What employee benefits do I need to provide for myself and my workers?
Employees are critical to a successful business. Here are some mandatory and optional benefits you may provide.
There are several legislated (mandatory) employee benefits in Canada that small business owners may have to provide. You pay for these employee benefits through your company’s payroll, which your bank or accountant can help you with. Additionally, you may want to provide some optional benefits for yourself and your employees. Here’s the breakdown.
Mandatory employee benefits
Employment Insurance (EI)
You must deduct and match employee contributions to EI at a rate set by the federal government. This gives employees access to insurance if they become unemployed and provides maternity, paternity, sickness and compassionate care benefits. Not everyone is eligible for EI, so check before you make deductions. Small business owners can choose to opt in to EI and have access to its benefits.
Canada Pension Plan (CPP)
CPP is another benefit legislated by the federal government; again, you must match your employees’ contributions. CPP provides a guaranteed pension at age 65 (or after age 60 if you opt for a reduced pension) based on employer and employee contributions. Unincorporated business owners calculate their CPP contributions when they file their personal taxes.
Run by provincial and territorial governments, these programs pay workers in the event of workplace accident or injury. They may cover up to 75% of an employee’s previous salary. Contributions are made entirely by employers based on the probability of accident in your industry. High-risk employers pay higher premiums.
As an employer, you’ll also pay premiums to provincial health care plans on behalf of your employees to give them access to a range of medical benefits.
Optional employee benefits
There’s no doubt that you feel inclined to take care of your employees, but there are other reasons why purchasing additional employee benefits makes sense. These benefits help retain existing employees you want to keep in a competitive labour market, improving customer service and reducing onboarding costs. A great benefit plan can also help you recruit the best people, increase productivity and reduce absenteeism, and they are tax deductible.
Helping your workers with a retirement plan, such as a group RRSP, is relatively simple and inexpensive to set up. Starting one requires only a couple of employees, and you can improve its value by matching employee contributions. While there are some costs involved, including some initial setup fees and ongoing payroll deductions, there is immediate payoff for you and your employees in the way of tax deductions.
Here a few more employee benefits that you can offer:
extended health care (vision care, drug plans, dental)
life, accidental death and dismemberment insurance
continuing education opportunities
motivational rewards such as extra vacation time or flexible work hours
One caveat—these benefits can be costly. As with any investment your company makes, you should carefully weigh the return on investment (ROI) for each benefit, including how they help you retain your best employees, improve company morale and reduce recruitment, hiring and onboarding costs. You should also consider the nature of your business and the demographics of your employees in making these choices.
Also, when offering these benefits to your workers, look for ways to minimize your costs while still rewarding their value to your company. For example, enhancing their health plan with prescription drug coverage is just as valuable when it prioritizes generic over brand-name drugs.
Whether you’re getting your small business off the ground or focused on growing, your employees play a big part in your success. Show them you value their hard work and dedication with benefits that address their needs and fits your budget. It’s an investment in them and your business.
These tips are neither a comprehensive review of the subject matter, nor a substitute for professional tax advice. Be sure to consult with your tax advisor to confirm the suitability of any of these strategies for your personal situation.
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