A Complete Guide to Employee Benefits Costs in Canada

Employee benefits are more than just add-ons—they’re key drivers of employee satisfaction, retention, and long-term well-being. From health benefits and retirement savings to flexible work arrangements and mental health support, what an employee benefits plan offers can significantly impact a compensation package.

But how much do employee benefits actually cost in Canada? How can employers build a competitive, cost-effective plan?

This guide breaks down the cost of employee benefits in Canada, including what employers and employees pay, the key drivers of cost, and how small businesses can manage their benefits budget without compromising quality.

What Are Employee Benefits?

Employee benefits are non-wage compensations that employers provide to support their workforce’s health, financial security, and overall well-being. These offerings play a significant role in shaping the employee experience, beyond base salaries and hourly wages. Strong employee benefits packages not only attract top talent but also help reduce turnover, increase engagement, and build a more resilient and loyal team.

Common examples of employee benefits in Canada include:

• Health and Dental Insurance: Covers medical expenses and health insurance coverage not paid for by provincial health care.
  
  
• Retirement Savings Plans: Includes Group RRSPs or pensions, helping employees build long-term financial security.
  
  
• Life and Disability Coverage: Offers peace of mind in the event of illness, injury, or death.
  
  
• Paid Vacation and Statutory Holidays: As required by employment standards, this benefit ensures employees get the break they need without salary deductions.
  
  
• Wellness Programs and Flexible Work Policies: Foster a work-life balance and promote mental health.

While some benefits are legally required under provincial or federal legislation, many others are offered voluntarily by employers. These employer-sponsored benefits are increasingly becoming essential, especially in today’s competitive hiring landscape.

Many job seekers consider the cost of benefits, quality of coverage, and available perks when comparing job offers, sometimes weighing them just as heavily as salary. That’s why providing employee benefits with a thoughtful mix of mandatory and voluntary perks has become the norm today. Businesses remain compliant while positioning themselves as employers of choice in their industry.

How Much Do Employers Pay for Benefits in Canada?

As a general rule of thumb, the cost of employee benefits in Canada ranges from 15% to 30% of an employee’s total compensation package—a significant investment that pays off through improved retention, productivity, and morale.

The exact number depends on several variables, including company size, industry, employee demographics, plan design, and the cost-sharing level between employer and employee. 

How Much Do Benefits Cost per Employee? 

For most Canadian employers, the annual cost of benefits per employee ranges between $3,000 and $7,500, although this can fluctuate depending on the plan complexity. For example:

• A basic group health benefits plan covering dental might cost a small business around $2,500–$4,000 per employee per year.
  
  
• Adding life insurance and short-term disability could increase the cost by $500–$1,000.
  
  
• Including long-term disability, critical illness insurance, wellness programs, or retirement savings plans can further increase total costs.
  

 

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Cost-Sharing and Plan Flexibility

Employers have options when it comes to structuring their employee benefits program. Many share premium costs with employees, commonly on a 50/50 or 80/20 basis. Offering a Health Spending Account (HSA) or Lifestyle Spending Account (LSA) can also provide more flexibility and cost control, as these accounts give employees a fixed annual budget to spend on eligible health and wellness expenses.

For small businesses, managing the cost of benefits is especially important. Many choose pooled insurance plans, which spread risk across multiple small employers, making premiums more predictable and affordable. Others partner with benefits brokers to customize coverage that fits their workforce’s needs while staying within budget.

Ultimately, the best benefits strategy strikes a balance between employee satisfaction and financial sustainability, and begins with understanding your baseline costs.

→ Learn more: Choosing an Employee Benefits Plan for Your Business

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Mandatory Employee Benefits

Some employee benefits in Canada are mandated by law, requiring companies to offer them regardless of their size or industry. Mandatory perks that help employees save money, have a work-life balance, and prepare for future expenses include:

Employment Insurance (EI)

Employment Insurance (EI) provides temporary income support for unemployed individuals, employees on parental leave, or those unable to work due to illness or caregiving responsibilities.

• Contributions: Employers pay 1.4 times the employee’s contribution amount, deducted from payroll.
  
  
• Eligibility: Determined by work hours and regional requirements, managed by Service Canada.

Canada Pension Plan (CPP)

The Canada Pension Plan (CPP) offers retirement, disability, and survivor benefits. Most Canadian employees outside Quebec are covered under the Canada Pension Plan (CPP).

• Contributions: Based on 2025 CPP contribution rates, both employers and employees contribute 5.95% of the employee’s annual salary, up to a yearly maximum.
  
  
• Eligibility: CPP benefits begin at age 60, but full benefits start at age 65.

Paid Vacation and Statutory Holidays 

Under provincial labour laws, Canadian employees are entitled to:

• Minimum Vacation: 2 weeks after 12 months of employment (increasing with tenure)
  
  
• Vacation Pay: Typically 4% of gross earnings, paid during vacation or in regular pay
  
  
• Statutory Holidays: 9–11 per year, depending on the province

Most employees are entitled to paid time off on statutory holidays or 1.5 times their pay if they’re required to work.

Workers' Compensation Insurance

Workers’ compensation insurance is designed to protect both employees and employers in the event of a workplace injury or illness. It provides financial and medical support to injured workers while limiting employers’ legal liability. While not part of a federal mandatory employee benefits program, many provinces, including Ontario, require coverage based on the nature of the business.

Each province and territory has its own compensation board and regulations. For example, in Ontario, this program is managed by the Workplace Safety and Insurance Board (WSIB). Businesses operating in industries classified as higher risk, such as construction, manufacturing, and warehousing, are typically required to register for coverage.

What Does Workers’ Compensation Cover?

