Employee Benefits

Employee benefits are optional, non-wage compensation provided to employees in addition to their normal wages or salaries. These types of benefits may include group insurance (e.g., health, dental, vision, life), disability income protection, retirement benefits, daycare, tuition reimbursement, sick leave, vacation (paid and non-paid), funding of education, as well as flexible and alternative work arrangements.

In this Section:

The benefits of benefits plans

Although expensive, there are many intrinsic benefits to providing your employees with a comprehensive benefit plan. For most employers, it is the ability to find and keep highly qualified staff that is the key driver. With the sector being highly competitive, employers are challenged to become even more creative and responsive in the design, timing and generosity of their benefit plans. The more progressive the organization, the more flexible the structure is in response to today’s challenges: for example, having four different generations of employees working side by side. Employers who continue to provide the more traditional and limited program may find it more difficult to find and keep different types of employees.

Below are a few of the advantages of offering benefits to your employees.

For employers:

  • By providing increased access and flexibility in employee benefits, employers can not only recruit but also retain qualified employees.
  • Providing benefits to employees is seen as managing high-risk coverage at low costs and easing the company's financial burden.
  • Employee benefits have been shown to improve productivity because employees are more effective when they have a measure of security for themselves and their families.
  • Premiums are tax deductible as corporation expenses, which means savings for the organization.

For employees:

  • Employees can experience peace of mind when they know they and their families have benefit coverage, which leads to increased productivity and satisfaction.
  • Employees with personal life and disability insurance can enjoy additional protection, including income replacement in the event of serious illness or disability.
  • Employees can feel a sense of pride in their employer if they are satisfied with the coverage they receive.

The basics: health and dental

Health and dental benefits are considered the foundation of any benefit program design. When considering the root issues of all absenteeism from the workplace, most employers agree that health or dental related illness are cited most often as the cause. While many have not thought of dental coverage as being a key attraction point, a number of medical reports have been published recently that indicate many of our common virus and illnesses are actually related to poor dental health. An organization’s ability to be creative, flexible and generous in providing health and dental coverage can be a key to attracting and retaining top performers as part of the total compensation package.


Even in Canada, where government plans provide approximately 70% of all health care expenses, the remaining gap is still perceived as a major concern for employees and employers. Private health care plans are restricted by legislation to expenses not fully covered by government programs.

Organizational health expense plans are generally permitted in the following areas across Canada:
  • Hospital room charges in excess of the standard rate to cover semi-private or private accommodation
  • Hospital charges for emergency treatment outside Canada
  • Drugs, medication, vaccines and other supplies available only by prescription
  • Professional services of a physician for out-of-country medical expenses
  • Professional services for private-duty nursing
  • Charges for special medical appliances such as crutches, artificial limbs or wheelchairs
  • Non-emergency ambulance services
  • Dental treatments not requiring hospitalization
  • Professional services provided by licensed paramedicals, such as psychologists, massage therapists, speech therapists, podiatrists, physiotherapists, chiropractors, osteopaths, or naturopaths
  • Vision care expenses including frames and lenses, contact lenses, fitting and remedial treatment and laser eye correction surgery (Employers struggle over vision care, since it could raise the employer’s costs by between 20% and 40% because so many people require this care.)

It is common practice to include many of the above items under a single extended health care plan. Most benefit carriers will tailor a plan to include only those features and coverages desired. Certain items, however, are often restricted or sold in combination with other coverages to contain overall plan costs or to subsidize heavily utilized services.

Extended health care plan options should be selected based on the organization’s overall compensation objectives and employee needs. For small organizations, the range of coverage options may be limited if the plans are financed on a fully insured basis. These plans offer restricted flexibility to limit the occurrence of high-risk claims. These pre-packaged plans are available to small organizations through affiliation with umbrella organizations such as chambers of commerce, boards of trade, trade associations and professional organizations. For larger organizations, the range of options is mostly limited by cost considerations.


Dental plan design is the art of finding a delicate balance between understanding what the foundational priorities are, and allocating sufficient funds to ensure that the coverage is perceived as being sufficient and appropriate.

