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Insights & advice

How much do benefits cost employers?

Dec. 2021 – 15 min read

Key takeaways

  • While the average annual premium is about 15% of payroll for a smaller business or up to 30% of payroll for large companies, there are small business options for as low as 1% to 5% of payroll.

  • The reasons to offer a benefits plan include employee retention, employee wellness and morale, and some potential tax advantages for employers

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The average cost of employee benefits in Canada

Because Canadian health and dental plans vary, it’s difficult to know an average cost. According to MaRSOpens a new website in a new window - Opens in a new window , the average annual premium works out to about 15% of payroll for a smaller businesses or up to 30% of payroll for large companies. 

However, there are benefits plans that cater to small businesses allowing them to offer a plan for as low as 1 to 5 % of payroll.

What percentage of benefits do employees pay?

Employers (plan sponsors) must pay at least 25% of the cost of the plan, which means employees usually pay up to 75% of the cost of benefits.

What types of benefits should you offer?

  • Health insurance (covers things like physiotherapy, chiropractic, etc.)
  • Drug
  • Vision
  • Dental
  • Out-of-country insurance
  • Life insurance
  • Accidental death and dismemberment (AD&D) insurance
  • Critical illness insurance
  • Disability insurance

The benefits of benefits

  • Attract and retain employees – Today, most employees expect, and value,  benefits. In fact, according to the 2020 Sanofi Canada Healthcare survey, 86% of plan members  agree their health benefits plan is an important factor when deciding on a job offer. That’s why a benefits plan helps smaller employers compete with larger ones.

  • Healthier employees – Benefits help keep your employees healthier by making health care costs easier to afford, which can lead to fewer sick days.

  • Morale boost – Knowing you care about their well-being builds loyalty and appreciation.

  • Tax advantages – The cost of many employee benefits can mean a tax deduction for the employer.

  • A foundation for success – Offering employee benefits sets the stage for you to succeed and grow by attracting, hiring and keeping good employees. According to the 2020 Sanofi Canada Healthcare survey, 71% said their health benefits plan is a strong incentive for them to stay with their employer.

When should you consider getting health benefits for employees?

There are benefits plans available for companies as small as 2 employees.

What’s next?

Now that you understand more about how much benefits cost, you may want to meet with an advisor to:

  • Learn more about how adding an employee benefits plan could help keep your business successful

  • Get a quote on a benefit plan for your employees

Contact us to learn how our benefits and savings solutions can help your small business

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This information is general in nature and is intended for informational purposes only. For specific situations you should consult the appropriate legal, accounting or tax advisor.