Canadian HR Reporter

February 20, 2017

Canadian HR Reporter is the national journal of human resource management. It features the latest workplace news, HR best practices, employment law commentary and tools and tips for employers to get the most out of their workforce.

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CANADIAN HR REPORTER February 20, 2017 2 NEWS Recent stories posted on Check the website daily for quick news hits from across Canada and around the world. WEB O N T H E ACROSS CANADA Feds' growth panel to push plans for future job skills, helping more women work Blueprint unveiled highlighting goals in fi ve categories Anticipated Canadians with Disabilities Act to focus on employment: Minister Consultations across country to play key part in shaping new laws Human rights board says Nova Scotia man's medical marijuana must be insured Since drug requires prescription by law, it doesn't fall within plan's exclusions CPHR Canada offi cially launches new designation, brand Association says it will 'always welcome back HRPA' RM of Wood Buff alo cuts jobs due to eff ects of wildfi re, slumping oilsands Reduction expected to save $24 million annually Canadian tech community issues call for visas for people displaced by Trump Happy to take 'extremely talented, intelligent, brilliant minds from around the world' Ontario tells colleges to reconsider large proposed raises for executives Some colleges using universities, hospitals as comparators for compensation AROUND THE WORLD U.S. job growth accelerates in January, but wages lag Non-farm payrolls increased 227,000 last month Women are, very slowly, getting more seats in the boardroom Diversifi cation happening within publicly traded U.S. companies LGBT advocates scared, despite White House words on equality 'LGBTQ people must remain on guard for attacks' Inquiry to ask: Could U.K. sex discrimination laws be weakened by Brexit? Maternity rights, equal pay and part-time workers' rights will be examined Highlights from the 2017 HRPA conference Videographer Alexia Kapralos reports on the 75th annual event held in Toronto FEATURED VIDEO Taxation of health benefi ts unpopular with experts Implementation could have had 'very disruptive eff ect': Lawyer BY MARCEL VANDER WIER LATE last year, as part of a com- prehensive review of the tax sys- tem, the federal government said it was considering taxing private health and dental plans across Canada. But the proposition had lawyers and industry experts wav- ing caution fl ags. e move would have had "sig- nifi cant ramifi cations" for work- ers, said Sheryl Smolkin, a Toron- to-based lawyer and journalist. "It's a bad idea," she said. "(Ben- efit plans) are a way that em- ployers can provide additional compensation to employees on a tax-eff ective basis… Once they become a taxable benefi t, it's not as valuable in the employees' hands. If employers say they'd be less inclined to make benefi t plans available, at the end of the day, they could end up with sicker employees and they would lose a valuable compensation tool." Implementing such a tax would have raised $2.9 billion in ad- ditional revenue for the govern- ment, according to the National Post. Currently, 13.5 million Canadians have lower tax bills due to health and dental benefi t packages. However, on Feb. 1, Prime Min- ister Justin Trudeau said the tax would not go ahead. Trouble on the horizon e urge to even the playing fi eld is understandable, said Dale Bar- rett, principal of Barrett Tax Law in Vaughan, Ont. "On one hand, anything that you give to an employee in lieu of money is taxable," he said. "Taxing employee benefits does keep things even in terms of making sure that people pay tax on what they receive. If you start talking about not taxing employee benefi ts in general, there's going to be all kinds of abuse. Certainly employee benefits have to be taxed, or else employers stop pay- ing their employees cash and give them benefi ts instead." But, if taxed, employees may have been more apt to decline benefi ts in lieu of monetary com- pensation — an action that could lead to bigger problems. People on the lower-income levels may be more inclined to ask for cash, said Barrett. "And that may have a very dis- ruptive eff ect in terms of getting their kids' teeth done, getting medication, that sort of thing… And they're the ones who can probably least aff ord to make that decision." If benefi ts were taxed, employ- ers would have also seen extra charges in terms of employment insurance and Canada Pension Plan fees, said Barrett. "It's probably a poor policy deci- sion to start taxing these benefi ts," he said. "Is the couple billion dol- lars they're going to generate go- ing to be worth all the diffi culties, and all the people who may end up not getting benefi ts as a result?" " at's a terrible position to put people in, because you're going to get people who are making the de- cision for the wrong reasons and foregoing their health." e number of Canadians who are covered by employer