Canada Employee Compensation & Benefits
Capital
Ottawa
Official Language
English, French
Currency
Canadian Dollar
Payroll cycle
Bi-Monthly
Quick facts about Canada
Canada is one of the United States' most important economic partners. Home to one of the best public education systems in the world, Canada is a booming talent hub across all industries, including tech, financial services, healthcare, and agriculture. Despite being a relatively small country by population, Canada's GDP is approaching $2 trillion. Companies looking to expand globally can hire top Canadian talent by partnering with an EOR service like Via.
Offering the right employee compensation and benefits package in Canada is crucial for maintaining compliance and retaining top talent.
Canada has strict employment laws for Canadian residents and Temporary Foreign Workers (TFW). To make matters more complicated, every Canadian province has unique labor regulations, rules, minimum wage requirements, and hours an employee may work.
Not sure how to build a competitive compensation package in Canada? Read our guide to learn more.
Understanding mandatory benefits in Canada
Compensation laws and employee benefits vary by province, so familiarizing yourself with local laws is critical. However, some rules are federal and thus are applicable in each province.
Paid time off
Under the Employment Standards Act, mandatory paid time off (PTO) extends to four major areas:
Vacation: 2 weeks are given after a year (12 months)
Medical leave: 10 days per year
Maternity/parental leave: 15–76 weeks, depending on whether it’s strictly maternity leave, standard parental leave, or extended parental leave
Observed public holidays: nationwide and provincial/territorial
Vacation leave
All provinces in Canada guarantee employees 2 weeks of vacation pay. The amount of pay is determined based on the employee's length of service to the company. Read more about how to calculate vacation pay in our Leave in Canada page.
How is vacation pay calculated in Canada?
Vacation pay in Canada is a little tricky to navigate. According to the Employment Standards Act:
4% of the employee's annual salary in vacation pay to cover 2 weeks after 1 year of continuous service
6% of the employee's annual salary in vacation pay to cover 3 weeks after 5 years of continuous service
8% of the employee's annual salary in vacation pay to cover 4 weeks after 10 years of continuous service
When an employee is terminated, any leftover vacation time not taken for that year or previous years must be paid out in the employee's severance package.
Is vacation pay taxed?
Yes, vacation pay is taxed in Canada and should be deducted from employees’ paychecks and treated as regular earnings.
Medical leave
Employees hired on or after December 1st, 2022 will receive:
3 days of leave after 30 days of employment
One additional day per month after 60 days of employment, up to a max of 10 days per year
Employees can carry over any additional medical leave into the next year. However, employees may never have more than 10 days of medical leave in any given year (even with the carried over leave).
Employers are allowed to require a medical certificate from a doctor if an employee takes more than 5 days of consecutive paid medical leave.
Maternity and parental leave
To receive the EI (employment insurance) maternity and parental leave benefit, workers must apply as soon as they stop working for an employer. Once on leave, workers should have at least 600 hours of insurable employment in Canada.
In general, workers receive the EI benefit pay at 55% of their income and up to a maximum amount of $650 weekly. In Quebec, workers can get up to 75% of your income.
Maternity leave
Maternity leave is only available to biological and surrogate mothers. Parental leave is available to both parents and can be shared between both parents.
The first 15 weeks are considered mandatory maternity leave. Weeks 16-32 switches to "parental leave" and must be claimed within 12 months after the birth of the child.
Maternity leave is broken down as follows:
First 15 weeks are considered mandatory maternity leave
16 weeks-76 weeks are considered parental leave
50 weeks or less: 55% of average weekly earnings
50-76 weeks: 33% of average weekly earnings
Paternity leave
Paternity leave falls under parental leave, so new mothers are always entitled to 15 weeks of mandatory maternity leave paid at 55%. New fathers can take some of the parental leave up to 61 weeks total split between both parents. (because 15 weeks are automatically deducted for the mother).
For example, a new mother takes her mandatory 15 weeks, but a new father wanted to take the same amount of time, he would be able to take that leave alongside the mother. However after the 15 weeks, they would only have 46 week of parental leave that they could take between both parents.
Holidays
There are 10 paid public holidays in Canada (not including provincial/territorial), including:
New Years (January 1, 2023)
Good Friday (April 7, 2023)
Victoria Day (May 22, 2023)
Canada Day (July 1, 2023)
Labour Day (September 4, 2023)
National Day for Truth and Reconciliation (September 20, 2023)
Thanksgiving (October 9, 2023)
Remembrance Day (November 11, 2023)
Christmas Day (December 25, 2023)
Boxing Day (December 26, 2023)
Pension plan contributions
Canadian Pension Plan (CPP) contributions are mandatory and required for both the company and the employee. CPP contributions assist in providing employee benefits and pensions.
Employment Insurance Contributions (EI)
Employment Insurance (EI) contributions are mandatory deductions from an insurable employee’s earnings. EI contributions are based on an employee’s income and are deducted regularly from payroll.
Medicare
According to the law, all individuals working in Canada have access to healthcare through the country’s social security system. And all residents have a Medicare card for free healthcare for the province where they live. These are statutory benefits for all.
Canadian Medicare is a decentralized, universal, and publicly funded healthcare system administered predominantly by the 13 provinces and territories. Each province and territory has its own insurance plan and receives federal assistance per capita.
