Employers need to pay attention to differences in source deduction and employment standards rules that may apply
This summer, many teenagers will be starting their first paid job. They may be excited about earning their “own” money or nervous about embarking on this new phase of life.
Whether employers are hiring summer students or part-time workers throughout the year, they need to follow source deduction and employment standards rules that apply to young workers.
Not only is this good human resources practice, it may also save penalties and fines that may result from a Canada Revenue Agency (CRA) audit or employment standards inspection.
In Ontario, for example, the labour ministry is currently conducting a provincewide employment standards inspection blitz focusesd on young workers (under 25 years) employed in food services, retail, construction and other sectors.
To help payroll and HR departments stay on top of employment rules related to hiring youth, here is an overview:
Social insurance number: Young people, like other employees, need a social insurance number to do paid work. There is no minimum age for applying for a SIN. If they do not have one, the employer must inform them they need to go to Service Canada to apply for one.
“Within three days of their start date, they should be able to show proof that they have applied for a social insurance number and provide you with the number once they receive it,” says Patricia Joncas, a payroll consultant with Carswell’s Payroll Consulting Group.
Source deductions: Depending on their age and circumstances, young employees may be subject to source deductions for CPP, EI and income tax or only one or two of the deductions.
CPP: Employees under 18 do not contribute to the CPP (or QPP in Quebec).
“They need to know whether the CPP contributions are going to come off immediately or sometime during the period of time (the young person) will be employed,” says Joncas.
Once 18, payroll has to start deducting CPP contributions if the employee works in pensionable employment. Contributions begin in the first pay dated in the month after the employee turns 18. (For QPP, deductions begin on the first day of the month following the month an employee turns 18.)
To calculate CPP contributions, payroll has to prorate the employee’s maximum yearly contribution over the number of full months in the year after the employee turns 18.
While most payroll departments follow these rules, they may not always inform employees of them, which could leave some young workers surprised when their first pay after turning 18 includes a new deduction.
For young people, this may be the first time they have heard about CPP, EI or income tax.
“(Employers) should be providing an explanation to students about their pay and what the statutory deductions are and what is going to come off to familiarize them with their pay cheque. A lot of them are very naive—they have no clue,” Joncas says.
In addition, she says employers could inform young employees how they will be paid (cheque or direct deposit), when and what information will be included on their pay statement.
She adds while smaller companies “may not have the manpower or the time to do it, it would be something that companies should consider just to explain to them what the expectations are and this is your pay cheque and this is what happens.”
EI: While CPP contributions are age dependent, employers have to deduct EI premiums from all employees working in insurable employment.
“They could be 14 working in a day camp and they would be subject to EI. The first dollar is insurable,” Joncas says.
Income tax: Like EI, there is no age requirement. Some young workers, however, may pay little to none.
“It all depends on what is said on the TD1 form. That is going to determine the tax bracket and what amount of tax is going to be deducted, if any,” says Joncas.
It is essential young employees complete a federal and provincial (if applicable) TD1 form, even if they are only working for a few months or a few hours per week during the school year.
Record of employment: Employers have to complete and issue an ROE when an employee’s employment terminates. This applies whether the employee works for the employer throughout the year or only in the summer. It is also required regardless of whether the employee plans to apply for employment insurance benefits.
“Do an ROE even if they aren’t going to use it. Completing an ROE, that’s our obligation as an employer,” Joncas says.
T4: At year end, employers have to issue T4s for all employees, regardless of their age or whether they plan to file a personal income tax return. If the young person is a summer student, it is especially important to remind them at the end of the employment period to notify the payroll department if they change their mailing address.
Employment standards: When it comes to employment conditions, employment standards rules generally apply to young employees, meaning they are entitled to vacation pay, paid statutory holidays, overtime pay and termination pay as long as they are eligible.
Some may be exempt from certain standards depending on the type of work they do. For example, in Alberta and Ontario, students who instruct children or work as counsellors at vacation or recreation camps run by non-profit organizations are not covered by overtime or statutory holiday pay requirements.
