Employee Benefits in Canada: A Guide for US Employers

Even though the US shares a border with Canada, employment laws are not the same. If you’re a US company hiring employees in Canada, it’s crucial to be aware of mandatory employee benefits.

Failure to offer statutory benefits could result in legal issues and large fines. And knowing which supplemental benefits to offer can make finding top talent easier.

This article will help you navigate the employee benefit landscape in Canada.

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Who Should Receive Employee Benefits in Canada?

In Canada, all full-time working Canadian citizens, permanent residents and legal foreign workers are entitled to employee benefits.¹

Depending on the province, employee benefit requirements can vary.

For some benefits, employees may have to work a certain number of months to be eligible. For other benefits, they'll be entitled to them from day one.

Keep in mind that at-will employment doesn’t exist in Canada. Employers have to provide a reason for the termination of a contract.

Read on to find out:
Types of Statutory Employee Benefits in Canada Additional Employee Benefits in Canada You May Offer to Attract Talent Discover Wise Business: The Easy Way to Pay International Employees

Types of Statutory Employee Benefits in Canada

Here’s an overview of the statutory benefits your employees are entitled to receive.

Keep in mind that this list doesn't cover every industry. It's always best to consult an in-country compliance expert for rules in your industry.

Pension contributions

In Canada, pension contributions are mandatory for employees. The contributions are split equally between the employer and employee.

The contribution rates change every year and vary between Canada and Quebec.

In both Quebec and the rest of Canada, employees earning less than $3,500 CAD per year are exempt from making contributions.² This extends to their employers too.

The Canada Pension Plan (CPP) requires that both parties pay 5.95% of the employee’s salary in yearly contributions. The maximum annual contribution for each party currently stands at $3,867.50 CAD.

This means that even if your employee earns more than $68,500 CAD per year, contributions are fixed at $3,867.50 CAD.

🧮 How is this calculated?
The first $3,500 of income of exempt from contributions, so it's: $68,500 - $3,500 = $65,000 0.0595 x $65,000 = $3,867.50

The Quebec Pension Plan (QPP) requires both parties to pay 5.4% of the employee’s salary in yearly contributions.³ The maximum annual contribution for each party currently stands at $3,867.50 CAD.⁴

Employees can begin receiving their pension at the age of 60. This applies to both the CPP and QPP. How much they’ll receive depends on the amount they’ve contributed, as well as the length of time.

Employment insurance

Employment insurance (EI) is another mandatory employee benefit. Both employees and employers are required to make EI contributions. It covers employees in the case that they become unemployed due to:

• Lay-offs or a shortage of work
• Sickness
• Maternity or parental leave
• Compassionate care-giving

Unemployed workers can receive up to 55% of their average insurable weekly earnings. Currently, the maximum yearly insurable earnings amount is $63,200 for both Quebec and the rest of Canada. This means that employees can receive a maximum of $668 per week.⁵

In Quebec, employees need to pay 1.32% of their insurable earnings in EI premiums. For the rest of Canada, they need to pay 1.66%. Employers need to contribute 1.4 times the employee’s amount.⁶

If an employee is laid off, they can claim EI for a maximum of 45 weeks, depending on:

1. The amount of insurable hours they’ve accumulated in the previous 52 weeks or the time since their last claim.
2. The unemployment rate in their region at the time of filing their claim

For unemployment due to sickness, workers can receive EI for up to 26 weeks at a rate of 55%.⁷

For maternity leave, workers can claim a maximum of 15 weeks of leave at a rate of 55%. Keep in mind that employees can combine maternity leave with parental leave.⁸

Parental leave can either be standard or extended:

• Standard leave. Entitles parents to 40 weeks of shared leave, of which one parent cannot receive more than 35 weeks
• Extended leave. Entitles parents to 69 weeks of shared leave at a 33% rate, of which one parent cannot receive more than 61 weeks.⁸

For unemployment due to care-giving responsibilities, employees can receive between 15 to 35 weeks of EI at a rate of 55%. The amount depends on the age and medical condition of the person receiving care.⁹

Paid time off

There are some instances where you may need to pay your employees for time off work.

Here’s an overview of situations that will trigger paid leave for federally regulated workplaces:

Benefit	Requirements to receive payment	Amount
Personal leave	Employee must have three consecutive months of employment with the same employer to be eligible for paid leave	5 days of leave per calendar year, of which the first 3 are paid.
Leave for victims of family violence	Employee must have three consecutive months of employment with the same employer to be eligible for paid leave	10 days of leave per calendar year, of which the first 5 are paid
Bereavement leave	Employee must have three consecutive months of employment with the same employer to be eligible for paid leave	10 days of leave per calendar year, of which the first 5 are paid
Medical leave	After completing an initial 30-day qualifying period, the employee will earn 3 days of medical leave with pay. The employee will earn 1 extra day at the start of each month	10 days of paid leave per year; unused days will carry over to the next year, up to a maximum of 10 days¹⁰

There are many other instances where Canadian employees are eligible for unpaid time off:

• Maternity-related reassignment and leave
• Maternity leave and parental leave
• Compassionate care leave
• Leave related to critical illness
• Leave related to death or disappearance of a child
• Leave for traditional Aboriginal practices
• Leave for court or jury duty
• Leave of absence for members of the reserve force¹⁰

* Leave will be unpaid if the requirements for paid leave aren’t met.

