Employee benefits: what’s required, what’s optional

Small business handbook

If you’re a small business owner, then you likely understand the importance of hiring the right people to work for you. When your business is in the early stages, it’s even more critical that you hire candidates that are well-qualified. But before you post a job description, you should know what employee benefits are required in Canada.

One of the ways to attract better candidates is by offering better employee benefits and perks.

 

While most employees love a good salary, they also value the different perks and benefit plans that they’ll be eligible for while employed at a specific company.

In this article, we are going to look at the different ways that your business can gain an edge by offering a better benefits program to your employees.

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7 employee benefits that are required in Canada

This post covers the most popular employee benefits, starting with these seven, which are mandatory for all businesses.

  1. Minimum wage in your province.
  2. Employment insurance.
  3. Canadian Pension Plan.
  4. Workers compensation.
  5. Minimum paid vacation time.
  6. Paid public holidays.
  7. Maternity/parental leave.

Keep reading for a list of taxable benefits, followed by the perks that attract the highest-quality job applicants.

The three broad types of employee benefits

An employee benefits package is any non-salary compensation that is provided by a company for its employees. These benefits are provided along with the employee’s salary to create a competitive package that will attract quality workers.

Employee Benefits Electrician at Work
Benefits packages vary depending on the industry.

There are generally three types of employee benefits:

  • Mandatory benefits
  • Taxable benefits
  • Employer-provided perks and benefits

We will take a look at each of these categories so that you can find out what you’re required to offer and which benefits you can choose to offer to the best job applicants.

Mandatory benefits

These are the benefits that an employer is required to provide by provincial or federal law. For a complete list of all required benefits, visit the Canadian Revenue Agency Website.

1. Minimum wage in your province

When you hire an employee, you’re required by law to pay the provincial minimum wage to that employee. Each province and industry will have a different minimum wage, and the employer is responsible for following all applicable laws.

2. Employment insurance

This is a federal insurance program that provides benefits to unemployed individuals. Both you and your employee will have to pay into this program.

3. Canadian Pension Plan

The Canadian Pension Plan is a social insurance program that is set in place to ensure that each Canadian will have a pension when they retire.

For an employee to become eligible for the CPP program, both the employer and employee must contribute to the program.

4. Workers compensation

Despite a company’s best efforts, accidents can happen on the job site. The Canadian worker’s compensation program is set in place so that an employee doesn’t have to deal with financial hardships while they are unemployed due to work-related injuries.

5. Minimum paid vacation time

In Canada, employers are required to provide at least two weeks of paid vacation time to an employee per year.

Many business owners make their benefits packages more appealing by giving extra vacation time to their employees.

It’s not uncommon for a business to provide three to four weeks of paid vacation time per year.

6. Paid public holidays

In Canada, an employer is required to give their employees a day off when it’s a statutory holiday. There are generally nine recognized statutory holidays per year in Canada. While an employee isn’t required to work on a statutory holiday, they may wish to work on that day for an increased salary.

7. Maternity/parental leave

Employee Benefits Mother and Daughter
Canada requires mandatory parental leave of 17 weeks for mothers and fathers.

In Canada, new parents are allowed to take time off of work while they get accustomed to having a new child in their household.

Employers are required to offer a minimum of 17 weeks for parental leave.

 

However, employees may get up to as much as 102 weeks off, if eligible.

Common taxable benefits

A taxable benefit is a payment from an employer to an employee and can be in cash form or other forms of compensation.

Many employee benefits within Canada are considered taxable benefits and they must be reported on the employee’s personal income tax statement. To view a complete list of all taxable benefits, check the Canadian Revenue Agency’s Benefits and Allowances Index.

Premium healthcare plans

The most common taxable benefits are healthcare programs and life insurance. These plans can include:

  • Premium health insurance
  • Dental coverage
  • Life insurance

This is one area that every potential employee will look at before they agree to work at your company.

