A whitepaper released today proposes that Canadian employers implement emergency savings accounts through payroll systems to combat financial stress that costs businesses $69.5 billion annually in lost productivity, more than double the $26.9 billion recorded four years ago.
The Building Financial Resilience Through Employer-Sponsored Emergency Savings Whitepaper, authored by Canada’s Financial Wellness Lab in partnership with the National Payroll Institute (NPI) and CI Wealth, outlines how payroll-deduction emergency savings accounts could help address widespread financial fragility among Canadian workers.
More than one-quarter of Canadians live paycheque to paycheque and cannot cover a one-week delay in pay, according to recent NPI data cited in the report. The whitepaper notes that 51 percent of employees admit to spending work hours worrying about money, and six percent spend more than 90 minutes daily preoccupied with personal finances.
“Financial fragility seeps into all aspects of life for those who are struggling,” said Chuck Grace, co-founder and advisory chair at Canada’s Financial Wellness Lab. “But our research shows that workers who have even modest savings set aside are dramatically less likely to fall behind on debt or turn to costly last-resort measures like high-interest credit cards or RRSP withdrawals.”
Financial stress widespread among Canadian workers
The whitepaper presents data showing nearly half of Canadians are financially stressed and one unexpected expense away from financial hardship. More than 60 percent of working-age Canadians cannot cover an unexpected expense exceeding $1,000.
Canadian credit card debt reached a record $124 billion by early 2025, with 64 percent of outstanding balances carried over from previous months, according to TransUnion data cited in the report. The number of borrowers in arrears has surged to nearly 2.5 percent.
The whitepaper states that without adequate short-term reserves, retirement savings become a line of defense against financial shortfalls. For every $5 contributed to RRSPs each tax year, $1 is withdrawn before retirement, according to research cited in the document.
Two-tier emergency fund structure proposed
The whitepaper proposes a two-tiered structure delivered through payroll systems. Tier 1 would provide a liquidity buffer of $2,500 or half of a monthly paycheque to manage smaller, frequent financial shocks such as car repairs or urgent home maintenance.
Tier 2 would hold reserves equivalent to at least four months of income to protect against high-impact events like job loss or extended illness. The report notes that even with Employment Insurance benefits, individuals typically need to cover 12 to 16 weeks of living costs out of pocket during unemployment.
The accounts would use automatic payroll deduction. “The money is withheld from pay automatically before the employee first sees it,” according to the whitepaper, which describes this as a mechanism that counteracts present bias and reduces perceived loss.
Peter Tzanetakis, president and CEO of the National Payroll Institute, said financial strain has been treated as a personal problem for too long. “The truth is: financial stress comes to work with your employees. It’s increasingly costing businesses billions in lost productivity, absenteeism, and turnover,” he said.
Behavioural design strategies and implementation options
The whitepaper examines strategies to increase participation and maintain savings discipline, including auto-enrollment, default contribution rates starting at three percent of salary, auto-escalation features, and withdrawal friction designed to discourage non-emergency use while allowing immediate access when needed.
Evidence from U.K. emergency savings trials shows that automatic enrollment increases program uptake by almost 50 percentage points compared to opt-in schemes, with account balances more than quadrupling for those enrolled automatically, according to the report.
Implementation options outlined include using Tax-Free Savings Accounts or non-registered accounts, single-ledger versus two-ledger structures, and investment vehicles ranging from high-interest savings accounts to conservative balanced funds.
The report notes legal uncertainty exists in Canada for auto-enrollment in non-pension savings plans. The whitepaper recommends legislative and regulatory updates to allow automatic enrollment in employer-sponsored emergency savings programs, similar to how some workplace pension contributions function.
Payroll systems reach 85 percent of workforce
The authors note that payroll systems have the capacity to reach over 85 percent of the Canadian workforce, or more than 18 million people. Voluntary payroll contributions already fund flexible employee benefit programs in Canada, including employee stock purchase plans and lifestyle savings accounts.
Research from the U.K. found that approximately two-thirds of workplace emergency account holders made at least one withdrawal over 12 to 18 months, with average withdrawal amounts equivalent to 62 to 81 percent of available balance, demonstrating participants use accounts as intended.
Chris Enright, executive vice president and co-head of wealth at CI Financial Corp., said the approach could be transformative. “Just as auto-enrolment has revolutionized retirement savings through RRSPs and pensions, applying the same behavioural design to short-term savings can be a game changer,” he said.
Authors call for Canadian action
The whitepaper authors are Alina Kuimova, Charles Grace and Fabrizio DiMuro from Canada’s Financial Wellness Lab at Western University and the University of Winnipeg.
“Emergency savings accounts are no longer experimental. In the U.S., they are fast becoming standard in workplace benefits, and similar momentum is building across the U.K. Yet, in Canada, this solution remains largely unexplored,” the authors write.
Grace said financial literacy alone is not helping Canadians get a better handle on their finances. “They need a tangible solution, and I believe we’ve found it,” he said.
Tzanetakis said the costs are real and growing. “Supporting emergency savings and employee’s financial wellness is a strategic investment. ESAs offer a clear ROI for organizations that prioritize the financial resilience of their employees,” he said.
