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 in Canada is crucial for maintaining compliance and retaining top talent.
Labor policies regarding benefits and compensation must adhere to Canada’s Pay Equity Act, which strives to redress systemic gender-based discrimination as it relates to compensation. Equal compensation for work of equal value regardless of gender is the goal.
Understanding compensation and benefits packages in Canada
Canada has strict employment laws for Canadian residents and Temporary Foreign Workers (TFW), which extend to employee compensation and benefits. Therefore, maintaining compliance and following the law is crucial. To make matters more complicated, every Canadian province has unique labor regulations, rules, minimum wage requirements, and hours an employee may work.
Compensation laws and employee benefits vary by province, so familiarizing yourself with local laws is critical.
Mandatory compensation and benefits in Canada
Even though local laws differ, there are mandatory compensation regulations and employee benefits that employers in all provinces must adhere to, including offering a pension plan, PTO, vacation time, healthcare, and eye exams.
Paid time off
Under the Employment Standards Act, mandatory paid time off (PTO) extends to four major areas:
Vacation: Two weeks are given after a year (12 months)
Sick leave: Up to five days of paid leave for illness or personal injury
Maternity/parental leave: 15–78 weeks, depending on whether it’s strictly maternity leave/blog/countries-with-paid-maternity-leave/, standard parental leave, or extended parental leave
Observed public holidays: nationwide and provincial/territorial
Non-paid time off
One type of non-paid time off leave is critical illness leave. This situation applies to employees who must care for a critically ill child or adult.
In a 52-week period, employees may take up to 37 weeks of leave to care for a child under the age of 18, or 17 weeks of leave to care for an adult, such as their spouse or parent.
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
Aside from the mandatory compensation and employee benefits, many employers offer several recommended benefits, including private healthcare, retirement, and health spending accounts. These bonus perks can help recruit employees that stick around for years.
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 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 provides employees lifetime coverage at a higher cost with flexible payments, with an added 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.
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 boots, 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.
A silver lining of the recent pandemic was the institutionalization of telehealth and virtual health services. Now, employees have the option to be consulted by a doctor from home; they can attend one-on-one counseling or therapy sessions or participate in exercise courses. Increasing accessibility has removed many obstacles that once prevented people from beginning their wellness journeys.
Profit share opportunities
Profit share opportunities, otherwise known asEmployee 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 their specific province’s rules, regulations, and labor laws. Such perks could be use of a company vehicle, reception of daily 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 matches with their business structure.
Outsourcing compensation and benefits in Canada
PEO vs. EOR
Regarding outsourcing compensation and employee benefits, companies can partner with an employer-of-records (EOR) service like Via or a professional employer organization (PEO), which an employer selects depending on their business’ needs.
Both EORs and PEOs can 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.
An EOR service is fully responsible for maintaining compliance and following local labor laws. If you partner with a PEO, on the other hand, your business technically enter into a co-employment relationship. This means they are If you choose to team up with a PEO, you are responsible for maintaining compliance.
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 best option because an EOR functions as the legal employer.
Why companies partner with Via
Companies of all sizes want to hire employees in Canada, but don’t know how to navigate the country’s local labor laws. Via makes hiring Canadian talent and building your global team seamless. With our easy-to-use platform, Via helps you manage local HR processes for direct employment such as benefits, payroll, background checks, and more. Our team of local labor lawyers and on-the-ground experts ensure that your company remains compliant while expanding abroad. As your employer-of-record/entity in Canada, Via assumes full responsibility for employment liability, so that you can focus on what matters: recruiting and managing your team.
With Via’s transparent pricing, you can manage payments for full-time employees or contractors in Canada with no hidden set-up fees, no foreign exchange or transaction fees, and no minimums–start with 1 employee and scale up at your own pace.
