Does a group plan help you keep employees?

Replacing an employee is one of the most expensive things a small business does. You lose their output, you pay to recruit, and you spend months training the replacement. Anything that slows turnover pays for itself quickly.

What the research says

A C.D. Howe Institute memo published in April 2026 summarized research showing that employers who offer retirement benefits see tenure increase by three to six years and turnover fall by 35% to 70%. The same memo noted research finding Canadian workers would accept 6% to 10% lower wages for a job with a pension plan.

Employee surveys point the same way. In one study, 73% of workers said they had stayed with an employer specifically because of its retirement benefits, and 64% valued their group retirement plan as highly as extra vacation time. Only 6% of employers realized their people valued it that much.

How a plan actually keeps people

A balance they can watch grow. An employee who logs in and sees their account rising, much of it from your contributions, thinks about leaving differently from one who sees nothing.

A vesting clock, if you use a DPSP. The Income Tax Act lets a DPSP hold back your contributions until the employee has been in the plan for up to 24 months. Leave before then, and the unvested portion is forfeited. An employee who knows their balance becomes fully theirs in 18 months makes different decisions than one with nothing waiting. The mechanics are in how DPSP vesting works.

A match that improves with time. A Group RRSP has no vesting, so the retention tool there is a tiered match that grows with years of service. See tiered matching by years of service.

Why this beats a noncompete

Noncompete clauses are hard to enforce in Canada, and Ontario has banned most of them for employees since 2021. Vesting works differently. It doesn’t stop anyone from leaving. It simply means they leave behind money they haven’t earned yet. There’s no clause to enforce and no lawyer to call.

The honest limits

A plan won’t save a bad hire or fix a poor manager. Vesting only applies during the first 24 months of plan membership; after that, every new DPSP contribution belongs to the employee immediately. What a plan does well is tip the decision for people who are undecided, through one more year and often the one after that.

Sources: C.D. Howe Institute, “Here’s How to Get Retirement Plans for More Canadian Workers” (April 7, 2026); Income Tax Act (Canada), section 147; Ontario Employment Standards Act, 2000, as amended by the Working for Workers Act, 2021. Research figures vary by study, sector and plan design. General information, not legal advice.

Common questions

Do retirement plans help retain employees?
Yes. Research summarized by the C.D. Howe Institute in 2026 links employer retirement benefits with longer tenure and lower turnover. The effect is strongest when employees can see their balance grow and when a DPSP vesting period applies.

How does a DPSP help with retention?
A DPSP can require up to 24 months of plan membership before the employer’s contributions vest. If the employee leaves earlier, the unvested amount is forfeited, which gives employees a concrete reason to stay.

Is vesting the same as a noncompete?
No. A noncompete tries to restrict where someone works after they leave. Vesting does not restrict anything. It only determines whether unvested employer money goes with them.

Does a Group RRSP have vesting?
No. Employer contributions to a Group RRSP belong to the employee immediately. Employers who want a retention incentive in a Group RRSP usually tier the match by years of service.

Will a retirement plan stop unhappy employees from leaving?
Usually not. A plan is most effective with employees who are undecided, not with those who want to leave for other reasons.