Skip to content

Employee benefits: A way for startups to enhance employee compensation

Startups that are strapped for revenue should consider a strategy of offering benefits to enhance compensation and attract and retain employees.

Benefits represent a form of compensation in addition to an employee’s remuneration. Some types of benefits are mandated by the government, while others are provided voluntarily by the company. Offering company-sponsored benefits can prove an effective method of attracting and retaining employees.

Legislated benefits

Legislated benefits are mandatory — all employers must provide these employee benefits. They include:

  • Employment Insurance: both employer and employee contributions are required
  • Canada Pension Plan: both employer and employee contributions are required
  • Workers’ Compensation: the rate paid by the employer depends upon the industry; in Ontario, coverage is mandatory for some industries and optional for others

Employer-sponsored benefits

While a significant cost, many start-ups have discovered that they must offer competitive employee benefits to attract and retain quality employees in spite of the significant costs. Defining the benefits package is a crucial business decision—it should not be a “one-size-fits-all” proposition. As costs continue to rise, any decision to provide benefits should consider a startup’s financial situation, the ability to contain costs and your employees’ demographics.

Non-legislated employee benefits come in many different forms and can range from basic to deluxe, with costs being very little to none, or high. They include, among others:

  • health insurance (for example, prescription drugs, paramedical coverage, out-of-province emergency)
  • vision care
  • dental insurance
  • life insurance
  • paid sick days
  • short-term disability insurance
  • long-term disability insurance
  • retirement/pension plans (separate from Canada Pension Plan)
  • educational assistance
  • wellness programs
  • employee assistance programs
  • flexible work arrangements

Setting up your benefits package

Do your research when developing a benefits package. A suitable and affordable plan must meet the unique needs of both your startup and your employees. Before making any decisions, investigate the following resources:

  • insurance brokers that specialize in small groups
  • insurance agencies
  • boards of trade/chambers of commerce
  • professional and trade associations

Containing costs

In general, the cost of employer-sponsored benefits is regularly estimated to add at least 15% to a company’s total compensation costs. To contain costs, many employers implement some or all of the following strategies:

  • sharing the cost of premiums between the company and employee
  • annual and/or dispensing fee deductibles
  • yearly or lifetime maximums
  • coinsurance—the ratio of coverage shared between the insurer and the insurance company for covered benefits


Butteriss, M. (1999). Help Wanted: The Complete Guide to Human Resources for Canadian Entrepreneurs. Toronto: John Wiley & Sons. pp. 121-127.