Recommended benefits in Canada
Aside from the mandatory compensation and employee benefits, many employers offer several recommended benefits, including private healthcare, retirement investment accounts, and health spending accounts. These bonus perks can help recruit employees that stick around for years.
Remote work/flexible working
Many employers now offer either remote work arrangements or flexible working hours through a hybrid-remote work model. Remote work in Canada has become increasingly popular in the last few years, and more and more employers are embracing this benefit in the country.
Employer-sponsored health benefits
Since Canada has a publicly funded healthcare system, it is not typical for a Canadian employer to offer additional healthcare. However, offering additional healthcare options make businesses more competitive in the job market.
The following medical services are not generally included in the Medicare plan; however, they are often provided as part of the opt-in, employer-offered plans:
Dental
Vision
Paramedical services: massage therapy, chiropractor, or physical therapy
Prescription drugs
Short-term disability
Long-term disability
Critical illness
AD&D
Life insurance
Life insurance is an important benefit many employees offer. In Canada, there are two main types: Term and Permanent.
Term life insurance
Term Life Insurance offers temporary coverage at a lower cost with fixed payments, and there is the option to convert the plan into Permanent Insurance. Term Life Insurance can replace lost income and/or be used to cover debts and funeral expenses.
Permanent life insurance
Permanent Life Insurance provides employees lifetime coverage at a higher cost. Perks include flexible payments and the opportunity to build its cash value through investments. Permanent Life Insurance can also replace lost income and cover one’s debts and funeral expenses. Many plans offer options for estate planning as well.
Dependent life insurance
Another form of insurance is dependent life insurance, which is available only to an employee’s spouse or dependent children and provides coverage in flat amounts. Amounts vary, depending on what type of coverage you’re looking for. Dependent life insurance premiums may be paid solely by the opt-in employee, or the employer may contribute a percentage.
Spending accounts
When it comes to spending accounts, there are a couple of options: Health Spending Accounts (HSA) and Lifestyle Spending Accounts (LSA).
HSA
An HSA is an employee account with a fixed dollar amount to reimburse health and dental expenses that aren’t covered by the provincial healthcare coverage or employer-offered insurance plan. HSA funds may be applied to the employee and their dependents. Depending on the plan, unused HSA funds may roll over to the following year’s plan.
Also, HSA plans must adhere to Private Health Service Plan rules.
LSA
Employers offering LSAs create a customized list of additional health and wellness expenses for which they will reimburse employees, such as gym memberships, childcare, or counseling. An LSA helps employees pay for items and services that typical group healthcare plans do not cover.
LSAs are also sometimes known as "Wellness Spending Accounts."
Employee Assistance Programs
Employee Assistance Programs (EAPs) are free, short-term counseling options for an employee’s personal or work-related problems. This confidential service focuses on mental health support for employees and their immediate family members.
EAPs are accessible for 24/7 crisis counseling.
Wellness programs
Wellness programs in Canada provide employees with tools, resources, and support to improve their mental and physical health. Such offerings include stress reduction, weight loss, and dietary/nutrition education.
Profit share opportunities
Profit share opportunities, otherwise known as Employee Profit-Sharing Plans (EPSP), are arrangements that enable a company to share business profits with some or all employees. With an EPSP, a trustee receives the specified funds and invests them for the plan members’ benefit.
Additional perks
As they see fit, employers can offer additional perks to employees, as long as they are legally filed or reported and adhere to the specific province’s rules, regulations, and labor laws. Such perks could be use of a company vehicle, daily meal stipends, or vouchers for transit fees.
Flexible/Unlimited PTO
Within reason, PTO or vacation time can be quite flexible in Canada. For example, upon approval from their HR representative, an employee may swap a nationally recognized PTO public holiday for a different day that suits their schedule better. Employers usually offer more PTO after a few years of service.
Now, a new option that some businesses are exploring is unlimited PTO, meaning employees are not given a set number of paid days off per year but instead are allowed to take time off when needed, as long as their tasks are accomplished and their absence does not disrupt the flow of business.
Unlimited PTO does create flexibility for employees, but it may not be the best option for all businesses. As with anything, there are pros and cons to offering unlimited PTO. It’s up to the management to determine if that perk makes sense with the business structure.
Outsourcing compensation and benefits in Canada
PEO vs. EOR
To outsource employee benefits, companies can partner with an employer-of-records (EOR) service like Via or a professional employer organization (PEO).
Both EORs and PEOs perform HR-related administrative work, including payroll, benefits, tax deductions, and reporting. The distinction lies in compliance, employment arrangement, and whether your business has a local entity, or subsidiary, in Canada.
Your business must own a local legal entity or subsidiary to hire a PEO. If you want to employ workers in Canada without a subsidiary, then working with an EOR is the only option.
Why companies partner with Via
Via makes hiring talent around the world and building your global team seamless by helping you onboard workers in as little as 2-3 business days. With our easy-to-use platform, Via helps you manage local HR processes for direct employment such as work visas & permits, employee data privacy compliance, benefits, global payroll, background checks, and more. Our team of local labor lawyers and on-the-ground experts provide 24-hour local support and ensure that your company remains compliant while expanding abroad. As your employer-of-record/entity abroad, Via assumes responsibility for employment liability, so that you can focus on what matters: recruiting and managing your team.
