This is another “perk” that many employers look at for their employees. It can have a significant impact on the level of “satisfaction” that an employee feels.
There are good ways and better ways to provide a health plan and similar benefits to employees.
A good way for example is to make a plan available to employees on the basis that the employee pays for it. Although this might not sound great, it can actually be good for the employees because now they can get health or disability or other benefits that are very difficult to buy on a “one off basis”. They also should be getting a discount from the price of a “one off” plan because of the group benefit concept of pooling risk and costs.
What sometimes is assumed to be better is to have the employer pay for the package. This certainly will save the employee costs up front but can be very expensive in the long run because the benefits might be what we call “taxable benefits”. This means that the employee is considered to have received a benefit equivalent to the value of the plan and this is added to the employee’s income. This can have a backlash effect on the employees if it is audited by CRA and the employees have some unpaid taxes.This can be made even more complex if the employees and employers split the cost of the plan. (50% / 50%) for example. Without clear documentation the employee could end up with all the tax cost and no one gets the tax savings.
The best plan it to have a professional accountant (like our firm) go through the proposed benefits with you and determine if they are “taxable benefits” or “non-taxable benefits”. We find this works very well in plans where the employees and the employers share the costs. The employers pay for the “non-taxable benefits” and the employees pay for the “taxable” ones.
There are actually a lot of details in managing employee plans and there are some very tax effective ways to reduce taxes; for example Private Health Services Plans. The catch is that they are complex to set up correctly and if set up incorrectly can have a big tax cost.
Contact us at partner@gilmour.ca or www.gilmour.ca
We are Professional Corporate Tax Accountants / Advisors
Chartered Accountants serving Langley, Surrey and Abbotsford British Columbia
