A full 90% of employers firmly believe that part of their job is to play an important role in providing retirement benefits for their workforce. That, in essence, is what pension plans are all about. This is a specific type of plan that allows an employer (or some other sponsor) to make contributions to an employee's future retirement savings using a formula that is usually based on their earnings history, how long they've been with a company, their age, and other important factors. Each country has its own unique approach to pension plans, and Canada’s retirement and pension plans.
Overview of Canada's Retirement and Pension Plans
In Canada, workers between the ages of 18 and 65 must contribute to a pension plan unless they have exempt status. Across the country, these plans offer workers a defined monthly payment during their retirement years. Benefits first become available in part at age 60, and full benefits kick in at age 65 or 70 with a permanent increase thereafter. In the event of the unfortunate death of said employee, those benefits (must to may) be paid to their spouse or other surviving domestic
In 2019, Canada pension plan rates are 5.1% for employees and employers. Maximum annual pensionable earnings are currently capped at $57,400. To help employees better determine if earnings are pensionable, the Canadian government has put together a number of helpful charts. They can be used to determine whether or not employers should deduct not only CPP contributions, but also employment insurance premiums as well as income tax on the special payments made to their workforce.
Quebec's Pension Plan
Quebec holds the distinction of being the only province in Canada that has its own separate pension fund for employers. Once again, workers over the age of 18-years-old must contribute unless they already have exempt status. This will again generate a defined monthly payment during retirement and is applicable to anyone who has ever worked in Quebec at any point in their life.Current rates are 5.55% for both employees and employers as of 2019, and maximum annual pensionable earnings are capped at $57,400.
All About Canada's Voluntary Plans
As a way to attract and retain top talent, there are also a number of voluntary plans that Canadian employers can participate in to help provide a more attractive benefits plan for future employees. These include but are not limited to ones like:
- The Registered Retirement Savings Plan (RRSP)
Funds in this plan are non-taxable at the time of deposit and both the employee and their employers can contribute. Likewise, a spouse and even a common law partner can contribute as well.
- The Pooled Registered Pension Plan (PRPP)
This specific pension plan will generate a defined monthly payment during retirement and it moves with the employee from job to job. For self-employed individuals in particular, this plan is key because of the lower administration costs it brings with it.
- The Registered Pension Plan (RPP)
This is a unique type of pension plan that is registered and established by a company, giving employees a defined monthly payment during retirement. As is true in many other cases, contributions can be made by the employer alone or by both the employer and the employee in question.
Expand Into the Great White North With Confidence—and an Experienced Global Expansion Partner
As an employer, which voluntary plans you choose to participate in will depend not only on your workforce, but your talent acquisition and retention strategy moving forward.
Fully understanding Canada retirement and pension plans, when coupled with unique rules and regulations governing nearly every aspect of doing business—including how employers can take care of their employees long after they've left the organization—can be a challenge. This means expanding companies have much to consider when developing their global expansion strategy.
Whether you are still exploring your global expansion options, or you are ready to commit to establishing a presence in the Canadian market, Velocity Global’s International Professional Employer Organization (PEO) solution can help make your transition a smooth one. International PEO can have your organization up and running in Canada (or one of the other 185 countries in which we operate) quickly and seamlessly—no foreign entity required.
Ready to go global? We’re ready when you are.