Do you have to contribute to your staff’s RRSPs?

Contribute and stand out while you save

Dominique J. Favreau,

in collaboration with Martin Lépine, Fonds de solidarité FTQ subscription coordinator.

Attracting the best talent is a constant challenge companies have to face using a bit of creativity today. Improving the benefits you offer is one possible course of action, especially for small businesses. What’s more, since the 2012 cancellation of the taxable benefit status for employer contributions to employee pension plans, now’s the time to do it at less cost. Contributing to an employee RRSP, such as the Fonds RRSP+, helps to set your company apart, since you can offer improved retirement benefits simply and effectively.

Contribute to an employee RRSP and save

Offering bonuses or salary increases is a time-honoured strategy for improving employee retention or attracting new staff. Yet, by offering a retirement savings solution like a group RRSP, a VRSP or an RRSP+ via payroll deductions, an employer can obtain these objectives while keeping costs down.

Offering to contribute to an RRSP+ as a bonus can help save on payroll taxes which are normally applicable on salaries, as these contributions themselves have not been taxable since 2012. Payroll taxes are numerous and affect notably:

The Québec Pension Plan (QPP)
Employment Insurance (EI)
Québec Parental Insurance Plan (QPIN)
Commission des normes, de l'équité, de la santé et de la sécurité du travail
La Commission des normes du travail (CNT)
Vacation pay

They represent close to 16% of costs, an amount the employer can therefore save. A company that wants to give each of its 20 employees a $1000 bonus will therefore save $3,200 by electing to contribute to a retirement savings plan rather than paying a straight bonus. On the other hand, using an RRSP+ via payroll deductions comes with at no cost to the employer, and the cost to the employee is minimal.

In addition, this approach adapts to the formula selected by the employer, whether they want to contribute regularly or annually in accordance with profits, individual performance or seniority. As employers select their own contribution formula, there is no longer any complicated contributions management to deal with, related, for example, to irregular working hours, turnover rate, options for phased retirement or even for seasonal lay-off periods.

The support of Fond counsellors working throughout Québec makes setting up an RRSP+ and making staff aware of its benefits very easy as counsellors can visit a place of work to present the advantages of the RRSP+ via payroll deduction, at no cost to the employer.

Improve employee benefits

Many employers opt for the RRSP+ via payroll deductions as it lets staff members enjoy additional tax savings of 30% thanks to the labour-sponsored fund tax credit. It’s a way of giving staff more without any cost to the employer, as each dollar in contributions becomes $1.39 for the employee.

For example, an employer with $1000 available for an employee bonus can only pay out $840 after the 16% in payroll tax. Also, the employee needs to pay his or her share of the QPP, the QPIN and the employment insurance on the $840. That means for an employee earning $40,000 each year, his or her bonus would only amount to $780. By choosing to contribute to the Fonds de solidarité FTQ RRSP, the employer guarantees that all of the $1000 goes to the employee, and with no payroll tax to pay for either, and with the additional 30% due to the tax credit, that results in a total of $1300. That’s over 67% more than the employee would have received if they were paid a bonus, at no additional cost whatsoever to the employer.

A tool for attracting and retaining talent

Today’s lack of skilled workers, especially in the regions, is causing employers to look for new solutions to stand out in the labour market. Today we’re seeing more and more employers supplementing the salaries of their staffs by actively contributing to their RRSPs. Businesses look at these contributions as a benefit to take advantage of, but also as a way if investing in the futures of their staff.

Going forward, employers can help staff members build their retirements or facilitate the purchase of a first home with the Home Buyers’ Plan (HIP) while demonstrating their sense of social responsibility. By accepting to increase their staff members’ RRSP contributions, employers can even help them build awareness of the importance of saving for retirement.

For a SME, there are many benefits to playing an active role in its employees’ retirement plans by making direct contributions to an RRSP. By electing solutions that are simple for the company and beneficial to the employee, such as the RRSP+ via payroll deductions, the company can easily differentiate itself in a competitive labour market where every little extra counts. By taking the time to present these benefits and how they work to staff, the company can increase their chances of taking full advantage of them. That’s why our counsellors are always standing by to help and lend their support.

Learn more about RRSP+ via payroll deductions or call us Monday to Friday between 8:30 am and 4:30 pm at 1 888 385-3723.