Employee benefits in Canada: A complete guide for employers

When hiring employees in Canada, it's crucial to offer them the right benefits package to stay compliant with Canadian labor laws, as Canadian employees enjoy more rights and protections than workers in many other countries (including the US).

Here's everything you need to know to offer benefits that meet statutory requirements under Canadian labor laws—and how to go above and beyond for your employees in Canada.

Mandatory vs. supplementary benefits in Canada

Employers in Canada must distinguish between mandatory and supplementary benefits to ensure compliance with Canadian employment standards and to enhance their benefits package. Mandatory employee benefits are legally required under Canadian law, ensuring basic protections and financial support for employees. Supplementary benefits, while not required by law, are offered by many employers to create a more attractive benefits package.

Below are a few examples of mandatory and supplementary benefits for your Canadian employees:

Mandatory employee benefits in Canada

Mandatory benefits programs are required by Canadian law—primarily, the Employment Standards Act, which establishes the rights and responsibilities of employers and employees in Canada. If you employ a Canadian worker and fail to offer them these mandatory employee benefits, you could wind up with a hefty fine. Keep in mind that the benefits required by the government of Canada are statutory minimums, and employers can always offer more than these mandatory benefits. Also, note that these benefits are mandatory for employees—independent contractors in Canada aren't entitled to any benefits.

Pension

The Canada Pension Plan (CPP) is a mandatory, contributory savings plan for most employed Canadians outside of Quebec. There are a few exemptions to pension contributions in Canada—like if an employee makes less than C$3,500 per year.

Employers and employees both contribute a percentage of the employee's earnings to the CPP: 5.95% in 2023, up to the maximum of C$3,754.45, then an additional 4% on earnings between the maximum and an upper earning limit that increases yearly.

Canadians in Quebec are covered by the Quebec Pension Plan (QPP), a taxable public insurance plan that covers employees and their families for retirement, accidental death, or disability. Similar to the CPP, employers and employees equally split contributions to the QPP: 5.4% each on all earnings between C$3,500 and C$64,900 in 2022.

Canadian workers can start withdrawing from the CPP or QPP at age 60 (or CPP withdrawals can be deferred up to age 70). The amount they will receive depends on their average earnings, their pension contributions, and the age at which they decide to start receiving their pension.

Employment Insurance

Employment Insurance (EI) provides income to Canadian employees who lose their jobs and struggle to find new employment. It replaces income for employees who are unable to work as a result of:

• Sickness
• Parental leave, including maternity and paternity leave to care for a newborn or newly adopted child
• Critical illness leave
• Compassionate care leave

Most employees in Canada are entitled to EI, which totals 55% of their average weekly earnings up to a maximum (C$61,500 in 2023). Canadian workers can receive EI for up to a maximum of 14-45 weeks, depending on regional unemployment rates and the number of working hours they've accumulated over the previous 52 weeks or since their last claim (whichever is shorter).

EI is commonly used to provide income to Canadians who take parental leave. In Canada, natural or adoptive parents are entitled to a minimum of 15 weeks of leave, which is not paid by their employer. Parents can submit EI claims to receive income during parental leave.

Canadians in Quebec are covered by the Quebec Parental Insurance Plan (QPIP), which provides financial assistance to eligible parents who take time off work to care for a newborn or newly adopted child. The QPIP was introduced in 2006 to replace the federal government's parental leave program in Quebec.

Under the QPIP, eligible parents can receive up to 55% of their average weekly income for a maximum of 32 weeks of maternity leave. In addition, there is an optional 8-week period of paternity leave available to fathers or partners and an optional 12-week period of extended parental leave available to either parent. The program is funded by contributions from both employees and employers, with the rate of contribution based on the employee's salary.

Vacation entitlements

Vacation entitlements are based on the province or territory where the employee is located. They can be accrued or front-loaded and should be prorated for the employee's first year. Minimum vacation entitlements by years of service are listed below.

Statutory holidays

Employees in Canada are entitled to different statutory holidays, depending on the province or territory of employment. If a statutory holiday falls on a weekend, employees are typically given a substitute holiday (usually on the first working day following the statutory holiday).

Below are the statutory holidays for Canada's provinces and territories.

Province-specific mandatory benefits in Canada

A number of other benefits may be mandatory in Canada, depending on the province or territory of employment, industry, and other factors.

Workers compensation

In Canada, workers compensation is controlled by independent, provincial Workers Compensation Boards (WCB) and funded by premiums paid by employers. Premiums are set by WCBs and are regularly updated. Workers comp is primarily to pay employees for lost wages since Canada has a social healthcare system.

In most cases, employers are required to register with the WCB in their province or territory of employment. However, there are exceptions related to the size of the company, the number of employees, and the industry. Some workers comp exemptions in different parts of Canada are listed in the table below.

Sick leave

Minimum sick leave entitlements for each province and territory are listed below.

Sick leave is not accrued; it's always front-loaded, meaning employees receive a set number of days off at the beginning of the year.