• Medical care for work-related injuries and illnesses, including hospital visits, surgeries, medication, and rehabilitation services
  
  
• Wage replacement benefits that provide a percentage of regular income while the employee recovers and is unable to work
  
  
• Return-to-work support, including retraining and accommodations to help employees transition back into their role or a new position if they can no longer perform their previous duties
  
  
• Permanent impairment benefits if the worker sustains lasting damage
  
  
• Survivor benefits, which may be provided to the family in the event of a fatal incident on the job.

How Much Does Workers’ Compensation Insurance Cost?

Premiums vary based on:

• Industry classification (e.g., construction has a higher risk than office-based work)
  
  
• Company size and payroll
  
  
• Past claims history, known as your experience rating
  
  
• Risk level associated with the type of work being performed
  

In Ontario, for example, the WSIB calculates rates annually using a rate framework system that adjusts premiums based on performance and sector-specific risk.

Who Needs to Register?

Not all businesses are required to register. However, if your company falls within a category listed in the Workplace Safety and Insurance Act, you are legally obligated to enroll. Failure to comply can result in:

• Fines and penalties
  
  
• Retroactive premium assessments
  
  
• Investigations or legal action

Many businesses that are not legally required to register choose to do so voluntarily. This ensures their employees are protected, and the business is safeguarded from legal liability in the event of a workplace incident.

Suppose your business is not covered under a provincial workers' compensation plan. In that case, it’s advisable to explore private coverage options or ensure you have sufficient Employment Insurance (EI) coverage as a secondary form of protection.

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Employer-Sponsored Job Benefits

These are benefits that employers choose to offer in addition to government-mandated ones. They can be tailored to support employee well-being, increase retention, and boost morale.

Extended Health, Life, and Disability Insurance

Employers may pay 100% of premiums or cost-share with employees.

Registered Retirement Savings Plan (RRSP) Matching

Group RRSPs enable employees to save for retirement, with employers offering matching contributions. This benefit:

• Supplements CPP income
  
  
• Provides tax-deductible contributions
  
  
• Encourages long-term savings
  

Matching contributions are often capped (e.g., 3–5% of annual salary) to manage costs. Other retirement options may include defined benefit pension plans and deferred profit-sharing plans (DPSPs).

Wellness and Fitness Programs

Modern benefits plans often go beyond healthcare insurance coverage to include wellness-focused initiatives, such as:

• Subsidized gym memberships
  
  
• Employee Assistance Programs (EAPs)
  
  
• On-site fitness classes
  
  
• Health coaching
  
  
• Mental health services coverage
  
  
• Prescription drug coverage
  
  
• Dental benefits

Wellness programs are proven to reduce absenteeism and lower overall healthcare costs. According to Benefits Canada, businesses that implement wellness strategies experience a decrease of up to 72% in healthcare costs over time.

Build an employee benefits plan that grows with your business

Voluntary and Perk-Based Benefits

These flexible perks aren't required or always expected, but they can help set your company apart in a competitive hiring market. Offering employee benefits such as these is especially attractive to younger employees.

Flexible Work Arrangements 

Giving employees control over when and where they work boosts satisfaction and reduces turnover. Examples of flexible benefits include:

• Remote or hybrid work
  
  
• Flexible start and end times
  
  
• Compressed workweeks

With over 30% of workers citing flexibility as a reason for leaving a job, offering this perk can have a major impact on retention.

Educational Assistance and Professional Development

Supporting your team’s career growth can be an attractive benefit in their package:

• Tuition reimbursement
  
  
• Certification support
  
  
• Conference stipends
  
  
• Internal training and leadership programs

Professional development leads to enhanced employee performance and a stronger internal talent pipeline.

Alternate Perks and Discounts

Some employers get creative with their offerings:

• Meal or snack programs
  
  
• Staff retreats or offsites
  
  
• Discounts on tech, travel, or wellness products
  
  
• Monthly commuter or phone subsidies

These perks contribute to a positive workplace culture and can improve employee loyalty at a low cost.

→ Learn more: A Complete Guide to Work Benefits in Canada

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How to Reduce Healthcare Costs for Employers

Offering benefits doesn’t have to break your budget. Here are five ways to control small business health insurance costs and reduce the overall cost of employee benefits:

1. Customize Your Plan: Avoid a One-Size-Fits-All Package: Choose core benefits and allow flexibility through Health Spending Accounts (HSAs) or Lifestyle Spending Accounts (LSAs).
   
   
2. Audit Usage Annually: Review claims data and employee feedback to identify underused benefits or high-cost coverage areas.
   
   
3. Invest in Prevention: Encourage healthy habits with wellness programming. Healthier employees mean fewer claims and lower premiums.
   
   
4. Promote Benefit Literacy: Educate your team on what’s covered, how to submit claims, and how to avoid unnecessary out-of-pocket costs.
   
   
5. Work with a Benefits Broker: A trusted advisor (like KASE Insurance) can negotiate rates, analyze plan performance, and help you find the best balance of cost and value.

Build the Best Employee Benefits Program with KASE Insurance

Employee benefits are a vital part of running a successful business. They protect your team’s health, support their financial future, and help you attract top talent in a competitive market.

At KASE Insurance, we specialize in crafting custom employee benefits packages tailored to businesses of all sizes—from small startups to large corporations. We help you:

• Understand what benefits make sense for your industry and budget
  
  
• Balance employer and employee contributions
  
  
• Reduce healthcare costs while improving satisfaction
  
  
• Navigate changing regulations and cost trends

Whether you're just starting or looking to improve your current plan, our expert employee benefits brokers are here to help you navigate the cost of employee benefits.

Ready to build a benefits program that works for your team—and your bottom line? Contact us today to get started with a free quote.

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Frequently Asked Questions