Should you contribute to your employees' RRSPs?

Making employer contributions to your employees' RRSPs, as in the case of RRSP+ with the Fonds, helps you to stand out from the competition and help your employees save for retirement.

By Fonds de solidarité FTQ

To attract the best talent these days, companies need to get creative. Improving the benefits you offer is one possible course of action, especially for small businesses.

Contributing to an employee RRSP will help set your business apart by providing your staff with improved retirement benefits. Saving isn't easy for many workers, which is why an employer's help can be a significant advantage, demonstrating that they support their employees, even outside of work. Through their own savings, and your contributions, your employees can make their plans a reality and plan for retirement. This is even more true with the RRSP+ with the Fonds.

Contribute to employee RRSPs and save

Giving employees payroll bonuses or salary increases is a time-honoured strategy for retaining staff and attracting new talent. However, by offering a retirement savings solution, such as the RRSP+ with the Fonds or another type of voluntary retirement savings plan (VRSP), you can achieve these goals while keeping costs low.

Offering to contribute to an employee's RRSP+ lets you save on payroll taxes that are normally deducted from salaries. There are various types of payroll taxes (link in French), which notably affect the following:

  • The Québec Pension Plan (QPP)
  • Employment Insurance (EI)
  • The Québec Parental Insurance Plan (QPIP)
  • The Commission des normes, de l'équité, de la santé et de la sécurité du travail (CNESST)
  • The Health Services Fund (HSF)

What does this mean in practical terms?

If you want to give each of your employees a $1,000 bonus, it'll actually cost you $1,125 per employee, as you'll have to pay approximately 12.5 percent1 in payroll taxes on top of that amount.2 Each employee will then be required to pay their own QPP, QPIP, and EI premiums, which will leave them with a total gross profit of $9261—an amount that will be even further reduced by provincial and federal taxes.

However, if you help an employee purchase Fonds shares by contributing $1,000 directly to their RRSP+, neither you nor the employee is subject to payroll taxes. This way, they can benefit from the full $1,000 added to their RRSP+, all tax-free because of the RRSP deduction applied to their pay.

A tool for attracting and retaining talent

To attract and retain talent, more and more employers are supplementing their employees' salaries by actively contributing to their RRSPs. Businesses see these contributions not only as an attractive benefit, but also as a way of investing in their employees' futures. And no contribution is too small!

By choosing this option, you can help your employees build their retirement funds or facilitate the purchase of their first home thanks to the Home Buyers' Plan (HBP). Adding to your employees' RRSP contributions or offering to contribute on their behalf also increases their awareness of the importance of saving for retirement. This shows that your company cares about its employees.

Improving employee benefits through the RRSP+ with the Fonds

Many employers opt for the RRSP+ via payroll deduction with the Fonds de solidarité FTQ. It's a way to give more to your employees, since every $1 you contribute becomes $1.30 for your employees thanks to the additional tax credits.3

By setting up an employer contribution program with the RRSP+ with the Fonds de solidarité FTQ for your employees, they can enjoy an additional 30 percent in tax savings3 (e.g., a total of $1,300 if you contribute $1,000).

The employer's contribution to an employee's RRSP+ consists in purchasing Fonds de solidarité FTQ shares on behalf of the employee.

Moreover, the RRSP+ via payroll deduction at the Fonds comes at no cost to either the employer or their employees. This approach can be adapted to whichever formula you choose, whether you wish to contribute regularly or annually based on profits or seniority. Since you select your 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 seasonal layoff periods.

Learn more about the RRSP+ via payroll deduction or call us at 1-888-385-3723, Monday to Friday, between 8:30 a.m. and 4:30 p.m. Our agents are here to help if you have questions about employer contributions or if you want to offer your employees the option of contributing via payroll deduction.

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  • 1
    Example based on the 2023 tax year, for a person with an annual taxable income of $40,000.
     
    The amounts calculated are estimates and may vary depending on your company's payroll and industry.
    2
    The employer's payroll taxes are calculated on the gross bonus, which in this example is $1,000.
     
    Payroll taxes charged to the employer include the Québec Pension Plan (QPP), Employment Insurance (EI), the Québec Parental Insurance Plan (QPIP), the Health Services Fund (HSF) and the Commission des normes, de l’équité, de la santé et de la sécurité du travail (CNESST). Certain contribution rates vary according to the employers specific situation.
    3
    So long as the maximum annual amount eligible for tax credits has not already been reached.

    The acquisition of shares of the Fonds de solidarité FTQ may give rise to labour-sponsored fund tax credits. The tax credits amount to 30%, namely 15% at the Quebec level and 15% at the federal level, and are limited to $1,500 per fiscal year, which represents a $5,000 purchase of shares of the Fonds de solidarité FTQ. On March 1, 2024, The Government of Québec announced in Information Bulletin 2024-3 that tax legislation would be amended to postpone by three years the rule providing that the tax credit would be available only to individuals whose taxable income for a given taxation year was below the highest tax rate. Please note that this postponement may be subject to legislative changes.

    Please read the prospectus before buying Fonds de solidarité FTQ shares. Copies of the prospectus may be obtained on the Website fondsftq.com, from a local representative or at the offices of the Fonds de solidarité FTQ. The indicated rates of return are the historical annual compounded total returns including changes in share value and reinvestment of all dividends and do not take into account income taxes payable by any security holder that would have reduced returns. The shares of the Fonds de solidarité FTQ are not guaranteed, their value changes and past performance may not be repeated.