Employees that start work part way through a calendar year are entitled to the full entitlement for that year.

Sick leave doesn't roll over to the next calendar year and it is not paid out upon termination.

Minimum sick leave entitlements for each province and territory are listed below.

Supplemental employee benefits in Canada

The statutory benefits we've covered so far are all minimums that must be provided by employers in Canada. In addition to these required benefits, many Canadian employers also provide additional benefit plans and perks to help them attract and retain employees. Some of the most common supplementary benefits are below.

Health, dental, and vision insurance

While all Canadian employees are covered by government health insurance plans, it's common for employers to offer supplemental insurance benefits with more robust coverage.

Extended healthcare coverage may include things like prescription drug coverage, paramedical services like massage therapy or physical therapy, dental, and vision coverage—all health benefits that are not standard offerings under Canada's social healthcare.

Retirement savings plans

In addition to pension plan contributions, many employers offer supplemental retirement plans (for example, Group Registered Retirement Savings Plans, or RRSP) to help employees build long-term savings at a higher rate of return. These can be funded through payroll deduction, employee contribution matching, and other schemes.

Paid time off

Many employers offer paid time off beyond Canada's statutory minimums to make their workplaces more attractive to top workers. Paid time off can include additional vacation time, extra paid sick days, paid personal days, or flexible leave policies.

Life coverage

Life coverage insurance (similar to life insurance in the US) helps a late employee's surviving family members with the financial impact of their death. It can be used to pay for funeral expenses, pay off debts, provide for dependents, replace lost income, or even make charitable donations in the deceased's name. Employers can pay part or all of the premiums for supplemental life coverage for their employees, even though this isn't a required benefit.

Long-term disability

Employment insurance covers some lost wages for employees who are unable to work due to short-term disability. Many Canadian employers offer additional long-term disability insurance, which can provide additional financial assistance for employees while they are unable to work or replace their wages once they've received the maximum from their EI coverage.

Employee assistance programs (EAPs)

Employee Assistance Programs (EAPs) are a popular supplementary benefit in Canada, designed to support employees' mental, emotional, and physical well-being. EAPs typically provide confidential counseling, wellness resources, and support for issues such as stress management, mental health, financial planning, and legal concerns. By offering EAPs, employers can promote a healthier work environment, reduce absenteeism, and improve employee retention. Although EAPs aren’t mandatory, they are a valuable addition to a comprehensive employee benefits package.

How much do employee benefits typically cost in Canada?

Employee benefits costs in Canada vary significantly based on the industry, employee type, and benefit types offered. For example, mandatory contributions like CPP and EI account for a standard percentage of payroll costs. Adding supplementary benefits such as extended healthcare, dental, or retirement savings plans can further increase costs. Employers should aim to balance mandatory benefits with supplementary options, allowing for a benefits package that attracts and retains talent while remaining financially viable.

Offer affordable employee benefits in Canada with Rippling

Managing a global workforce is challenging, especially regarding benefits compliance. Hiring employees, contractors, or remote workers in Canada requires a trusted partner like Rippling to simplify onboarding, payroll, and benefits enrollment.

Rippling offers a native Employer of Record (EOR) service, which allows you to hire employees in Canada, enroll them in benefits, and run payroll in 90 seconds—even if you don't have a legal entity there.

Employee benefits in Canada FAQs

What benefits do employees value most in Canada?

Canadian employees highly value supplementary benefits that go beyond the statutory minimum. Commonly appreciated benefits include extended health and dental coverage, flexible paid time off, mental health support through Employee Assistance Programs (EAPs), and employer-contributed retirement savings plans. Employers offering these benefits often see improved retention and satisfaction rates.

What are the tax implications of employee benefits in Canada?

Employee benefits in Canada have tax implications for both employers and employees. Mandatory benefits like CPP and EI require payroll deductions, which are tax-deductible for employers. Supplementary benefits may also have tax considerations, depending on the benefit type and funding arrangement. Employers should consult tax professionals to ensure compliance and understand tax-efficient benefits planning.

How can employers ensure compliance with Canadian benefits laws?

Employers can ensure compliance with Canadian benefits laws by staying up-to-date with federal and provincial regulations. This includes offering mandatory benefits like CPP and EI and meeting regional requirements for benefits such as workers' compensation and minimum sick leave. Partnering with a benefits provider can also help streamline compliance efforts.

Are independent contractors eligible for employee benefits in Canada?

In Canada, independent contractors are not entitled to mandatory employee benefits. While contractors work with organizations, they are not considered employees and therefore do not receive benefits like CPP, EI, or vacation entitlements. However, some companies offer optional benefits to contractors as a retention strategy.

This blog is based on information available to Rippling as of November 12, 2024.

Disclaimer: Rippling and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide or be relied on for tax, accounting, or legal advice. You should consult your own tax, accounting, and legal advisors before engaging in any related activities or transactions.