Happy and satisfied employees make your business thrive and lead to even better profits. However, the specific benefits for employees in Canada might not all be familiar to you yet. By using our PEO and EOR service we can provide compliant labor contracts for employees in Canada including local benefits.
When expanding your company’s presence in a new country, you need to ensure compliance both in your employment contracts and benefit guarantees. These involve social security contributions, sick leave, health insurance, and unemployment, to name a few. In Canada, benefits are guaranteed by national legislation as well as collective agreements with trade unions or workers’ councils.
Our guide will explain what benefits and employee compensation are guaranteed and what can be modified, for any employer who wishes to expand their business into Canada.
What Employee Benefits are there in Canada?
A wide-ranging framework of federal laws, plus those set by provinces and territories, cover employee entitlements and benefits in Canada. Minimum requirements of government - mandated employee benefits include participation in Employment Insurance (EI), the Canada Pension Plan (CPP) or the Québec Pension Plan (QPP), Worker's Compensation Act (WC) and the Workplace Safety and Insurance Board (WSIB).
Basic guaranteed benefits include:
- National minimum wage – although actual minimums vary with the 10 provinces and three territories setting their own minimum rates of pay
- Holiday entitlements
- Working hours
- Termination, dismissal, notice periods and severance regulations
- Sick leave
- Maternity and parental allowances
Again, many jurisdictions have their own versions of laws, while case and common law can also apply where issues are not covered by mandatory regulations.
The responsibilities of foreign companies reach further than simply complying with tax, social security, and payroll regulations, however. Specific regulations apply to benefits and entitlements with the risk of fines and sanctions for non-compliance.
It is vital that employers have a firm grasp of what is guaranteed for their employees, as this will affect the employer-employee relationship.
This is where Bradford Jacobs steps in to point you in the right direction, drawing on over 20 years’ experience as a Professional Employer Organization (PEO) and Employer of Record (EOR).
What Compensation Laws exist in Canada?
A variety of workers’ compensation programs in Canada safeguard employees from the financial implications of injuries or occupational illnesses suffered at work. Support programs are generally administered by provincial and territorial authorities. The Labor Program covers claims for federal employees working in Canada or abroad.
Companies that are incorporated or have employees must register with their province or territory Workers’ Compensation Board. Mandatory registration may also depend on the number of employees.
Both the labor rights of employees and the responsibilities of employers fall under the Canada Labor Code. The rights of foreign workers are also protected.
It is still vital for employers to fulfil responsibilities to employees over benefits, compensation and minimum requirements that are governed by law, either federally or at the provincial and territorial level and in whichever sector, public or private. Do not take the risk of ignoring them. Compensation, entitlements, and benefits include:
- National Minimum Wage: On December 29, 2021, Canada introduced a new Federal Minimum Wage affecting all private sector federally-regulated employees of CAD 15 (US$11.92), regardless which province or territory they work in. This is the lowest hourly rate which can be paid, although if the province mandates for more than CAD 15, the higher rate applies.
For those workers not covered as federally-regulated private sector employees, the minimum wage will still be set according to which of the 10 provinces or three territories they work. For example, as of October 2021, rates included Alberta CAD 15 (US$11.92), Newfoundland and Labrador CAD 12.50 (US$9.93), Northwest Territories CAD 13.46 (US$10.69) and Nunavut CAD 16.00 (US$12.71).
- Sick Leave: Federal Employment Insurance (EI) sickness benefits provide up to 15 weeks’ benefit at 55% of salary to a maximum of CAD 595 (US$472). A medical certificate is required to prove inability to work due illness, injury or any other designated condition. Arrangements can differ between Canada’s different jurisdictions.
- Working Hours and Breaks: Standard hours in a federally-regulated industry are eight per day in 24 consecutive hours, totaling 40 a week, stretching from midnight Saturday till midnight the following Saturday.
Employees are entitled to one full day of rest, usually Sunday. Except in certain circumstances, the maximum working hours should not exceed 48 in a week. Employees are entitled to one 30-minute break every five working hours.
- Overtime: Hours worked over the standard week are considered overtime and reimbursed at 1.5 times the normal hourly rate. Managers, executives and professions such as doctors, lawyers, dentists, architects and engineers are precluded from overtime.
- Paid Vacations: Federally-regulated employees receive two weeks’ paid vacation for each completed ‘year of employment’ up to four years, increasing to three weeks after five years with the same employer and four weeks after 10 years.
The qualifying ‘year of employment’ begins on the date employees begin work or a 12-month period decided by the employer within parameters of the Canada Labor Standards Regulations. Arrangements can differ between Canada’s 10 provinces and three territories.
- Maternity Benefits: These are federally-administered for all jurisdictions from Employment Insurance (EI) except for Québec. Benefits depend on the type of benefit chosen and the pre-tax earnings in the previous 52 weeks or since the last claim, whichever is shorter.
The benefit is 55% of average insurable weekly pay up to a maximum of CAD 595 (US$478) in 2021. Québec employs an independent Parental Insurance Plan (QPIP), with rates assessed according to which plan is chosen. Québec is the only province that identifies paternity leave as a separate benefit.
- Parental Leave: Job-protected entitlements vary between regulations for federally-regulated private sectors and those of the 10 provinces and three territories.
Typically, parental leave is for 35 weeks from when the baby is born until the baby is one year old.
