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Talent & CultureRecruitingCanadian Employee Benefits & 4 things we need to know about

Canadian Employee Benefits & 4 things we need to know about

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A comprehensive Canadian employee benefits package is critical for companies hiring top talent in Canada’s competitive job market. While statutory Canadian employee benefits like health care coverage and pension contributions are mandatory for employers, workers also expect and value supplemental employee benefits like retirement savings plans, disability insurance, paid vacation time, and flexible working arrangements.

This guide will provide an overview of the most essential Canadian employee benefits when hiring employees in Canada. We will examine expected supplemental benefits and the costs of benefits packages and discuss which offerings provide the best value in attracting and retaining skilled employees.

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Unlocking Success: Essential Canadian Employee Benefits Demystified

Statutory Canadian Employee Benefits

Canadian federal and provincial laws require certain employee benefits. These statutory Canadian employee benefits represent a significant investment for employers, as contribution amounts are set as payroll percentages. Here’s an overview of the significant mandatory Canadian employee benefits:

Canada/Quebec Pension Plan (CPP/QPP)

The Canada Pension Plan (or Quebec Pension Plan for workers in Quebec) is a mandatory social security program funded through contributions from employees and employers. For 2023, contribution rates are set at 5.95% of pensionable earnings up to an annual maximum of $64,900, meaning the maximum employee contribution will be $3,867.55 and the maximum employer contribution will be the same.

In Quebec, the 2023 QPP contribution rate is 6.15% to a maximum pensionable earnings amount of $66,333, capping employee contributions at $4,077.89 annually and employer contributions at the same level.

These pension contributions provide retirement income, survivor benefits, and disability coverage for Canadian employees. Employers must remit contributions on behalf of all eligible employees.

Employment Insurance (EI)

Employment Insurance is another social insurance program funded through mandatory payroll contributions. It provides temporary financial assistance to workers who lose their jobs and maternity, parental, compassionate care, and illness leave.

For 2023, employees contribute 1.58% of insurable earnings up to an annual maximum insurable amount of $60,300. So, the maximum yearly EI premium per employee will be $952.74. Employers also contribute 1.4 times the employee rate, meaning they will pay a maximum of $1,338.84 per employee. Lower rates apply in Quebec, where the maximum employee premium is $685.44, and the maximum employer premium is $959.62.

These contributions fund Canadian employee benefits like regular EI payments to unemployed workers, maternity and parental leave, compassionate care, and sickness leave. The amount paid out depends on the type of claim and the employee’s earnings history.

Workers’ Compensation

Every province and territory in Canada has legislation governing workplace injury insurance, commonly known as workers’ compensation. Industries with higher inherent risks generally pay higher premiums. Employers must register with the appropriate provincial workers’ compensation board and pay premiums based on their industry’s risk level and claims history.

If an employee is injured at work, workers’ compensation insurance will cover their medical treatment, rehabilitation, and wage replacement benefits while they recover. This no-fault insurance protects employers from lawsuits while guaranteeing support for injured staff.

Expected Supplemental Canadian Employee Benefits 

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Securing Well-being: Exploring Key Supplemental Canadian Employee Benefits

In addition to mandatory statutory benefits, Canadian employers commonly provide supplemental benefits to attract and retain talent. These additional Canadian employee benefits are optional, but help companies stand out and protect employees from financial risks. Here are some of the most popular supplemental employee benefits for Canadian staff:

Extended Health Care

Private extended health insurance plans cover services excluded or not fully covered under provincial healthcare, like prescription drugs, vision care, dental care, ambulance services, private hospital rooms, and paramedical practitioners like physiotherapists, psychologists, and massage therapists.

Most plans reimburse 80-100% of eligible expenses, sometimes after a deductible is met. Extended health premiums are usually paid in full by the employer. About 26 million Canadians have extended health coverage through private employer-sponsored plans.

Dental Care

Dental care makes up about 70% of Canada’s private health expenditures. While provincial healthcare does not include dental, employer-sponsored dental plans are expected to supplement Canadian employee benefits. These plans cover preventative, primary, and significant dental services at around 80-90% reimbursement levels. Orthodontic braces are sometimes included as well.

Vision Care

Vision coverage provides set dollar amounts per year or two years towards prescription eyeglasses, contact lenses, eye exams and sometimes laser eye surgery. Employers typically fund vision benefits fully.

Prescription Drugs

Private drug plans through employers supplement provincial drug coverage. They expand the range of eligible drug expenses and provide direct payment to the pharmacist through electronic payment cards. This allows employees to avoid paying upfront and claiming reimbursement later.

Group Retirement Savings Plans

While CPP/QPP provides a baseline level of retirement income, employer-sponsored group retirement plans offer additional tax-deferred savings. A group Registered Retirement Savings Plan (RRSP) is the most common option. Employers and employees make regular tax-deductible contributions to the group RRSP up to the annual limits. Employers often match a percentage of employee contributions.

The annual RRSP contribution limit for 2023 is $29,210; employers can contribute and match up to this amount per employee. Group RRSPs allow employees to save more for retirement simply and cost-effectively.

Life and Disability Insurance

Many Canadian employers provide life insurance plans that pay a lump sum to the beneficiaries of an employee who passes away. They may also offer short-term and long-term disability plans to replace lost income if an employee cannot work due to illness or injury. The benefits and premium costs vary based on the coverage level selected.

