Is a group retirement plan worth it for a small business?

“Worth it” depends on what you need the plan to do. For most owners I work with, the answer comes down to four things.

1. It helps you hire

Fewer than one in five Canadian employers with 5 to 499 employees offer a workplace retirement plan (C.D. Howe Institute, March 2026). If you offer one, you stand out in a market where most of your competitors don’t.

Employers who do offer plans see the value. In a HOOPP and Common Wealth survey, 77% to 87% of employers rated their retirement plan “extremely” or “very important” for recruiting, and 83% to 88% for keeping people. That ranked alongside pay and above health, dental and life insurance.

2. It helps you keep people

Research summarized by the C.D. Howe Institute in April 2026 found that employers who offer retirement benefits see employee tenure rise by three to six years and turnover fall by 35% to 70%. A DPSP adds a legal waiting period before your contributions belong to the employee, which gives people on the fence a dated reason to stay. More in whether a group plan helps you keep employees.

3. It delivers pay more efficiently than a raise

A raise loses a large share to tax and payroll costs before it reaches the employee. A DPSP contribution reaches them in full, with no CPP or EI for you to pay. On a $5,000 example, a salary increase costs the business about $5,225 and leaves the employee about $3,400. The DPSP route costs $5,000 and puts the full $5,000 in their account. The worked example is in the cheapest way to give a raise.

4. It takes a worry off your team’s list

Money is a leading source of stress for Canadians, and it follows people to work. The Canadian Payroll Association has estimated the cost of financial stress at work at about $16 billion a year in lost productivity. A retirement plan won’t fix someone’s finances. It does take one large, permanent worry, “will I be okay when I stop working?”, and turn it into something their employer is visibly helping with.

Why the structure matters so much

Research by HOOPP, the National Institute on Ageing and Common Wealth found that a good workplace pension can deliver two to three times the retirement value of a typical approach where people save on their own on the same contributions. A Group RRSP or DPSP is not a pension, so don’t read that number as a promise. But a solid group plan captures the same three advantages that drive most of the gap: lower fees, professional diversification, and saving that happens automatically every payday.

When it isn’t worth it

A plan can cost you money and earn you nothing. That happens when:

• there’s no employer match, so few people join (why employees don’t join),
• the fees are high and never reviewed (what fees cost your employees),
• nobody looks at the plan after launch (the plan checklist).

Sources: C.D. Howe Institute, “Spreading the Benefits” (March 2026) and “Here’s How to Get Retirement Plans for More Canadian Workers” (April 7, 2026); HOOPP and Common Wealth employer research; HOOPP, National Institute on Ageing and Common Wealth; Canadian Payroll Association. Figures are national estimates. General information only.

Common questions

Is a group retirement plan worth it for a small business?
For most small businesses with steady staff, yes. A well designed plan helps with hiring and retention and delivers compensation more efficiently than salary. It is not worth it without an employer match, at high fees, or without regular review.

Do group retirement plans help with recruiting?
Yes. Fewer than one in five Canadian employers with 5 to 499 employees offer a plan, so offering one helps a job offer stand out. Most employers that offer plans rate them very important for recruiting.

Do retirement plans reduce employee turnover?
Research summarized by the C.D. Howe Institute in 2026 links employer retirement benefits to longer tenure and lower turnover. DPSP vesting adds a further reason to stay for up to 24 months.

Is a group plan better than giving a raise?
For the employer’s cost and the employee’s total value, often yes. A DPSP contribution avoids CPP and EI and reaches the employee in full, while a raise loses a large share to tax and payroll costs. The tradeoff is that plan money is for retirement, not spending today.

When is a group retirement plan not worth it?
When there is no employer match, when fees are high and never reviewed, or when nobody oversees the plan after launch.