Parents can choose between standard benefits at 55% of average weekly insurable earnings to a maximum of CAD 595 (US$480), or extended benefits up to a maximum of 61 weeks, at 33% of average insurable weekly earnings capped at CAD 357 (US$286), plus family supplement if the parents are entitled
- Notice Periods, Termination and Severance: An employer must provide at least two weeks’ written notice of their intention to terminate employment. In lieu of written notice, the employer must pay two weeks’ wages and give severance pay regardless of the length of service or the company’s size.
Written notice or pay in lieu does not apply in certain circumstances - if the employee has not completed three months’ continuous service, is being dismissed for just cause or the contract specifies an end date for employment.
An employee is not legally required to give notice, but contracts usually include a notice period clause for both employer and employee. Also each province/territory has its own rules and regulations.
Social Security in Canada
Canada’s social security and insurance programs cover topics such as health, education, and unemployment as well as family and child assistance and support for the disabled.
All Canadian employers (and employees) must pay into the Employment Insurance (EI) fund, which provides income for workers who lose their jobs, and into the Canada Pension Plan (CPP). Québec has its own pension plan, the QPP.
Employers’ percentage EI contributions of the employees’ salaries are 2.212% to a maximum of CAD 1,245.36 (US$989) in 2021 and CAD 1,333.84 (US$1,058) for 2022. Employers also pay 5.25% into the CPP fund with maximum pension contributions capped at CAD 55,900 (US$44,406).
Employees contribute 1.58% of their salary into the EI up to a maximum salary of CAD 56,300 (US$45,195). Employees contribute 5.25% into the CPP fund.
Statutory Employer Costs in Canada
Employer Payroll Taxes
Social Insurance Taxes
- Employment Insurance (EI): Employer contributes 2.212%
- Canada Pension Plan (CPP): Employer contributes 5.25%
Corporate Income Tax (CIT)
The federal rate is 15%, but provinces also apply corporation taxes. These range from 8% in Alberta up to 14% in New Brunswick, 15% in Newfoundland & Labrador and 16% for Prince Edward Island.
Under the small business deduction scheme, Canadian-controlled private corporations have reduced rates of CIT up to a limit of CAD 500,000 (US$405,050) on ‘active business income’, but this concession reduces when taxable income reaches CAD 10,000,000 (US$8,100,120) and is removed at CAD 15,000,000 (US$12,150,176).
National Minimum Wage
On December 29, 2021, Canada introduced a new Federal Minimum Wage affecting all private sector federally regulated employees of CAD 15 (US$11.92), regardless which province or territory they work in.
This is the lowest hourly rate which can be paid, although if the province mandates for more than CAD 15, the higher rate applies. For those workers not covered as federally regulated private sector employees, the minimum wage will still be set according to which of the 10 provinces or three territories they work.
For example, as of October 2021, rates included Alberta CAD 15 (US$11.92), Newfoundland and Labrador CAD 12.50 (US$9.93), Northwest Territories CAD 13.46 (US$10.69) and Nunavut CAD 16.00 (US$12.71)
What Benefits are guaranteed in Canada?
Holiday entitlement: The Canada Labor Code allows for two weeks for every completed 12 months from the start of employment. This increases to three weeks after five years and four weeks after 10 years. Individual provinces and territories can apply their own allowances.
Working hours: The Labor Code stipulates 40 hours a week. Working hours, with a maximum of 48 in a week, can be averaged over a period of time.
Sick leave: Federal Employment Insurance (EI) sickness benefits provides up to 15 weeks’ benefit at 55% of salary to a maximum of CAD 595 (US$472).
Maternity leave: Employment Insurance (EI) funds up to 55% of earnings to a maximum of CAD595, (US$472) with different allowances, restrictions and timescales applying to maternity and parental benefits.
What Restrictions exist for Benefits and Compensation in Canada?
Unemployment Benefit: To qualify for unemployment benefit the employee must have lost their job through no fault of their own, have been without pay for seven consecutive days in the previous 52 weeks, have worked the required insurable employment hours in the previous 52 weeks or since the start of a previous claim under Employment Insurance (EI).
Since January 1, 2021, CAD 56,300 (US$45,600) annually and CAD595 (US$478) per week are the maximum insurable amounts. Generally, EI benefits are calculated at 55% of weekly earnings up to the maximum amounts.
Health Insurance and other Benefits in Canada
All Canadians are covered by the healthcare system, which is funded by tax revenues covering necessary medical and doctors’ services without having to pay at the point of service.
The Canada Pension Plan (CPP) is a monthly, taxable benefit that replaces part of employees’ income when they retire. Qualifiers receive the CPP retirement pension for the rest of their life.
The CPP is financed through mandatory contributions from employees, employers and self-employed, and through the revenue earned on CPP investments. Workers contribute to the Plan from age 18. Employees contribute at a rate of 5.25%, and employers match that with equal contributions
Other benefits at federal, provincial, and territorial cover such as minimum wages, maternity and parental leave, sick leave, paid vacations, overtime and more.
Benefit from our advice!
Legally protected compensation and benefits are an essential factor in ensuring contracts comply with Canada’s various labor regulations at federal, provincial, and territorial level. Bradford Jacobs ensures compliance with these crucial requirements to avoid delays in becoming operational. Contact us today for more information.