Across the Canadian HR landscape, emphasis on employee wellness has never been more prevalent.
In particular, companies with 3-100 employees (small and medium-sized businesses, or SMBs) are looking for the best ways to support and retain their employees.
The COVID-19 pandemic underscored the importance of providing the best possible wellness solutions for employees. It also showed how varied employee health and wellness needs can be, even in small businesses with few employees, underscoring their importance. About 89% of insured Canadian employees view their benefits as more valuable to their mental well-being.
As these SMBs work to take care of their employees and provide competitive benefits for hiring and retaining staff, one question frequently comes up: "What exactly is a wellness spending account, and is it right for our business?"
In this article, we will walk you through how a Wellness Spending Account works in Canada.
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What are Wellness Spending Accounts (WSAs)?
A Wellness Spending Account (WSA) is an employer funded benefit that allows an employee (and often their dependents) to spend their allocation on products, memberships and solutions that are not CRA approved to support their physical health and wellness. This can include physical gym or fitness memberships, sports equipment, running shoes, skis, rackets, digital memberships, protective equipment, yoga, meditation, etc.
Unlike traditional health insurance plans, which often have predefined coverage limits and specific eligible expenses, WSAs provide employees with a set amount of funds to use at their discretion for a wide range of wellness activities.
WSA coverage: Flexibility that fits every employee
The most appealing characteristic of a WSA is its flexibility. It enables employees to use funds for wellness programs personalized to their unique needs and preferences.
It reflects a modern, more nuanced understanding of well-being when employees are given the autonomy to decide how they manage their health and wellness. It’s a great way to show that their organization is dedicated to promoting employees’ well-being and health, leading to enhanced job satisfaction, productivity and reducing attrition.
Wellness Spending Accounts (WSAs) empower employees to build a support system that suits their requirements rather than a one-size-fits-all checklist. They cover a wide range of wellness activities and are becoming increasingly popular across Canada.
The advantages and disadvantages of WSAs
Advantages:
- Flexibility and adaptability: Employees are not stuck with a one‑size‑fits‑all plan — they can personalize the benefits as per their wellness needs.
- Employee Morale: WSAs boost morale, which results in greater job satisfaction and engagement among employees.
- Customization for employers: Business owners can adjust these accounts to align with their company culture and financial capabilities. Organizations can support different groups of employees at different levels as well (for example, managers could get a larger incentive than non-managers).
Disadvantages:
- Financial commitment: Establishing WSAs is a notable financial undertaking for the employer.
- Administrative resources: Effective administration of these accounts will require a dedicated administrative effort for the non-digital administrative process.
- Employee misuse: If employers are managing WSA themselves, it will be very challenging to detect employees submitting false receipts. It is a best practice to have a third party administer the plan to avoid problems.
- Clear guidelines: It’s imperative to have well-defined rules to prevent misuse of the allocated funds.
- WSAs are taxable: While Health Spending Accounts (HSAs) are non-taxable in the hands of the employee, WSAs are taxable like cash (employees are only taxed on the amount they actually use).
Who should consider a Wellness Spending Account?
Wellness Spending Accounts can be a good fit for businesses that:
- View employee wellness as an integral aspect of their company culture.
- Seek to provide flexible, personalized benefits to their employees.
- Recognize the varied wellness preferences within their workforce.
Exploring alternatives to Wellness Spending Accounts
Apart from WSAs, Canadian businesses can also explore several other employee wellness solutions:
- The traditional insurance arrangement offers broad coverage that ensures everyone has access to the same basic levels of care/support. It is not customizable to individual needs/preferences.
- Health Savings Accounts (HSAs) are known for their tax advantages and suitability for employer and employee contributions.
- HSAs are also 100% funded with employer dollars — no employee contributions allowed.
- Employee Assistance Programs (EAPs) provide comprehensive support for various personal and work-related issues.
- Rise Health: A digital platform offering cost-efficient and comprehensive employee benefits solutions, including WSAs.
- Direct subsidies for fitness and wellness activities.
- On-site wellness amenities like gym facilities or yoga classes (not an option for small or work-from-home businesses).
- A child care subsidy or maternity/parental leave programs.
- “Floater” days that are dedicated to manage life events
- Flexible hours, such as a compressed work week and work from home options.
Embrace modern employee benefits with Rise Health
Wellness Spending Accounts are a flexible solution for employee benefits.
However, for businesses that want to provide comprehensive coverage, Rise Health is ideal for Canadian businesses eyeing cost savings, digital ease, and modern packages.
Feedback from our clients is consistently positive, and we look forward to meeting and exceeding their expectations.
Exploring Rise Health's offerings can provide deeper insights into how your business can improve, or even start offering, an employee benefits package that helps it stand out. This can pave the way for a healthier, more satisfied workforce while also taking extra administrative work off your plate with fully digital HR processes and systems.
Rise Health stands out for Canadian firms looking to enhance their employee benefits package, offering:
- Affordability for Canadian businesses: Rise Health plans are more budget-friendly than traditional carriers, with clients saving an average of 10% on their monthly premiums. Additionally, integrating their Payroll + HR platform at no extra cost (a unique offering from Rise Health) amplifies the savings.
- 360-degree digital benefits experience: Rise Health's fully digital platform streamlines the administration of benefits, significantly reducing paperwork and tedious administrative tasks. It also offers an all-in-one app for employees to access their Rise Health account and submit claims easily. The dual advantages for both employees and employers make this a win-win solution for businesses.
- Modern benefits packages: Rise Health enables smaller companies to offer extensive benefits plans that might otherwise be out of reach from conventional providers, without the hefty price tag. Being able to offer modern benefits that employees will find valuable can be an essential factor in attracting and retaining talent in Canada's competitive job market.
Rise Health’s team will work with you and your advisor to help assess and build programs that will resonate with your employee population and support your culture and hiring objectives.
Want to see the platform in action? You can learn more about Rise Health right here.
Frequently Asked Questions
How do wellness spending accounts work?
The process of WSAs can be described in the following points:
1. The employer allocates a specific annual amount to employees for eligible wellness expenses such as fitness, mental health, and lifestyle services.
2. Submit receipts through your employer's WSA provider for reimbursement. With Rise Health, dedicated carriers administer the plans that Rise Health supports.
3. Post-approval, employees will receive reimbursement.
Are wellness spending accounts taxable in Canada?
Yes, unlike Health Spending Accounts (HSA), Wellness Spending Accounts are considered a taxable benefit by the Canada Revenue Agency (CRA).
What is the difference between a Wellness Spending Account and a Health Spending Account?
While both are employer-funded accounts designed to support employee well-being, a Wellness Spending Account (WSA) and a Health Spending Account (HSA) serve different purposes and come with different tax treatment.
A Health Spending Account covers CRA-approved medical expenses such as prescription drugs, dental care, vision, and paramedical services like physiotherapy or chiropractic. Amounts reimbursed through an HSA are non-taxable for employees, making them a highly valued benefit.
A Wellness Spending Account, by contrast, covers expenses that fall outside CRA-approved medical categories — gym memberships, fitness equipment, yoga classes, meditation apps, and other lifestyle wellness purchases. Because the CRA does not recognize these as medical expenses, WSA reimbursements are taxable in the hands of the employee (on amounts actually used).