As a federally regulated employer, your employees will also be eligible for certain annual vacation benefits:

• After 1 year of employment, employees are entitled to 2 weeks of paid annual vacation (paid at 4% of gross annual wages)
• After 5 consecutive years of employment, employees are entitled to 3 weeks of paid annual vacation (paid at 6% of gross annual wages)
• After 10 consecutive years of employment, employees are entitled to 4 weeks of paid annual vacation (paid at 8% of gross annual wages)
• 10 days paid “general holidays leave”¹⁰

Keep in mind that these requirements can change from province to province. If you’re not a federally regulated industry, you’ll need to consult your province’s employment laws.

Workers' compensation insurance

For certain industries, it’s mandatory for employers to set up and pay workers’ compensation insurance. This entitles your employees to income in the event of injury or illness as a direct result of their work.

Premium rates and requirements vary by province. To find out if you need to pay, you need to contact your province’s Workers’ Compensation Board (WCB).¹¹

Additional Employee Benefits in Canada You May Offer to Attract Talent

Ensuring your employees receive their statutory employee benefits is crucial for staying compliant. But if you want an edge when hiring talent in Canada, you’re going to need to go above and beyond the bare legal minimums.

Here are some of the top supplemental benefits you can offer your Canadian employees. Keep in mind that many of these benefits are expected and play a key role in job selection.

Supplemental health insurance

The Canadian government provides universal health care. This means that basic medical treatment is covered for your employees. For this reason, health insurance isn’t a mandatory employee benefit in Canada.

But if you wish to attract employees, it’s crucial to offer a private health insurance benefit scheme.

Employers should consider offering the following insurances:

• Drug prescription
• Vision
• Dental care
• Paramedical services (such as physical therapy)

Another health care benefit offered by employers in Canada is a spending account. These can either be a:

• Health Spending Account (HSA), or;
• Taxable Lifestyle Spending Account (TLSA)

These accounts are employer-funded and can be offered either as a standalone benefit or in conjunction with a health insurance plan. An HSA is tax-free and allows employees to cover health related expenses. A TLSA is a taxable benefit that covers a wider range of wellness expenses.

Spending accounts are becoming increasingly popular in Canada and can be a great pay-as-you-go option for small businesses.

Group registered retirement savings plan

Similar to a 401(k), a Group Registered Retirement Savings Plan (GRRSP) is a common benefit offered by Canadian employers.

A GRRSP is set up by the employer and funded through payroll deductions, up to the maximum limit. The current maximum contribution limit for 2024 is $31,560 CAD.¹² Contributions are made on a pre-tax basis and funds can grow tax-free. This makes it a lucrative retirement benefit for attracting top employees.

Employees can withdraw their funds at any time, which will be subject to tax.

Life and disability insurance

You should also consider including life insurance and long-term disability insurance as part of your employee benefits package.

Disability insurance is separate from workers’ compensation insurance. It guarantees that employees will receive between 60% to 85% of their income in the event of either a temporary or permanent disability, preventing them from working.

Employers can offer short-term or long-term disability insurance. Short-term typically covers employees for up to 6 months, while long-term insurance can cover them for up to 2 years or longer.

Long-term disability insurance kicks in after these benefits end:

• Sick leave
• EI sickness benefits
• Short-term disability insurance¹³

Life insurance is another benefit you can offer to retain top employees.

Life insurance is designed to support your employee’s family in the event that they die. It provides their named beneficiary with a one-time, tax-free payment. This is called a death benefit.

You can offer your employees either permanent life insurance or term life insurance.¹⁴

Discover Wise Business: The Easy and Low-Cost Way to Pay International Employees

International business doesn’t need to be complex. With the right provider, managing international employee payments can be simplified.

This is where Wise Business can help. Wise is not a bank, but a Money Services Business (MSB) provider and a smart alternative to banks.

With Wise Business, you can hold and manage over 40 currencies, all from a single account. You can easily send payments in CAD to employees and contractors in Canada, having your money exchanged at the mid-market rate. This saves you on hidden fees, making your money go further.

You can open a Wise Business account online, and there are no monthly subscription fees.

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You can also use Wise’s batch payment tool to pay 1,000 payees in one-click. And if you connect to QuickBooks, you’ll have your bill payments tracked and synced, making accounting a breeze.

🔍 Read next:
How to Pay International Employees: All You Need to Know International Payroll: The 14 Best Services You Should Know What is an employer of record (EOR)? Employ overseas staff with EOR PEO vs EOR: Which is Best for Your Business?

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Sources:

1. Temporary foreign workers: Your rights are protected - Canada.ca
2. CPP contribution rates, maximums and exemptions – Calculate payroll deductions and contributions - Canada.ca
3. Employee Contribution to the Québec Pension Plan
4. Québec Pension Plan
5. EI Regular Benefits - How much could you receive - Canada.ca
6. EI premium rates and maximums – Calculate payroll deductions and contributions - Canada.ca
7. EI sickness benefits: What these benefits offer - Canada.ca
8. EI maternity and parental benefits: What these benefits offer - Canada.ca
9. Caregiving benefits and leave - Canada.ca
10. Types of leaves offered to federally regulated employees - Canada.ca
11. 2024 Workers Comp Rates Across Canada
12. MP, DB, RRSP, DPSP, ALDA, TFSA limits, YMPE and the YAMPE - Canada.ca
13. Disability insurance - Canada.ca
14. Life insurance - Canada.ca

Sources checked January 2023