A recent Canadian survey uncovered that 78 percent of businesses offer a traditional benefits plan to employees. The remaining 22 percent of Canadian businesses offer a flexible plan that allows workers to choose their coverage level.
A traditional plan does not only include benefits required by the Government of Canada. They often add the major types of employee benefits: medical insurance, life insurance, and disability insurance.
When creating an employee insurance benefits package to attract and retain workers, there are things you need to know. Keep reading to learn how to choose what to offer and the cost of doing so.
Types of Employee Benefits
To create the right employee insurance benefits package, you need to know the different types of benefits in Canada. The types can be split into two categories: mandatory employee benefits and supplementary benefits.
The Canadian government outlines mandatory benefits that employers must give their employees. Supplementary benefits, or fringe benefits, can be offered to staff but are not required.
Mandatory Employee Benefits
The provincial employment standards act dictates what mandatory benefits employers must provide to employees. Also known as statutory benefits, the government-mandated plants include the following:
Canada Pension Plan
The Canada Pension Plan (CPP) is a mandatory pension savings plan that employed Canadians have to be part of. Employers, employees, and self-employed individuals must contribute to this plan.
However, there are some groups exempt from making these contributions. Typically, those exempt are making less than $3,500 per year.
Employers have to contribute to each employees’ CPP through deduction of staff wages.
Legislated Leave
Legislated leave includes paid time off (PTO) and sick leave. This also factors in parental, maternity, and paternity leave along with vacation days.
Most Canadian provinces offer full-time employees two weeks of paid vacation leave for one year of employment. After five years employed, employees can get up to three weeks of vacation time.
The Canadian Labour Code entitles employees to three paid days of sick leave.
Compassionate care leave falls under legislated leave and is mandatory in almost every province in Canada. This is also known as critical illness leave and refers to the unpaid time for employees to take care of sick relatives.
Employment Insurance
Employee insurance benefits must be included in your package as a mandatory benefit. However, this does not refer to health and medical insurance.
Employment insurance (EI) covers individuals who lose their jobs by no fault of their own and are unable to find a new job. This insurance type only applies to businesses that hire employees.
For example, independent contractors and freelancers don’t need to purchase this benefits package.
Employers and employees pay for employment insurance. As an employer, you contribute to the employees’ premiums while deducting a set amount from each paycheck.
A business can deduct EI contributions as a business expense when filing a tax return.
Supplementary Benefits
Providing employee benefits that are supplementary is a good idea to attract and retain talent. Often, these are the benefits that potential hires look into before accepting a job offer.
Although not legally required, fringe benefits are the standard for most businesses in Canada. Supplementary benefits include the following:
Medical and Health Insurance
Some job prospects will turn down a job that doesn’t offer medical and health insurance. This is something to highly consider when creating an employee insurance benefits package.
Employers and employees pay for healthcare coverage. The employer will make contributions to healthcare premiums while taking money from employee paychecks.
Employees will have the choice to opt for this type of benefit. They might choose to forego the medical plan because they already have healthcare insurance that they prefer.
Under this benefits plan, the following services might be covered:
- Dental care
- Hospital visits
- Vision care
- Prescription drugs
- Paramedical services
- Mental health support
- Out of country medical care
Like employment insurance, an employer can deduct health insurance premiums from their income tax returns.
Life Insurance
An employer that offers life insurance will make contributions to the insurance plan with the employee.
A life insurance plan will ensure an employee’s loved ones are taken care of if they were to pass away unexpectedly. An employee who has this coverage will appoint a beneficiary to receive a payout.
An insurer typically offers an employee’s annual salary to the beneficiary.
Employers can deduct life insurance premiums from their business expenses on tax returns but only if they follow specific stipulations. Employers have to make regular contributions and keep coverage the same no matter the age or gender of an employee.
If these two factors are followed, employers can deduct the entire cost of premiums in their tax returns.
If you offer life insurance, you can decide to offer accidental death and dismemberment coverage as well. With this coverage, a beneficiary receives a payout from both insurances.
Disability Insurance
If an employee cannot work because of injury or illness, disability insurance covers part of the employee’s salary. Employers can choose to offer short-term or long-term disability insurance to their staff.
Although long-term insurance is more beneficial to workers, short-term is better than nothing. Offering disability insurance of any kind as part of supplementary health insurance plans will attract employees.
Short-term disability coverage generally covers six months of injury or illness. Long-term insurance will kick in when the former ends. Long-term disability plans can also be used when EI benefits or sick leave ends.
The employer pays for these coverages but can deduct them from their business tax returns.
An employer cannot access some forms of disability insurance. If your employees need disability benefits for their children, benefits for veterans, or need to register for the disability savings plan, refer them back to the Canada Pension Plan.
Your Employee Insurance Benefits Package
Knowing and understanding each type of benefit you can offer in Canada can help you create an employee insurance benefits package that is worth the cost.