Although the type of dental work can differ from person to person, some common elements have been found:
  • Most employees, their spouses and children, require basic preventive dental care and repair. Therefore, most employers elect to design the plan in such a way as to minimize the cost of basic coverage to employees.
  • Since major restorative care and orthodontics tend to be more elective in nature and less common in need across the employee group than basic services, most plans do not provide equal coverage in all areas. For example, the plan might pay 100% of basic and 50% of the other two categories. It is also common to find deductibles, co-insurance and benefit maximums for the non-basic services to free up more funds for the necessary preventive ones.
  • High employee deductibles and co-insurance percentages can help to limit plan disbursements because employees will be paying more of the total costs. The potential problem is that these high employee costs may, in effect, force postponement of needed dental work until the repair bill is even higher. Paying 100% of basic preventive care from day one is the overwhelming choice of employers.
  • Having the dental plan require a “pre-treatment” evaluation for certain expenses helps control cost levels by ensuring that the plan only pays for reasonable treatments. It also avoids any misunderstanding by the employee as to what services are covered and how much she or he is required to pay. It is always preferable to ensure the employee knows what the plan will pay for and what exact dollar amount is their responsibility.
  • A commonly asked question of benefit administrators is why the dental plan is not optional but compulsory. If the plan is optional, only those employees who are likely to need dental care will sign up. They will almost always use services that exceed their contributions, deductibles and co-insurance. Those who feel that the benefits will not cover their costs will decline. Because of this “adverse selection”, cost per employee will be so high that employers would not be perceived as competitive.

Life and AD and D

Most employers design their plans with a provision to protect employees and/or their families in the event of Accidental Death or Dismemberment (AD and D). Employers often provide basic coverage as a factor of the employee’s salary (e.g.,  two times the employee’s salary in the event of death or total paralysis) with additional coverage available should the employee chose to purchase it. Each employee benefit plan should include a chart that identifies what coverage is available and the associated cost.

Long-term disability

Long-term disability is an income-replacement provision. This is one provision that cannot be purchased through a spousal plan. Employees are asked to pay the total cost of the premiums in order to receive a tax-free payment should they be unable to work. Long-term disability coverage is applied for when an employee is unable to complete a certain percentage of the essential duties of their role due to illness on an ongoing basis. The structure of each plan can differ slightly, so understanding what you are trying to achieve with this program, including elimination periods and termination options, is critical at the outset.

Employee assistance plans (EAPs)

An EAP, or employee assistance program, is a confidential, short-term, counselling service for employees with personal problems that affect their work performance. Studies have shown that providing confidential qualified counselling and support can reduce the stress and conflict felt by the employee, which in turn can reduce absenteeism and ultimately turnover.

One-on-one sessions are offered and online information, coaching and support services are also available. Employees turn to the EAP for help with a variety of issues, including the following:
  • Dependent care issues, such as searching for child care information, identifying services for special needs children, obtaining advice on the college application process, or arranging for residential care for an elder.
  • Dealing with the stress of a major life change (even a positive one), such as having or adopting a child, getting married, moving or buying a home, or getting a promotion.
  • Serious personal or professional concerns, such as general anxiety, depression, substance abuse, burnout, coping with illness, the loss of a loved one, relationship challenges or resolving interpersonal conflicts.

Different types of programs are available to employers to provide employee assistance. Employers can establish their own in-house programs, join a consortium of organizations to provide external services or refer employees to public and private providers of this service. The range of costs across these options can vary widely. Organizations must then decide the most advantageous approach to achieve the level of improved wellness among their employees.

In selecting the best EAP provider, several factors need to be considered:
  • How accessible and convenient are the services to be provided? Location of offices and confidentially concerns are important.
  • How is the quality of services to be measured?
  • How is client satisfaction to be assessed?
  • How are service costs to be determined and will there be limits placed on the frequency and extent of services provided? What will the charges be per hour of service per individual?

Before choosing an EAP provider, these questions need to be answered and the answers reflected in any service proposal or contract.