Cost of Canadian Employee Benefits for Employers

“how much do employees pay for benefits in Canada?”

The costs of Canadian employee benefits plans vary significantly based on the number of employees, demographic factors like age and gender, the industry risk level, and the types of benefits included.

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Decoding Costs: Factors Influencing Canadian Employee Benefits Plans

For a small business with less than 50 employees, Canadian employee benefits expenses may range from 10-25% of payroll. The lower end includes only essential statutory benefits, while the higher end has supplemental health, dental, disability or retirement savings coverage added.

Depending on their supplemental offerings, medium-sized companies with 50-250 employees may spend 15-30% of their payroll on Canadian employee benefits packages. Large companies with over 250 employees fall into the 20-35% range.

The significant drivers for increasing benefits costs for Canadian companies include:

  • Rising healthcare costs – Drug expenses and paramedical services are increasing faster than inflation annually, driving up premiums.
  • Aging workforce – Older employees use benefits more frequently, raising usage and claims costs.
  • Expanded coverage – Additional benefits like prescription drugs and vision coverage boost costs.
  • Generous plans – Lower deductibles and higher reimbursement rates are more expensive.
  • High-risk industries – Workers’ compensation premiums increase for companies with higher injury rates.
  • Commissioned employees – Benefits expenses calculated as a percentage of payroll are higher when payroll includes variable compensation like commissions and bonuses.

Strategies to control benefits costs include:

  • Increasing employee cost-sharing through deductibles, copays and premium contributions
  • Offering flexible plans with options to choose additional coverage paid via payroll deduction
  • Carefully analyzing usage patterns and demographics to balance costs and coverage
  • Promoting wellness and preventative care to improve employee health
  • Shopping rates annually and benchmarking against other plans

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Most Valued Canadian employee benefits

With a multi-generational workforce ranging from Baby Boomers to Generation Z, companies must understand which benefits are most attractive to employees at different career stages. Research indicates the following offerings tend to be valued highest in Canada:

Health Insurance

According to multiple surveys of Canadian workers, comprehensive supplemental health insurance tops the wish list. This includes coverage for prescription drugs, dental and vision care, hospital stays, alternative care like physiotherapy and massage therapy, and disability insurance.

Younger employees are especially interested in health benefits as they have lower expenses and less savings to cover costs. Parents also value health insurance to cover their kids.

Retirement Savings Plans

Retirement savings are a high priority for employees nearing their middle career years. Additional contributions from employers to group RRSPs or pension plans are prized benefits. Older Gen X and Baby Boomer employees want to maximize retirement readiness.

Paid Vacation Time

Time off remains vital to employees of all generations, but millennials and Gen Z value extra vacation time even more than their older counterparts. Many prefer unlimited vacation policies. Others appreciate set amounts of vacation time that exceed the statutory minimum of 2-3 weeks.

Flexible Working Arrangements

Schedule flexibility becomes more important to employees as they reach their 30s and 40s and face greater family demands. Working remotely, flexible hours, compressed weeks, and job sharing appeal to parents and help employees balance personal and professional responsibilities better.

Wellness Benefits

Employees across generations are growing interested in benefits supporting mental health, fitness, nutrition, stress reduction, and disease prevention. Offerings like employee assistance programs, gym memberships, and counselling resonate strongly.

The Future of Canadian Employee Benefits

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Navigating the Future: Adapting Canadian Employee Benefits for Tomorrow’s Workforce

As this guide has explored, employee benefits in Canada continue to evolve as costs rise, generational priorities shift, and more companies adopt remote work models. While mandatory benefits like CPP, EI and workers’ compensation form the base, supplemental health insurance, retirement savings, disability protection and paid time off make up the rest of a competitive package.

To attract top talent, Canadian employers must think strategically about benefits as a long-term investment in their greatest asset – employees. Benefits should enhance your team’s recruitment, engagement, health, and retirement security. Insurance partners and HR technologies that simplify benefits delivery for distributed workforces are essential allies in benefits management.

Most importantly, benefits should provide financial protection and peace of mind across career and life stages. As an employer, you want to reassure employees that you have their back. One way to deliver on this “benefits promise” is partnering with a premier benefits provider agency like IDC Insurance Direct Canada.

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IDC Insurance Direct Canada: Your Partner in Benefits

IDC Insurance Direct Canada has the expertise and carrier relationships to build flexible, competitive plans for Customizable Canadian employee benefits solutions adapted to your workforce’s needs. IDC Insurance’s prestigious advisors help companies optimize their benefits spending through informed recommendations and regular fine-tuning of coverage and costs.

If you need an experienced partner to provide Canadian employees with the benefits they value most, look no further than IDC Insurance Direct Canada. IDC Insurance makes benefits administration easy through consolidated billing, dedicated support, and online account access. Their HR tech integrations also allow efficient benefits to be set up for remote workers.

To learn more about IDC Insurance Direct Canada’s services, get a free quote online or contact one of their advisors at 1-866-694-6462. IDC Insurance will ensure your Canadian benefits plan ticks all the boxes for mandatory requirements, supplemental coverage, and support for remote employees. With the right benefits partner in your corner, you can focus on running your business while IDC Insurance handles your Canadian benefits.

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