Employers need to be aware of age restrictions.
“Depending on what type of sector the student is being hired to work in, there are minimum age requirements that have to be adhered to and some companies don’t always follow that,” says Joncas.
For instance, in Ontario, young people may work in offices, stores or restaurants (as servers) once they turn 14. However, they have to be at least 15 to work in a factory and 18 to work in an underground mine or at the working face of a surface mine.
In many jurisdictions, employers may have to apply to employment standards for a permit to hire young people of certain ages or obtain the written consent of their parents. Even where permission is not required, there may be restrictions on work hours.
“Be mindful of, depending on the jurisdiction, if there are any limitations as to the number of hours the student can work. It’s different in all provinces, so there might be a limitation especially if it is during the school months,” says Joncas.
For example, in Alberta, employees between the ages of 12 and 14 may not work more than two hours on a school day or eight hours on a non-school day. They are not allowed to work between 9 p.m. and 6 a.m.
By comparison, British Columbia restricts working hours to a maximum of four on a school day and up to 20 hours a week in a week with five school days for employees aged 12 to 14. On a non-school day, these employees may work no more than seven hours per day, unless the employer has prior written approval from the director. They are not allowed to work more than 35 hours per week.
Employers also have to comply with minimum wage rules. In most jurisdictions, young workers are entitled to be paid at least the general minimum wage rate in their province/territory.
Exceptions may apply for types of work. In provinces such as Alberta, Manitoba, Nova Scotia and Ontario, students who instruct children or work as counsellors at vacation or recreation camps run by non-profit organizations are not covered under minimum wage rules.
Some provinces have specific minimum wage rates that are lower than the general rate for inexperienced workers (Nova Scotia) or for workers who receive tips, especially if they serve liquor (Alberta, British Columbia and Quebec). In Ontario, there is a specific minimum wage rate for students under 18 who work fewer than 28 hours a week or more than 28 hours during school vacation.
Knowing and following the rules for employing young people will help keep employers out of trouble with the CRA and employment standards boards. To ensure compliance, Joncas recommends that employers regularly compare their payroll and HR policies to current legislative requirements.
Whether employers are hiring summer students or part-time workers throughout the year, they need to follow source deduction and employment standards rules that apply to young workers.
Not only is this good human resources practice, it may also save penalties and fines that may result from a Canada Revenue Agency (CRA) audit or employment standards inspection.
In Ontario, for example, the labour ministry is currently conducting a provincewide employment standards inspection blitz focusesd on young workers (under 25 years) employed in food services, retail, construction and other sectors.
To help payroll and HR departments stay on top of employment rules related to hiring youth, here is an overview:
Social insurance number: Young people, like other employees, need a social insurance number to do paid work. There is no minimum age for applying for a SIN. If they do not have one, the employer must inform them they need to go to Service Canada to apply for one.
“Within three days of their start date, they should be able to show proof that they have applied for a social insurance number and provide you with the number once they receive it,” says Patricia Joncas, a payroll consultant with Carswell’s Payroll Consulting Group.
Source deductions: Depending on their age and circumstances, young employees may be subject to source deductions for CPP, EI and income tax or only one or two of the deductions.
CPP: Employees under 18 do not contribute to the CPP (or QPP in Quebec).
“They need to know whether the CPP contributions are going to come off immediately or sometime during the period of time (the young person) will be employed,” says Joncas.
Once 18, payroll has to start deducting CPP contributions if the employee works in pensionable employment. Contributions begin in the first pay dated in the month after the employee turns 18. (For QPP, deductions begin on the first day of the month following the month an employee turns 18.)
To calculate CPP contributions, payroll has to prorate the employee’s maximum yearly contribution over the number of full months in the year after the employee turns 18.
While most payroll departments follow these rules, they may not always inform employees of them, which could leave some young workers surprised when their first pay after turning 18 includes a new deduction.
For young people, this may be the first time they have heard about CPP, EI or income tax.
