about their coverage and report any work-related injuries, accidents, or illnesses.
Best Practices for Providing Mandatory Benefits in Canada
Beyond simply aiming for baseline legal compliance when managing employee benefits, organizations should also structure their programs using the following best practices:
Exceeding Minimum Requirements
While meeting legal minimums is essential, employers should exceed these where feasible to aid recruitment and retention. For example, providing three weeks of starting vacation or more generous family leave policies.
Effective Benefits Communications
Communicate details of available mandated benefits through channels like employee handbooks, HR portals, total compensation statements, and new hire orientations.
Leveraging Automated Tracking Systems
Automated or self-service HR information systems help easily track eligibility, utilization, accruals, reporting and remaining entitlements for each benefit. This avoids manual errors and improves compliance.
Guiding Employees in Maximizing Benefits
Offer resources like self-service portals, helplines, and one-on-one consultations to provide expertise on getting the most value from mandated benefits.
Fostering Open Dialogue and Feedback
Seeking regular input from employees on their benefits needs and satisfaction helps improve programs. Anonymous surveys and focus groups allow two-way communication.
Adapting to Workforce Demographic Needs
Evaluate whether benefits packages reflect the evolving needs of your workforce based on factors like age, family status, gender, culture, etc. Redesign programs accordingly.
Benchmarking Competitiveness
Leverage compensation surveys and benchmarking to compare your benefits package competitiveness in attracting and retaining talent versus peer organizations.
The bottom line
Offering employee benefits that follow the law and remain competitive can be challenging in Canada. Employers must meet the required benefits rules while also keeping up with changing regulations and best practices.