Retirement benefits

A retirement plan or a pension is an arrangement by an employer to provide employees with an income when they are no longer earning a regular income from working. Retirement plans may be set up by in a variety of ways but typically will have a form of a guaranteed payment. Often retirement plans require both the employer and employee to contribute money into a fund while employed so that the employees will receive benefits upon retirement. Pension plans are considered a form of delayed income.

Pension plans

Pension plans are usually classified as either defined benefit or defined contribution according to how the payments are determined.

  • A defined benefit plan guarantees a predictable monthly payment at retirement, calculated by using an established formula with some combination of the employee’s salary, years of service and/or age.
  • A defined contribution plan will provide a payment/payout at retirement that will be determined by the amount of money contributed during the life of the plan and the performance of the stock or investments used.

The Multi-Sector Pension Plan is targeting Canadian Union of Public Employees (CUPE) and Service Employees International Union (SEIU) bargaining units in smaller workplaces that currently do not have a defined benefit pension plan in place.

Registered Retirement Savings Plans

A Registered Retirement Savings Plan or RRSP is an account that provides tax benefits for saving for retirement yet is not necessarily based on the employer/employee relationship.

RRSPs can provide ways to save money for retirement and defer and reduce taxes because:
  • Contributions to RRSPs, up to established limits, may be deducted from income in pre-taxed dollars.
  • Income earned within the account is not taxed until money is withdrawn from the plan.
RRSP accounts can be set up as:
  • Individual RRSP - An Individual RRSP is associated with only a single individual; only they contribute money to their RRSP.
  • Spousal RRSP - The spouse of the contributor is actually the account holder. A spousal RRSP is a means of splitting income in retirement.
  • Group RRSP - An employer can arrange for employees to make contributions through a schedule of regular payroll deductions. In many organizations, RRSP contributions can be based on a “matching” program. This means that the employer will put in a certain percentage or dollar amount based on the contributions the employee makes.
Phased Retirement

Today’s workplace is challenged by having different generations working side by side. For most employers, designing a compensation and benefit structure that address the unique needs of each demographic group of employees is a complex task. Added to that is the shift in pension structures over the past few years. Some nonprofit organizations provide their employees with a pension fund; however most tend to offer only contributions to an RRSP. This leads to an increasing number of employees not feeling able to retire.

It is important that organizations understand the details of their pension plan – whether it is a defined benefit or contribution plan, or simply an RRSP program – before considering design changes. For those not hindered by a design change, one option that is gaining in popularity, especially in this sector, is providing a phased retirement program for older skilled employees.

For employees:

Components of the phased program are allowing employees who might be considering retiring to delay their departure date, and continue to earn a partial income that reduces the burden on their pension income. They continue to receive benefit coverage and are able to acclimate gradually by continuing to reduce their hours until they are prepared to leave.

For employers:

Employers are able to develop a timely and effective succession plan without losing critical skills or intellectual capital. Organizations benefit by being able to tap into the most experienced staff at a reduced salary, while transitioning to a new team or organizational design.


Employees need to understand the impact continuing to work may have on pension or benefit programs; also to be considered is the timing of starting your phased approach. If an employee starts too soon, she or he might not have accumulated enough to compensate for the reduced salary.

Employers need to be sure that the phased retirement program is structured in a way that will not diminish the work of the organization or the financial position of the employee.

Indirect compensation

Indirect compensation will look different in every organization. Ultimately it is the way in which you choose to define the culture of your organization and your total compensation rewards program that will differentiate it. Of course, it is important to ensure it aligns with organizational strategic objectives. Recent studies all indicate that in today’s changing work environment it is flexibility and creativity that draws and keeps the highly skilled employee.

Benefit perspective
From a benefit perspective, being creative and considering ways to improve the access or quality of your benefits could look like:
  • Allowing employees to access their benefit as of their hire date
  • Being able to accumulate sick days to bridge to disability coverage
  • Being able to use some sick days as “personal health days” to allow employees to have a break without using all their holidays or pretending to be sick
  • Receiving your birthday off with pay
  • Eliminating the probationary period language from contracts/offer letters
  • Seeking insurance providers with vision care benefits at reasonable costs
  • Allowing for some increased flexibility in personalizing benefit options (e.g., health spending accounts, vision care versus dental, and more paramedical coverage)

Although these options have a cost associated with them, it is significantly less than the benefit an organization can reap in return. If your insurance provider does not allow you the freedom to make some adjustments in your plan, then it might be time to research what else is available.

