No, employers in Ontario do not have to provide benefits to employees. Rather, all Ontario employers must contribute to and deduct monies for certain statutory benefits (e.g. EI and CPP) for all their employees. Otherwise, Ontario employers have a choice on all other kinds of benefits on whether to provide them or not.
Benefits: Summary in Ontario
There are two kinds of benefits in Ontario: (1) Statutory Benefits and (2) Competitive Benefits. As discussed above, first, employers do not provide Statutory Benefits, but they must contribute to them. Second, Competitive Benefits are entirely optional. No employer in Ontario is required to provide Competitive Benefits, and an employer is free to give one employee any Competitive Benefit but not to another employee even in the same position unless it is for discriminatory reasons.
The main Statutory Benefits in Canada are the Ontario Health Insurance Plan (“OHIP”), the Canada Pension Plan (“CPP”) and Employment Insurance (“EI”).
OHIP is Ontario’s universal healthcare, and it is provided to everyone, subject to eligibility requirements for non-citizens. Employers do not provide OHIP, and employers do not contribute to OHIP premiums. The Government of Ontario provides OHIP directly to everyone regardless of employment status, and it is funded by general tax revenue, not by employer/employee contributions. To be clear, employers do not, and are not required to provide or contribute to OHIP.
However, employers do have to contribute to CPP and EI on behalf of employees.
Employers and employees split the cost of CPP and EI.
All Ontario employers are required by law to deduct CPP contributions and EI premiums from most amounts they pay to their employees on their paycheck. Employers must remit these amounts to the Canada Revenue Agency (“CRA”) along with their share of CPP contributions and EI premiums.
In addition, select employers must contribute to Workplace Safety and Insurance Board (WSIB) premiums in certain industries and occupations.
Thus, in summary, the only thing employers in Ontario must do regarding benefits, by law, generally, is to deduct and contribute monies for the payment of an employee’s CPP and EI.
Competitive Benefits are, again, optional. However, many employers in Ontario provide them to stay competitive in the marketplace.
Because Competitive Benefits are optional, no law legislates an employer to have to pay for all the cost of Competitive Benefits. To that end, an employer is free to ask an employee to contribute to the cost of benefits or lose it. In my experience, dealing with the severance packages of many employees over the years, the average annual cost of Competitive Benefits is between 10 – 30% of an employee’s annual salary, and employers usually pay around 75% of that while the employee pays the balance. Also, anecdotally, in my experience, few small employers provide Competitive Benefits like health and disability insurance, while most large employers do.
In many cases, Competitive Benefits are taxed as income, and they can even be subject to CPP and EI deductions. Employers should consult the Federal Government’s T4130 Employers’ Guide – Taxable Benefits and Allowances to determine if the benefits they provide are taxable, and, if so, deduct those monies from employees’ paychecks.
The most common Competitive Benefit is group health insurance plans. This is supplementary health insurance over and above OHIP for such things as prescription drugs, dental care, vision care and physiotherapy.
The next most common Competitive Benefit is life, disability, accidental death, and other wellness insurance packaged into one plan.
The next most common Competitive Benefits are retirement savings and retirement benefit plans.
Lastly, some employers offer fringe benefits ranging from corporate discounts to golf clubs. Still, the list of potential fringe benefits is endless.
The Law of Benefits and Termination
Although no employer is required to provide benefits, if they do provide benefits, they must continue to provide those benefits post-termination for at least as long as the statutory minimum notice period. However, some employment contracts may contemplate benefits continuation longer than the statutory minimum notice period.
Once an employee is provided with a benefit, it essentially becomes a term of their contract, and any change in that benefit could trigger a breach of that contract, amounting to a constructive dismissal if the changes are drastic.
Conclusion: Do employers have to provide benefits in Ontario?
Employers must contribute to their employees’ Statutory Benefits like CPP and EI. However, employers do not have to provide Competitive Benefits like disability insurance. In other words, Statutory Benefits (contributions) are not optional, while providing Competitive benefits is optional.
Nevertheless, once an employee has been provided with an optional Competitive Benefit, the employer must maintain that benefit or provide a specific amount of notice to change or remove the benefit.
Jeff is a lawyer in Toronto who works for a technology startup. Jeff is a frequent lecturer on employment law and is the author of an employment law textbook and various trade journal articles. Jeff is interested in Canadian business, technology and law, and this blog is his platform to share his views and tips in those areas.