“(Employers) should be providing an explanation to students about their pay and what the statutory deductions are and what is going to come off to familiarize them with their pay cheque. A lot of them are very naive—they have no clue,” Joncas says.
In addition, she says employers could inform young employees how they will be paid (cheque or direct deposit), when and what information will be included on their pay statement.
She adds while smaller companies “may not have the manpower or the time to do it, it would be something that companies should consider just to explain to them what the expectations are and this is your pay cheque and this is what happens.”
EI: While CPP contributions are age dependent, employers have to deduct EI premiums from all employees working in insurable employment.
“They could be 14 working in a day camp and they would be subject to EI. The first dollar is insurable,” Joncas says.
Income tax: Like EI, there is no age requirement. Some young workers, however, may pay little to none.
“It all depends on what is said on the TD1 form. That is going to determine the tax bracket and what amount of tax is going to be deducted, if any,” says Joncas.
It is essential young employees complete a federal and provincial (if applicable) TD1 form, even if they are only working for a few months or a few hours per week during the school year.
Record of employment: Employers have to complete and issue an ROE when an employee’s employment terminates. This applies whether the employee works for the employer throughout the year or only in the summer. It is also required regardless of whether the employee plans to apply for employment insurance benefits.
“Do an ROE even if they aren’t going to use it. Completing an ROE, that’s our obligation as an employer,” Joncas says.
T4: At year end, employers have to issue T4s for all employees, regardless of their age or whether they plan to file a personal income tax return. If the young person is a summer student, it is especially important to remind them at the end of the employment period to notify the payroll department if they change their mailing address.
Employment standards: When it comes to employment conditions, employment standards rules generally apply to young employees, meaning they are entitled to vacation pay, paid statutory holidays, overtime pay and termination pay as long as they are eligible.
Some may be exempt from certain standards depending on the type of work they do. For example, in Alberta and Ontario, students who instruct children or work as counsellors at vacation or recreation camps run by non-profit organizations are not covered by overtime or statutory holiday pay requirements.
Employers need to be aware of age restrictions.
“Depending on what type of sector the student is being hired to work in, there are minimum age requirements that have to be adhered to and some companies don’t always follow that,” says Joncas.
For instance, in Ontario, young people may work in offices, stores or restaurants (as servers) once they turn 14. However, they have to be at least 15 to work in a factory and 18 to work in an underground mine or at the working face of a surface mine.
In many jurisdictions, employers may have to apply to employment standards for a permit to hire young people of certain ages or obtain the written consent of their parents. Even where permission is not required, there may be restrictions on work hours.
“Be mindful of, depending on the jurisdiction, if there are any limitations as to the number of hours the student can work. It’s different in all provinces, so there might be a limitation especially if it is during the school months,” says Joncas.
For example, in Alberta, employees between the ages of 12 and 14 may not work more than two hours on a school day or eight hours on a non-school day. They are not allowed to work between 9 p.m. and 6 a.m.
By comparison, British Columbia restricts working hours to a maximum of four on a school day and up to 20 hours a week in a week with five school days for employees aged 12 to 14. On a non-school day, these employees may work no more than seven hours per day, unless the employer has prior written approval from the director. They are not allowed to work more than 35 hours per week.
Employers also have to comply with minimum wage rules. In most jurisdictions, young workers are entitled to be paid at least the general minimum wage rate in their province/territory.
Exceptions may apply for types of work. In provinces such as Alberta, Manitoba, Nova Scotia and Ontario, students who instruct children or work as counsellors at vacation or recreation camps run by non-profit organizations are not covered under minimum wage rules.
Some provinces have specific minimum wage rates that are lower than the general rate for inexperienced workers (Nova Scotia) or for workers who receive tips, especially if they serve liquor (Alberta, British Columbia and Quebec). In Ontario, there is a specific minimum wage rate for students under 18 who work fewer than 28 hours a week or more than 28 hours during school vacation.
Knowing and following the rules for employing young people will help keep employers out of trouble with the CRA and employment standards boards. To ensure compliance, Joncas recommends that employers regularly compare their payroll and HR policies to current legislative requirements.