Other perspectives
Many articles have been written highlighting the keys to creating the best organization and to finding and keeping the best employees. In recent studies, the following were identified as key factors:


Paying employees fairly against both the market conditions as well as ensuring internal equity was still the number one factor considered. Providing clear information on the organization’s compensation structure and consistent processes were critical to an employee’s sense of commitment.

Professional development

For many people, especially the younger generations, the ability to develop both personally and professionally was highly valued and a key consideration when deciding where to work.

  • Access to training and development on the job and through courses or conferences were listed as important in a study done by the Conference Board of Canada.
  • Another variation of this was receiving reimbursement for courses taken on the employee’s own time – most commonly reimbursed were courses that aligned with a professional designation in the employee’s current role.


Employees who were surveyed and asked what kept them in their current role indicated that having a culture that recognized the importance of connecting performance to rewards were key to their satisfaction.

Performance management was one component that influenced the culture. Having clearly defined expectations, being able to identify goals to work towards and having their evaluation align with those agreed-to goals, contributed to higher satisfaction levels.

Receiving effective and realistic feedback, both positive and constructive, increased a continuous learning environment and increased commitment to the organization because performance, both good and bad, was recognized.

Succession planning when operating within an organization brings a sense of purpose and sustainability to employees. Those who had been identified for a succession plan consistently reported confidence in the future of the organization and their role in its future. Organizations should consider ways to develop younger staff with great potential by identifying them as potential successors to long-term employees. The younger employees win by learning new and critical skills while feeling rewarded for their hard work to date. The more senior employees feel rewarded for years of service and identified as key contributors. The organization wins by ensuring that intellectual capital is not lost, but transitioned from one employee to another.

Trust demonstrated as part of the culture of an organization is highly valued by all generations of employees. In Steven Covey’s book, Moving at the Speed of Trust, leaders are challenged to evaluate if their organization’s culture is one of trust or mistrust. Employees who feel trusted and respected will strive harder to maintain that trust and are less likely to do something that will result in a loss of trust.

Workplace flexibility

Alternative work arrangements are effective ways to negotiate an arrangement that meets the needs of the organization while also providing employees with what they need to balance their home and work environments. Listed below are just some of the ideas that could be explored. Some employers, particularly small ones, may have limited opportunity to offer staff alternative work arrangements, but that does not mean that opportunities should not be explored.

Finding out what your organization would value can start this process. The key is to ensure that any alternative arrangements considered do not hinder the organization’s ability to complete core work in the time and manner required to maintain sustainability.

Clear expectations on both the organization and the employee’s part about the terms and conditions of the alternative work arrangement can prevent ineffective or damaging results.

Compressed work week

An employee works her or his full number of hours in fewer days.

  • Example: Core hours are 40 hours per week. The employee works four 10-hour days instead of five 8-hour days.

Job sharing

Two qualified employees share the duties and tasks of one position.

  • Both could work 2.5 days or alternative between three days one week and two the next.
  • The advantage of job sharing is having two people who both know the role. The downside can be having a communication gap between individuals performing the role.
  • Consider having an employee who is contemplating retirement job share with a more junior employee with high potential to enable the transition knowledge, skills and commitment.
  • Many people today are looking for meaningful work, but on a part-time basis. A desire to balance work and life priorities has increased exponentially over the past decade, and employers who recognize the contribution part-time employees can make are leading their organizations forward.
  • Many employees are looking for opportunities to balance academic pursuits with employment opportunities.
  • Structuring a role for a person in the final stages of her or his education could result in an increased pool of potential employees, and employees who will be loyal to an organization that provided them with practical experience and the ability to create a flexible schedule.

Regardless of whether you are developing an alternative work arrangement or increasing the flexibility of your benefit program, it is important to understand what motivates employees and what culture you are building in your organization. The better able you are to align the two together, the more success you will have.