By Linda Keller
While the U.S. and Canada share significant common ground when it comes to business markets, businesses looking to test the greenness of the grass north or south of the border should keep in mind that there are differences between us, too.
Among the biggest can be found in the workplace, involving employee benefits and protections. Our different approaches can complicate a cross-border expansion and also add to costs if you’re not prepared. Here’s what to be aware of if your business is considering such a move.
Healthcare benefits – care for all or complications of ACA (and more)
U.S. employers in Canada will deal with a universal health system that provides nearly-free coverage for medically necessary hospital and physician services. The system is characterized by fairly simple processes (no co-pay, no complex bills), low administrative costs and a fraction of the government compliance requirements that are part and parcel of the U.S. system. But employers are still expected to step up with supplemental plans to augment the system as prescriptions and dental and vision insurance aren’t covered.
Canadian employers will find health benefits a bigger challenge in the U.S., especially since the Affordable Care Act’s (ACA) reporting requirements alone create untold administrative complexities. Overall, the healthcare environment is in a state of flux, with developments like telemedicine and urgent care centers playing a role in costs and helping to shape group benefits packages. Your best bet is to be guided by what your workers (according to demographics) will prize: Choice in plans and levels of coverage, a robust network of service providers, options on deductibles and manageable premiums.
Retirement – varying levels of employer support required
When it comes to retirement, U.S employers will find a Canadian workforce that’s as worried as anyone else – and maybe more so – about their readiness. Over 93% of Canadians consider finances a serious impediment, one study found. This despite the fact that, as with healthcare, the government sponsors a universal pension plan requiring both employee and employer contributions. That, however, only pays for 40% of their retirement, with 27% from employers and 33% from employees themselves. The onus is on employers to establish private pension plans. Options include a group retirement plan, where employers can match up to 5% of employee contributions. Such contributions are taxable income to the employee.
Canadian businesses heading south will find an environment with no universal retirement plan and a workforce with insufficient retirement savings. If your organization employs fewer than 100 employees on the U.S. side, new rules on pooled plans and tax incentives (among other changes) under the pending SECURE Act may make it more attractive to offer a retirement plan. That would put you in a competitive position as only 42% of small U.S. businesses currently do. As with healthcare, however, a higher level of regulatory compliance is involved, so a sharp eye to processes like payroll withholding practices and plan administration issues will be key to passing government audits and avoiding fines.
Employment versus unemployment
U.S. employers used to the unemployment system in the States will find the Canadian approach to employment insurance (EI) similar but not exactly the same. EI in Canada, for example, is intended as more than just a benefit for those who have lost their jobs. It also provides funds to those who are sick, on family medical or maternity or parental leave. Employers and employees pay into the fund and the benefits are taxable.
In the U.S., federal and state unemployment programs work together to supply benefits to qualified employees when they are involuntarily unemployed. Canadian employers will face a system that they fund based on formulas related to taxable wages paid. Unlike Canada’s program, unemployment does not replace the wages of those not working due to family leave. Like Canada’s, the benefits are taxable. In the U.S., many states address sick leave by mandating disability programs, and many employers will also offer both short- and long-term disability plans
Parental leave and other workplace considerations
U.S. employers also will encounter a benign environment in terms of leaves and vacations in Canada. Government-mandated leaves (and jobs to return to) for new parents extend to 52 weeks for mothers, depending on the length of their employment and the hours they’ve accumulated. Their pay is also guaranteed under its Employment Insurance program (above). Other workplace benefits are set by the provinces – and that includes vacation time and annual leave entitlements, which can vary widely. Alberta, for example, mandates two weeks after the first year and three weeks after five. But in Newfoundland and Labrador, it’s two weeks for the first eight years and three weeks thereafter.
Canadian employers will see a different environment south of the border. The Family and Medical Leave Act does guarantee jobs and protects benefits under certain eligibility terms and for various needs, from childbirth to adoption to a qualifying serious health condition. Leave is unpaid. And on matters like vacations and sabbaticals, it’s all at the employer’s discretion as, for that matter, is having a job at all.
HUB International has the employee benefits and compliance experts who can help your organization’s competitive positioning.