plans has steadily grown for the last 30 years, according to Stephen Frank, senior vice-president of policy at the Canadian Life and Health Insurance Association in Toronto. "In 1990, only about 50 per cent of people had employer coverage, and today we're up to 75 per cent. e vast majority of people have very high-quality health coverage at work." A loss of group coverage and a shift to individual packages is typ- ically accompanied by a decline in the quality of coverage and a rise in price, he said. "It will almost certainly result in fewer people having coverage than we do today. at just feels like the wrong way to be going, so we have to be very cautious and we would certainly urge them not to move in this direction," said Frank. " ere's no way to replicate what you lose in an employer benefi t by shifting everyone to the individual side. We don't see it as closing any gaps or ad- dressing fairness. We see it as a really signifi cant impact for the majority of people, if this were to happen." Access to health care e move would have impacted a signifi cant portion of the popula- tion, said Ondina Love, CEO of the Canadian Dental Hygienists Association, one of 12 private health organizations behind the website www.donttaxmyhealth- benefi, which urged citizens to share concerns with their po- litical representatives. As of Feb. 2, 80,000 Canadians had accessed the site to send an e-letter to their MP as well as the fi nance minister — a total of 160,000 emails. " e associations are most con- cerned with access to care for Ca- nadians," she said. "People may question if that's self-serving, but it's really not. Without health and dental ben- efi t coverage through employers, people would not access these kinds of preventative services like mental health or dental hygiene or dental services. at is a concern. Taxing these issues is going to really hurt the middle and lower classes the most." When available to employees, benefi t packages grant funding to preventive care not covered under publicly funded provin- cial health services — such as prescription drugs, vision care, mental health services, dental care, and more. So, any taxation could also see the public health system experi- ence strain as a result, said Love. For example, a worker who de- clines benefi ts and then doesn't seek out preventative care for her teeth could end up in a hospital emergency room with an oral issue. "How many people, because they don't have access to health and dental benefits, are going to end up in the publicly funded health-care system, costing that system more money which the federal government and provin- cial government pay for? ey re- ally have to assess the total impact of that cost." "Your employer pays for the premiums because they want you to be a healthy employee," she said. " ey want you to stay well." Additionally, lesser benefits would expose workers to the risk of fi nancial catastrophe in the event they faced a medical emergency, all while workers re- duce their amount of time at the dentist or forego prescription drugs as a cost-saving measure, said Frank. And if younger workers choose to decline benefi t plans en masse, that could have created a "very un- fortunate dynamic," he said. " e older people — or people who are sick and really rely on their plans — end up having more expensive coverage in the end, and the whole sustainability starts to be impacted… is creates some of that tension and that's one of the things we would really worry about. Employers would be under pressure to make changes because of that." While health and dental plans are the most common benefi t for working Canadians, their taxation wouldn't have had much eff ect on the payroll department, said Pat- rick Culhane, president of the Ca- nadian Payroll Association. "If they taxed it similar to some of the other more common tax- able benefits like insurance, it would show up as a benefi t on your T4, and that's how it would be taxed," he said. Lessons from Quebec Quebec introduced taxation on private health and dental benefi ts 20 years ago, with one in fi ve employers immediately ceasing to offer the packages due to cost. That should serve as a stark warning to policymakers, said Dale Barrett, principal of Barrett Tax Law in Vaughan, Ont. "It's pretty clear, if you look at the before and after there, that there are a lot of people now who can't get certain treatments or can't get their meds paid for," he said. "The federal government should probably do a study to see 'Has this affected the health of Quebecers?'" Additionally, more than half of small employers ceased offering benefi ts packages after the province levied its tax, said Stephen Frank, senior vice-president of policy at the Canadian Life and Health Insurance Association in Toronto. "That experience gives us a lot of pause," he said. "We would anticipate a similar reaction if they were to do it on a national level. It feels to us that it's a really poor policy."

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