In a fast-changing economy, Canada should consider creating a nimble benefits and pension system that is tied to the worker rather than the employer.

Employment is changing at its foundations. The traditional single-earner household supported by stable, full-time income, pension and benefits, is increasingly the relic of a bygone era. Temporary and part-time employment have increased steadily in recent decades, and the prospect looms of the digital gig economy fuelling a surge in task-based, on-demand forms of work. The solution may be to explore a model known as portable benefits: a nimbler, targeted way of providing benefits.

The standard employment relationship of the postwar period, when most of Canada’s social programs were designed, assumed that employers would provide access to retirement income security and extended health benefits. These employer-provided supports are backstopped by universal government programs providing relatively modest benefits such as the Canada Pension Plan, Old Age Security and provincial pharmaceutical programs for low-income residents and seniors.

Yet this is no longer the reality for many workers in Canada. Nonstandard work, such as temporary, part-time and self-employed positions, has accounted for 60 percent of job growth in advanced economies since the mid-1990s. These positions tend to have far less access to pensions and benefits. In Ontario, fewer than a quarter of workers in 2011 engaged in nonstandard employment had medical insurance (23 percent), dental coverage (22.8 percent), life/disability insurance (17.5 percent) or an employer pension plan (16.6 percent). By comparison, three-quarters of workers in standard employment relationships (permanent full-time, voluntary part-time and self-employed with paid help) had access to medical and dental insurance, and more than half had a pension plan.

For more and more workers, the question then becomes: If I am not able to access sufficient pension and benefit coverage through my own work efforts, and government programs don’t cover me either, where should I turn?

One notion is starting to gain traction: that of a portable benefits account that workers, employers and potentially even the government pay into, in order to increase benefit levels and access in areas such as pharmacare, life insurance, vision care and mental health services. One of the advantages of portable benefits is that they are tied to the employee, not the employer.

Not only would portable benefits offer flexibility and advantages for workers, but the broader access that portable benefits would provide might also remove some disincentives to employment reported among marginalized groups. For example, single parents and persons with disabilities who receive social assistance have reported that a significant “cost” of accepting employment is the loss of government-provided benefits, such as drugs and dental coverage.

Expanding access to certain types of benefits — for example, mental health services, dental care, physiotherapy and other allied health services — can reduce overall health costs by preventing the occurrence or intensification of illnesses that would require more expensive interventions later, or that could result in disability. Furthermore, entrepreneurs and small and medium-sized enterprises are drivers of economic growth, but their inability to provide stable benefits may be an impediment to attracting and retaining the talent they need. Portable benefits could help address these issues.

A portable benefits model would remove the question of employment classification from the benefits equation —  whether workers are engaged in full-time, part-time, temporary or gig employment should not determine their access to benefits.

A portable benefits approach could offer workers in part-time, temporary and gig roles the opportunity to have some level of coverage for their medical, health and retirement needs without either requiring high levels of public investment or unnecessarily burdening employers with high additional costs for these types of roles. It could also avert other social costs and potentially drive increased entrepreneurship.

Fundamentally, a portable benefits model would remove the question of employment classification from the benefits equation. Whether a worker is engaged in full-time, part-time, temporary or gig employment should not determine their access to benefits. Employers and workers could both be mandated to pay a portion of earnings into a protected, centrally administered account, which could be drawn upon for certain purposes (for instance, for general income upon retirement, or for pharmaceutical purchases or health services).

The exact scale and model of the portable benefits account could vary widely. In practice, we are already seeing similar models in certain sectors. For example, in New York City, the Black Car Fund, which has provided workers’ compensation benefits for livery and black car drivers since 1999, has recently expanded its mandate to include vision coverage and appointments with doctors for Uber and Lyft drivers.

Canada’s 1.7 million workers in the nonprofit sector, nearly half of whom are on contract or working part-time, may soon be able to participate in a portable retirement savings scheme. Common Wealth is working with Prosper Canada, the Maytree Foundation, Boys and Girls Clubs of Canada and the United Way Greater Toronto to assess interest among workers in a plan that would deliver lower fees than mutual funds, portability between jobs, flexible contribution rates and optional employer contributions.

Sectoral approaches have a certain level of appeal, as they are easy to implement among commonly situated workers. However, a more universal approach to portable benefits spearheaded by the federal government could realize far greater cost savings and efficiencies through scale, and by spreading risk among a broader pool of workers. A federal approach could also leverage the Canada Pension Plan and employment insurance programs operated by Service Canada and Employment and Social Development Canada.

Another key design consideration is the scope of the program. The range of benefits used during an initial implementation (whether it be a broad range of benefits or a small selection) would be a significant factor determining the expense and scope of the program. Whether the program is universal would also be an important factor, as a universal program could reduce contribution rates significantly. Including skills training funds could benefit a broad swath of workers who aren’t currently eligible for employment insurance and associated training programs, and may be of particular relevance in a future world of work where people are frequently bouncing between different roles that require upskilling and reskilling.

A number of challenges remain to implementing a portable benefits program in Canada, and many key questions need to be addressed.

  • Who qualifies? How are entitlements accumulated and tracked? Some models apply to gig workers for specific companies (such as Uber). Other models apply across a specific industry (for example, the Black Car Fund) or only to subscribers of specific platforms (such as Alia).
  • Who pays? How are costs shared among government, employers and beneficiaries? Or are surcharges levied on customers by companies employing gig workers?
  • Who manages? How will the relationships be navigated between private service providers, employers, employees and government? How are different levels of government involved?
  • How can technology be leveraged to provide a platform for tracking and supporting a shared benefits system? There are risks associated with efforts to develop large, centralized platforms, but also with fragmentation across multiple platforms.

Portable benefits could address a range of challenges associated with the present and future of work. As Canada continues to grapple with the transition to a 21st-century digital economy, our approaches to the provision of benefits should also be reconsidered for their ease of access, portability, coverage and generosity.

This article is adapted from Canada Next: 12 Ways to Get Ahead of Disruption, a Public Policy Forum series of 12 reports on disruptive challenges and opportunities facing Canada.

This article is part of the Nimble Policy-Making for a Canada in Flux special feature.

Photo: Shutterstock, by Monkey Business Images.


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