Are private sector workers losing out on benefits?

While inflation eats into household budgets and healthcare costs continue to climb, workplace benefits are becoming an increasingly vital part of financial security.

But not everyone is getting the same deal as recent StatsCan findings noted that in 2024, 80.9 per cent of public sector employees reported having workplace medical or dental care coverage, compared to only 62.1 per cent of private sector employees.

As Andrew Ostro, CEO of digital life insurance platform PolicyMe noted, this isn’t a new problem.

“If you look back historically… government employees have always received better benefits than private sector [workers] on average,” he noted. “That’s always been one of the perks to working government. Now that isn't always true for your higher earners in the private sector, I think executives often negotiate stronger benefit packages as part of their comp. But for an average employee, this is a trend that's been true for a long time.”

From an employer’s perspective, Ostro added, whether compensation takes the form of salary or perks, it doesn’t change the cost. But workers often push for more take-home pay. Ostro emphasized that many employees underestimate the value of workplace benefits because, unlike salary, the payoff isn’t immediately visible.

And often faced with a choice between extra cash or an equivalent benefits package, most workers will take the money, even if that decision later leaves them exposed. He noted that it typically takes a medical emergency or dental issue for people to realize the financial gap.

“It’s the type of thing where, as an individual, it’s hard to really value until you actually need it,” he said. “It’s an easier thing for employers to cut [while] the employee clearly understands the value of comp, but not $5,000 of benefits that, on average, they might not be appreciating as much as it’s costing. If the employee is attracted more to the $5,000 in cash, that's where it's going to go,” he noted.

Ostro argued that the divide between public and private sector benefits largely stems from how each is structured and governed. Public agencies, he said, tend to be less efficient, which often results in richer benefit packages. Whereas, the private sector, by contrast, leans on market forces to balance what employers offer and what employees value.

He believes this is where the government is breaking barriers and moving from compensation to offering more benefits, which is why the public sector gets more value.

 “The role of government is help individuals with things they may not be aware of or play that role where they interfere with natural market forces,” he added.

Ostro noted that the post-pandemic economy has made it harder for employers to sustain generous benefits. Rising inflation has pushed up costs across the board, forcing businesses to make tough choices about where to allocate limited dollars. For private companies under constant pressure to remain profitable, that often means cutting benefits before touching wages.

“If my choice is to cut someone’s benefits or cut their salary, I’m much sooner going to cut their benefits,” he said, adding that public agencies tend to move more slowly because they don’t face the same bottom-line constraints.

While Canada’s public health system covers a wide range of essential care, Ostro underscored it leaves out key areas like dental. Where employers have traditionally filled those gaps, he emphaszied that safety net is weakening.

“There has been a reliance generally on employers to play that role,” he said. “What we’re seeing, and the data is showing us… is that the ability to rely on that is slowly going away.”

He warned that private sector benefits are shrinking and unlikely to rebound soon, making it crucial for workers to assess their own needs.

Ostro acknowledged that employers who cut benefits run the risk of losing talent, but emphasized the private market has always been quick to adapt. After the pandemic, workers briefly held the upper hand, with labour shortages giving them leverage to demand more. But that’s now shifted, said Ostro, noting that the labour market now feels more balanced.

He argued that a deeper problem is employees not fully recognizing the value of their benefits. That disconnect, he added, pushes employers to put money into salaries instead, since workers notice that immediately.

The result is a system where “employers are cutting [benefits], employees are not fully appreciating that they’re having a gap… and therefore taking huge out-of-pocket expenses when they actually need it,” said Ostro.

Moving forward, Ostro predicts that workplace coverage is shifting from traditional group insurance toward more individual plans purchased directly by workers. He pointed to health spending accounts (HSAs) as one tool gaining traction since they give workers more control over how dollars are allocated, though they don’t provide protection against major health events.

 That’s where traditional health and dental plans still matter, he said, because they both encourage routine care and provide catastrophic coverage. Without that, workers risk significant financial strain if hit with unexpected medical costs such as expensive prescriptions not covered by the public system.

Still, the bigger issue isn’t just employers trimming benefits but also employees not being informed enough about what coverage they have and where needs are.

“Plan sponsors and employers should have the duty and the obligation to properly educate their employees… and empower the employee to make their decision on whether they’re comfortable with that gap or how they want to close it,” he said.