Profit-sharing plans

A profit-sharing plan is a contribution program that enables a company to help their employees save for retirement. There are different types of profit-sharing plans, and there’s no minimum or maximum amount of money that an employee will be given through profit sharing.

Performance bonuses

One of the ways that you can motivate your employees is by offering a performance bonus on a monthly or quarterly basis. Many employees will become more productive when they know that it will pay off with an extra reward.

Money acquired from tips

If you’re looking to provide an extra benefit to your employees, then you may want to place a tip jar at the cash register so that a happy customer can show their appreciation for exemplary service.

Boarding or rent-free housing

One of the standard perks that are provided to temporary workers is free housing while they work in Canada. This makes it financially easier for temporary workers to get started on their careers and training while they are in Canada.

Personal use of company vehicles

Another benefit you can offer to your employees is the use of company vehicles when required.

Remember that if an employee receives a taxable benefit, they’ll have to report it on their personal income tax statement.

Popular discretionary perks and benefits

These benefits are only offered at the discretion of the employer. These can be monetary or non-monetary rewards and reimbursements for working at your company.

Flexible working hours

Employee Benefits Man Working on Laptop
The option to work whenever the employee chooses is growing in popularity.

One increasingly attractive perk you can offer as an employer is a flexible work schedule. This is an appealing perk to many employees because it helps to maintain a work-life balance.

Transit passes
If you work in an urban setting that requires your employees to use public transit systems, then you may want to provide them with transit passes so that they can travel to work for free.

Gym memberships
Paid gym memberships not only help attract quality workers, they keep your employees healthier thereby reducing the premiums on your healthcare plan.

Flexible personal leave
Another free perk is extended personal leave. Whether your employee is sick or needs time away from work for other reasons, it’s nice to provide them with extra time.

Employee discounts
If your employees like to shop at your store, then you may want to provide them with some kind of employee discount. This will help them save money on their shopping — and it’s a nice perk for any benefits plan.

As an employer, you can get creative with the perks and benefits you offer to your employees. While you’re not required to provide more benefits than the seven mandatory listed above, a competitive benefits package will make it easier to attract better job applicants.

Related: Adding an Employee Assistance Program? Here’s what you need to know

Best practices for choosing which benefits to offer

Besides making sure that your business is compliant with all mandatory benefits and employment standards within Canada, there are best practices that you can use to create a compelling benefits package for your employees.

Get employee input

When you’re creating or updating your employee benefits package, it’s worth your time to talk with your employees and get their input before you finalize the features to include.

Ask employees to prioritise the perks that are most valuable to them. You could be surprised at what they choose.

 

After all, the benefits program is built for your employees, so you should get their opinions and feedback before you make any decisions.

Choose the right insurers

There are a lot of different insurance companies you can work with and it can be hard to choose. Step one is to make sure the features an insurance agency can provide will actually benefit your employees.

There’s little point in having a lot of extra benefits while the essentials aren’t being covered adequately. So, you’ll want to make sure that you choose the right insurance agency that offers the benefits your employees value most.

Communicate clearly

Once you’ve set up your benefits program, you should make sure that your employees know what they need to do to become eligible for the benefits they’re entitled to.

If your employees don’t know how to claim the benefits, then there’s little use in having an employee benefits program at your business.

Treat it as an investment

While it’s easy to view benefit programs as an extra cost for your business, you should view these programs as an investment in your workforce.

You would be nothing without the help of your employees, so it’s in your best interests to do what you can to invest in their lives and well-being.

Customise your plan as you’re able

An employee benefits package is much more than a bunch of perks. It can be a tool you can use to attract better candidates while keeping your current employees happy.

Besides providing the mandatory benefits that are required by law, there are many ways that you can create a better benefits package for your employees. You could pick from the full range of taxable benefits, or you could choose some cheaper perks that will please your employees without costing you a ton of money.

When it comes to employee benefits, there’s no one-size-fits-all plan.

However, with a little communication, research and planning, you should be able to create a competitive package that will help your employees and make your business a better place to work.