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Chapter 11 Employee Benefits

The purpose of employee benefits is to improve employee work satisfaction, meet

employee health and security requirements, attract and motivate employees,
reduce turnover, and maintain a favourable competitive position.

Flexible benefit plans enable individual employees to choose the benefits that are
best suited to their particular needs.

An organization is responsible for communicating its benefits program to

employees. Some of the many different ways businesses notify employees about
their benefits programs are: In-house publications (employee handbooks and
organizational newsletters), Group meeting and training classes,
Audiocassettes/videotapes, Bulletin boards, Payroll inserts/pay stub messages,
Specialty brochures, Employee self-service systems (ESS).

Canada and Quebec pension plans cover everyone between the ages of 18 and 70.
All contributions come from employers and employees.

Employment Insurance (EI) payments are the benefits paid to claimants who are
unemployed and actively seeking employment. The amount paid is determined by
the number of hours of employment in the past year, and the regional
unemployment rate. Additional benefits may be extended for situations involving
illness, injury, quarantine and for maternity, and paternity or adoption leave.

Workers’ Compensation Insurance is provincial and territorial insurance (funded by

an employer payroll tax) provided to workers to defray the loss of income and cost
of treatment due to work related injuries or illness.

Healthcare benefits, which include the costs of hospitalization, prescription drugs,

dental care, optical care, and mental health benefits, are the most costly to

Regarding retirement programs, a silver handshake is an early-retirement incentive

in the form of increased pension benefits for several years or a cash bonus.
Preretirement programs consist of: counseling, seminars, workshops, and retirement

A pension plan is recognized as an important aspect of an employee’s benefit plan.

There are four main types of pension plans:

i) Contributory plan—Contributions to a plan are made jointly by employees and


ii) Noncontributory plan—Contributions to a plan are made solely by the employer.

iii) Defined-benefit plan—The amount an employee is to receive upon retirement is
specifically set forth.

iv) Defined-contribution Plan—The basis (amount) an employer contributes to the

pension fund is specified.

The term Vesting refers to a guarantee of accrued benefits to participants at

retirement age, regardless of their employment status at that time. The term
pension portability refers to employees who leave an organization can leave their
funds in their current plan or transfer those funds to a locked-in RRSP or into their
new employer’s pension plan.

Employment assistance programs (EAPs) and child and elder care are both
employee services provided by some organizations to help create a work/life setting
and balance for employees.