Can an employer take away employee benefits in Canada?

Posted by Alden Hui on January 19, 2021
Find me on:

Employee benefits can make up a significant portion of an employee's total compensation. As a result, cutting employee benefits can have a lasting impact. The legal implications depend on the employment agreement. Besides the financial factors, an employer should also consider employee productivity and morale. 


In most cases... 

The employer cannot suddenly change the employment terms. However, there are some instances where an employer may legally change an employment contract with enough notice, usually by giving a future specified date. Regardless, the situation is case by case (province, industry, etc.) and largely depends on your contract. In some cases, non-cash benefits may be under contract or an agreement with the employee, in those cases, the employer must receive consent from the employee before making a change to the benefit.

As noted by Beneplan, any significant reduction in benefits compensation can be deemed a constructive dismissal, in which case, the employee may have a legal case against the employer. An example would be where an employee must look for a new job because the change in compensation is so profound. The law may side with the employee and they may be eligible to receive compensation from their employer. It is best to consult with a lawyer in these events.


Other factors to consider

Besides the legal implications, taking away benefits may also have a strong impact on the productivity and company culture of an organization. As many employees do consider benefits as a major deciding factor, a reduction or removal can lead employees to reconsider their employment.


Switching benefits for the better

An employer may cut employee benefits due to a decreased budget. For small businesses, health insurance or other health benefits are one of those big-ticket items that are hard to justify. Employers can feel trapped because switching plans can complicate things not only for the business, but also the employees.

Fortunately, there is a plan built specifically for small businesses in Canada that is both cost-efficient and versatile in coverage. The Health Spending Account is a customizable plan that allows employees to get reimbursed 100% tax free for medical expenses while letting the employer choose how much to provide to their staff.

With a Health Spending Account, we allow the employer to make increases to an employee’s spending limit if deemed necessary. The increase will be applied to the entire classification of employees to maintain fairness within the plan. The increase will occur within the same plan year. On the other hand, a decrease to an employee’s limit will only go into effect in the next plan year. This is to protect the employee since they may have planned for this year’s medical expenses with the current HSA limits.


With 56,000+ small businesses in Canada choosing this plan, Health Spending Accounts are fair and efficient plans that equally benefit both employer and employee. Learn more:

New Call-to-action


Related Reading:

How To: Payroll for Small Businesses in Canada

What's inside an Employee Benefits Package for Small Business?


Topics: small business, employee benefits