Employees don’t come cheap

Hiring a full-time employee in Canada is expensive
By Todd Humber
|Canadian HR Reporter|Last Updated: 06/25/2018

Employees are expensive. There is no getting around the fact that, for most organizations, the number one cost on the books is salary and benefits. In regulation-loving Canada, dare we say the burden on employers is getting a tad too heavy — and a recent human rights ruling is only going to increase the load.

Skyrocketing minimum wage, increasing Canada Pension Plan (CPP) and employment insurance (EI) premiums and the ever-popular double-digit increases in benefit costs are all unsavoury ingredients for a healthy bottom line.

Just look at some of the math already facing employers. From 2017 to 2018, the annual maximum CPP employer contribution stayed flat at 4.95 per cent. Nothing to complain about, right?

Well, no. Because as maximum pensionable earnings increase, so too does the contribution in real dollars — rising from $2,564 to $2,593 for employers outside of Quebec. Employers with workers covered by the Quebec Pension Plan (QPP) will see it jump from $2,797 to $2,829.

Employer EI premiums for non-Quebec employees also rose from $1,170 in 2017 to $1,201 this year. Quebec’s maximum rate rose from $912 to $940 — that doesn’t include the separately funded Quebec Parental Insurance Plan, which saw premiums rise from $556 to $567.

Put another way, if you have 500 employees contributing the maximum, then your contributions for those two things alone increased more than $30,000 year-over-year. In Quebec, it’s even higher at $36,000 plus.

Minimum wage has been a popular punching bag in many provinces, as the rush is on to get it to $15 per hour. In Ontario, between 2017 and 2019, the wage is scheduled to jump nearly 32 per cent from $11.40 per hour to $15. It currently sits at $14 per hour —and may very well stay there following the election of a Progressive Conservative government.

In Alberta, the minimum wage is scheduled to jump to $15 per hour in October. That’s a 47 per cent increase since 2015. Trot out all the numbers you want about the relatively small percentage of workers earning minimum wage, but the domino effect it has in driving wages up for all workers can’t be ignored.

The latest fuel to be thrown on the cost fire is coming out of Ontario, as detailed in the page 3 story by Sarah Dobson. That’s because a human rights tribunal has ruled it is discriminatory to cut off benefits for a worker who turns 65.

It is impossible to argue against that decision. You cannot, and should not, discriminate against someone on the basis of age. That battle was fought and won when mandatory retirement was outlawed for most jobs, with a few exceptions that had bona fide occupational requirements.

But remember the reason why governments didn’t mandate benefits coverage at the time? Anneli Legault, a partner at Dentons in Toronto, summed it up perfectly.

“They were so honest, they actually said, when they passed mandatory retirement abolishment, they said they were worried about the financial viability of benefit plans,” she said. “So (employers) were allowed not to give benefits to everyone.”

Well, the exemption is gone but the worry very much remains. I’m concerned about the viability of benefit plans as we know them in an age where Canadians are working longer than ever.

Older employees cost more to insure — the simple fact is they are more likely to have health issues. From prescription drugs to long-term disability, the price tag will be significant and many firms will have no choice but to scale back coverage or put much more of the onus on employees to share the burden.

But the biggest fear on benefits doesn’t rest with older workers. Many employers value the experience and wisdom they bring to the table and will figure it out in the short run. Instead, it’s on the generation about to enter the workforce who may never see a benefits package like their parents and grandparents enjoyed.

We have seen a rise in precarious work — contract after contract handed out rather than adding to dreaded headcount.

We’ve seen an explosion in companies that thrive on the backs of independent contractors — and some creative accounting and stretching, shall we say, to ensure these contractors (who are workers in everything but name) remain independent.

And we haven’t even touched on the obligations on employers when a worker is terminated, from severance to common-law notice periods.

The golden handcuffs that long-term employees wear — the ones who won’t walk out the door without a package — are non-existent for independent contractors. You can pretty much show them the door, for any reason, at no cost whatsoever.

It all goes back to one simple point — hiring a full-time employee in Canada is expensive. Adding headcount isn’t a slam dunk, but good HR practices tell us the benefits still outweigh the costs in most cases.

For HR, it just means that making the business case for investing in solid human resources practices is getting even more difficult.

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