Although not all mandatory benefits are insurance plans, CPP and legislated leave are required by law. Supplementary insurance benefits that you can include in your package are health insurance, life insurance, and disability insurance.
To help you further decide what to include in your packages, we’ll go over the costs of the insurance options.
EI Maximum Insurable Earnings
Maximum insurable earnings (MIE) refers to the income level at which EI premiums are paid. MIE determines the maximum rate to be paid for weekly benefits.
As of January 1, 2022, the maximum insurable earnings increased from $56,300 to $60,300. This means an insured worker pays premiums on earnings up to that amount.
The EI benefit rate per week is now $638 while the EI premium rate is $1.58 per $100. These premiums can be deducted from a business income tax return.
Cost of Employer Health Insurance Plans
Health and dental plans vary by cost in Canada so it’s hard to set on an average. Of course, the cost will depend on how many employees a business has.
It is estimated that premiums come out to about 15 percent of payroll annually for smaller businesses. For a large corporation, that number jumps to 30 percent.
If you find small business employee health insurance plans that cater to fewer employees, you could get away with spending one percent to five percent of your payroll annually.
Employers have to pay at least 25 percent of the cost of these plans which means employees are usually paying about 75 percent of the cost. Plus, employers can deduct these amounts on income tax returns.
Group insurance plan alternatives might also be able to help you get the cost down.
Cost of Group Life Insurance Plans
If you choose to offer life insurance for employees, a group life insurance plan is common.
Group life insurance is term insurance, meaning the coverage is only available during the term of employment. You can offer employees basic life insurance and dependent basic life insurance.
Employee basic life insurance is the coverage we discussed above that provides money to dependants or beneficiaries if the employee passes away.
In contrast, dependent basic life insurance provides coverage if an employee’s dependent passes away. This could be a child or spouse.
Typically, life insurance plans come with a $50,000 threshold for non-taxable compensation. This means the employee pays income taxes for this coverage but you both have to pay payroll taxes on it.
The amount is not set in stone as you will pay money based on how many employees opt-in for life insurance.
Around 80 percent of Canadians purchase their life insurance outside of their employer. Therefore, it might not be necessary to add this coverage to your benefits package. If you do, not every employee will opt-in.
Cost of Disability Insurance
A disability insurance plan shares costs between the employer and the Canadian government. The Government of Canada pays 85% of the premium while the employer covers the remaining 15 percent.
Since July of 2020, the premium rate for this insurance type is $2.32 per $1,000 of the employee’s insured salary. Employees pay 15 percent of that amount while the employer pays 85 percent.
This comes out to the employer paying $1.97 for every $1,000 insured salary. Employees only pay $0.35 for every $1,000.
You can calculate the insured salary by rounding the annual salary up to the next multiple of $250.
Contributions are waived if a member is receiving disability benefits or not being paid. This is known as the elimination period where benefits become payable after 13 weeks of disability.
Tips to Keep Employee Benefits Program Costs Low
Upfront costs are the toughest part of offering life, disability, and health insurance plans to employees. To minimize or contain costs in the long run, use these strategies:
- Share premium costs with employees
- Build deductibles into the coverage
- Consider the level of co-insurance coverage
- Limit coverage to certain amounts
- Limit carry-over for sick days not used
With these tips, you can allocate your budget toward the benefits you absolutely want to offer without worrying about running out of money.
Benefits of Including Supplementary Insurance in Your Benefits Package
If you are spending company money to offer supplementary insurance to employees, you’ll want to know the benefits you are getting out of it. Employee-sponsored insurance coverage plans can do the following:
Reduce Absenteeism and Boosts Retention
An employee who knows their company cares for them by offering health, life, or disability insurance will be more present and productive.
Not to mention, when they are given the care they need, they are healthy, physically sound, and less prone to injury. This makes them less likely to miss workdays.
Good benefits can increase employee satisfaction which can aid in retaining workers. An employer offering insurance benefits is more convenient because looking for private coverage is a stressful task.
Helps With Recruitment
Top talent is hard to recruit if you don’t offer insurance as a perk. Sought-out employees can negotiate benefits with other companies who might offer more than you are willing to.
A potential employee could be deciding between two jobs and the deciding factor might be the insurance options you provide. The best employee insurance benefits package will push you ahead of the competition.
Saves Money
If you can save your future and current employees money by offering insurance coverage, do it! The coverage you offer them is likely to be much less than a third-party program they find on their own.
If you stay compliant with the laws in Canada, you can save your own business money by deducting costs from your business income tax return.
Create Your Employee Insurance Benefits Package Today
Mandatory and supplementary employee benefits are vastly different and require a deep understanding by employers.
To create the perfect employee insurance benefits package, you must stay compliant with mandatory coverage while offering benefits that attract top talent.
While employment insurance is necessary, adding health, life, and disability insurance can make your company stand out from others. Start recruiting the best employees with your benefits program today.
Don’t forget to keep coming back to this website for more informative articles on running a business!
