Advantages of Group Benefits Plans


To the Employer:

• Premiums paid by the Employer are tax deductible as a business expense
• With babyboomers retiring in the next 5 – 10 years, there will be a labour shortage; benefits are a way of attracting & retaining valuable employees
• Benefits help meet competition in the labour market, especially when seeking employees who already enjoy group insurance benefits elsewhere
• Benefits foster a healthy workforce and consequently improve employee morale, productivity and efficiency
• Benefits can be provided in lieu of additional monetary compensation
• Benefit plans are easy to install, administer and adjust to changes in the workplace

Benefits and Cash

A 5% pay increase costs a lot more than the raise

If a company decided to give a 5% raise to an employee making $50,000, depending on the province the employer would have to spend up to an additional 16% on payroll taxes, and the employee would lose 42% of that raise to the government.

What are the hidden costs of a pay raise?

  • Canada Pension Plan/Quebec Pension Plan (CPP/QPP)
  • Employment Insurance
  • Workers Compensation
  • Employer Health Tax
  • Other

In addition, the employee has to contribute his or her portion of some of the payroll taxes, such as CPP/QPP and EI.

Employee benefit plans make good financial sense

Instead, if the employer put the extra 5% towards a health and dental benefit plan, all of the additional money spent goes to the plan for the direct benefit of the employee. Provincial sales tax and premium tax are charged on the plan’s premiums, but those taxes are still less than the payroll taxes charged on salary.

Get more value for your compensation dollar with an employee benefit plan.

Group benefit plans are a tax effective way to compensate employees
Health and dental plans allow employers to reward their employees by providing them with a form of compensation that is not taxable in most provinces. Because employees receive the full benefit of every dollar the employer spends, employees can get more out of their benefit plan than they would a pay increase.
Pay increases are impacted before payment by both a variety of employer payroll taxes and by employee income taxes. With a group benefits plan, employer contributions are treated as a tax-deductible business expense and employees receive health and dental benefits tax free.

To the Employee:

  • Employer pays part or all of the cost
  • Adds financial security for the employee’s family
  • Some group life and disability contracts allow conversion to individual/personal contracts without medical evidence
  • No need to use after-tax money to purchase various types of insurance policies
  • Usually doesn’t require medical evidence
  • Insurance is less expensive to obtain through a group plan than in the individual insurance market
  • Access to products that might not be available individually

Benefits and Cash 2

The information in this material is derived from various sources, Benefits by Design, Sanofi Canada Healthcare Survey, Globe and Mail, National Post and Benefits Canada. Material is provided for general information and is subject to change without notice. Every effort has been made to compile this material from reliable sources; however, no warranty can be made as to its accuracy or completeness. Before acting on any of the above, please contact us for benefit, pension and insurance advice based on your corporate or personal circumstances.

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