Employee benefits and benefits packages: What Ontario employers should know

Benefits are an important part of an employee’s compensation package. Some elements of a benefits package are legislated, while others are offered to be competitive. Both can provide peace of mind for employees.

Legislated employee benefits

Legislated benefits are mandatory—all employers in Ontario must provide these benefits to employees. These benefits include:

• Employment Insurance: Both employer and employee contributions are required
• Canada Pension Plan: Both employer and employee contributions are required
• Workplace insurance coverage: The requirements and premiums of Ontario’s Workplace Safety and Insurance Board vary, depending on your industry and work environment

Competitive employee benefits

While it’s important for Ontario employers to offer a competitive benefits package to attract and retain quality employees, a full suite of benefits can be cost-prohibitive for a startup. The costs of employee benefits will usually average about 15% of payroll in a small company, or as high as 30% in a larger one.¹ Each potential benefit should be considered and defined carefully.

Developing an employee benefits package

Before you develop a benefits package, take the time to understand:

1. What matters most to your employees
2. As an employer, what you can afford to spend

Competitive employee benefits commonly include:

• Health insurance (e.g., coverage for medications, physiotherapy, upgraded hospital care)
• Employee assistance programs
• Vision care
• Dental insurance
• Life insurance
• Additional vacation allotments above that required by the Ontario Employment Standards Act
• Paid sick days
• Short-term disability insurance (Tip: Investigate the disability coverage provided under Employment Insurance and Canada Pension Plan to determine if additional coverage is needed)
• Long-term disability insurance (Tip: This should be paid by the employee. It saves the employer money, but, more importantly, the employee will not be taxed on the benefit should they ever need to claim it)
• Group RRSP or pension plans (separate from Canada Pension Plan)
• Education and training
• Flexible work arrangements

Setting up your employee benefits package

Employee benefits packages are becoming increasingly complex. There is more flexibility than ever before. It’s strongly recommended that employers enlist the help of experienced professionals to help them navigate the process of setting up a benefits program. Without leveraging specific expertise, employers often get caught by growing liabilities and steep costs.

Working with a benefits consultant or broker can help tremendously in defining a competitive benefits program, and costs are often little to none, as the consultant will be paid by the insurance companies they work with. A consultant can provide relevant data and expert guidance to help you get the most from your benefits investment. If you can, obtain at least three different proposals to assess the costs and value from different perspectives.

Containing costs of your employee benefits program

When designing the benefits program, employers can use strategies to limit or contain costs in the longer term. These may include:

• Sharing the cost of premiums between the company and employee
• Building deductibles into the coverage
• Considering the level of coverage, or “co-insurance” (e.g., does the employer cover 80% of dental costs, or 90%, or 100%?)
• Capping coverage at certain limits (e.g., $400 for vision care over a set period of time)
• Limiting carry-over of unused sick days