Mandatory Contributions

The only benefits an employer is required to provide its employees are contributions to the Canada and/or Quebec Pension Plans, contributions to the Employment Insurance program and, in most provinces, some contribution towards the Medicare program either through the payment of premiums or a payroll tax.

Supplementary Benefits That May Be Offered by Employers

However, it is common for employers to provide additional supplementary benefits to employees. These benefits can be provided by the employer through employer funding or through the purchase of group insurance plans.

There are a number of different plans available. The most commonly provided are:

  1. Extended Health Care
  2. Dental Care
  3. Drug Coverage
  4. Life Insurance
  5. Dependent's Life Insurance
  6. Accidental Death & Dismemberment
  7. Short-term Disability
  8. Long-term Disability
  9. Health Care Savings Account

The terms of the coverage will vary depending on the terms of the policy purchased by the employer.

Employers may require employees to pay all or some of the premiums for this coverage. In the case of disability insurance, the disability benefits are taxable in the hands of the employee unless the employee pays the premium for such coverage.

Employers should ensure that their policies and procedures manual contains the flexibility to change the benefit carrier and the level of benefits and the contribution splitting at any time. A draft benefits policy is attached.

Employers must be careful not to misrepresent the terms of the policies as they may be liable to the employee for any errors they make in incorrectly describing the terms of the plan. It is wise to ensure that any benefits policy provides that if there is a difference between the benefits policy and the terms of the group insurance policy, the terms of the group insurance policy will prevail. It is also prudent to check all communications with employees to ensure that the descriptions of the benefits are accurate.

Benefits Administration

Employers must also ensure that they have proper procedures in place to administer the benefit plans. Employers can be liable to their employees in the event that they fail to enroll an employee properly or submit a claims form on time. It is often wise to have additional employment practices liability insurance coverage to protect an employer in the event that an error is made in the administration of benefit plans.

Benefits and Termination of Employment

When terminating an employee it is customary to offer benefit continuation during a reasonable notice period. In Ontario, employment standards legislation requires that all benefits be continued during the minimum statutory notice period. The Employment Standards Act, 2000 deems employees to be actively employed for the purposes of this coverage.

Thereafter, coverage may not be available depending on the terms of the group insurance plan. Therefore, it is always prudent to check with an insurer before offering any benefits to employees.

Long-term Disability and Termination of Employment

One of the biggest conundrums faced by employers is the provision of long-term disability coverage during a severance period. Most long-term disability policies will not allow for the continuation of the coverage after termination. However, should an employee become disabled during a reasonable notice period the employer could be liable for any disability benefits the employee would have received had they been employed during the reasonable notice period. In order to minimize this risk, employers should consider advising employees at the time of hire if they are terminated they will not receive LTD coverage on termination. The employer may also purchase long-term disability coverage with a conversion privilege that allows the employee to convert the policy to a private policy.