From personal vehicles for business use to calculating vacation pay in different jurisdictions, the following questions were fielded by Carswell’s payroll hotline service. Answers are provided courtesy of The Canadian Payroll Manual and The Canadian Payroll Manager newsletter, published by Carswell.
Question: We want to provide compensation to our employees for using their own vehicle for business use. This amount would be in addition to their regular salaries or wages. What are some of the options available to an employer and the tax implications for each of those options?
Answer: The following are some of the suggested methods of paying a car allowance and the associated tax implications for each of those methods:
•Reimburse a reasonable business per kilometre rate. If an employer pays an allowance based solely on the number of business kilometres driven in the year at a reasonable rate and the employee does not receive an additional reimbursement (such as gasoline), the allowance is deemed to be non-taxable and is not reported at year end.
The Canada and Customs and Revenue Agency (CCRA) has deemed a reasonable rate for 2003 to be 42 cents per kilometre for the first 5,000 kilometres and 36 cents per kilometre for additional kilometres. If the employee travels in the Northwest Territories, Yukon or Nunavut, employers can pay an additional four cents per kilometre.
•A per-kilometre allowance that is not considered reasonable. If an employer pays an employee an allowance based on a per kilometre rate that is too low or too high in the CCRA’s view, it will not be considered reasonable. In this situation the allowance is included as income and will be considered taxable.
•A straight fixed allowance. If an employer pays an employee a straight fixed amount per month (for example $450), this flat amount would be considered taxable income as the payment was not calculated solely on the basis of business kilometres driven and this amount would be reported on the T4.
•Pay both a flat-rate allowance plus a reasonable per kilometre allowance. If an employer pays both a flat car allowance plus provide a reasonable per kilometre reimbursement, the total combined allowance is included in income and subject to all statutory deductions such as Canada Pension Plan (CPP), Quebec Pension Plan (QPP), Employment Insurance (EI) and federal and provincial income taxes.
Question: We pay employees a percentage of their vacationable earnings when they take vacation time. Are we required to include the previously paid vacation in the calculation of the vacation pay?
Answer: The provinces and territories vary on considering whether previously paid vacation should be included when calculating vacation pay for the following year. The following are guidelines for each jurisdiction:
•Canada Labour Code: The previously paid vacation is included when calculating vacation pay.
•Alberta: The previously paid vacation is included when calculating vacation pay. But there is an exception. If the employer pays vacation pay with each pay, the employer is not required to calculate the vacation pay on previously paid vacation pay. But in the employee’s fifth year, when the vacation entitlement is three weeks, the employer must add a one time adjustment of two per cent of the previous year’s gross regular earnings to the vacation pay. It must be paid no later than the next regularly scheduled pay day after the employee begins the vacation.
•British Columbia: The Employment Standards Act includes previously paid vacation when calculating vacation pay for the following year.
•Manitoba: The Employment Standards Code includes the previously paid vacation when calculating vacation pay for the following year.
•New Brunswick: The Employment Standards Act excludes previously paid vacation when calculating vacation pay for the following year.
•Newfoundland and Labrador: The Employment Standards Act includes previously paid vacation when calculating vacation pay for the following year.
•Northwest Territories and Nunavut: The Labour Standards Act does not clearly address this issue. Employers are advised to contact the Ministry of Labour.
•Nova Scotia: The Employment Standards Code excludes previously paid vacation when calculating vacation pay for the following year.
•Ontario: The Employment Standards Act excludes previously paid vacation when calculating vacation pay for the following year.
•Prince Edward Island: The Employment Standards Act excludes previously paid vacation when calculating vacation pay for the following year.
•Quebec: The Commission des normes du travail includes previously paid vacation when calculating vacation pay for the following year.
•Saskatchewan: According to the Employment Standards Act, previously paid vacation is included when calculating vacation pay for the next year.
•Yukon Territory: The Employment Standards Act excludes the previously paid vacation when calculating vacation pay for the following year.
Question: What is our responsibility as an employer if we hire an individual with a Social Insurance Number (SIN) beginning with nine?
Answer: SINs that begin with a nine are issued to individuals who are not Canadian citizens or permanent residents. They are issued a SIN for work purposes. The SIN will be valid for the length of their stay in Canada as determined by Citizenship and Immigration Canada. They are required to have an employment contract and a valid working permit that allows them to work for that employer.
Employers should be aware that all SINs beginning with a nine will now have an expiry date. If the SIN card does not have an expiry date, then the number will be valid until April 3, 2004.
Question: We will have an extra pay period in 2003. How should we calculate the statutory deductions for the extra period?
Answer: Employers with a weekly pay period will have 53 pays every seven years instead of the usual 52 pays. Employers who pay every two weeks will have 27 pays every 11 years instead of the usual 26 pays.
Employers can choose from the following options to calculate CPP and QPP deductions when there is an extra pay period in a year:
•prorate the yearly basic exemption amount of $3,500 over 53 pay periods for a weekly pay (instead of the usual 52) and 27 pay periods for a biweekly pay period (instead of the usual 26); or
•apply the regular pay period exemption of $67.30 ($3,500 divided by 52 pay periods) for a weekly pay period and $134.61 ($3,500 divided by 26 pay periods) for a biweekly pay period throughout the course of the year. For the extra pay period in a year, multiply the pensionable earnings by the current year’s CPP or QPP contribution rate of 4.95 per cent provided the employee has not reached the yearly maximum contribution of $1,801.80 for 2003
EI premiums are calculated on a first dollar earned basis. When there is an extra pay in a year, simply apply the current year’s EI rate of 2.1 per cent to the insurable earnings in the 53rd or 27th pay period provided the employee has not reached the 2003 annual maximum of $819.
For federal and provincial or territorial income tax deduction, use the regular pay period deduction tables.
Question: What is the minimum call-in pay for an employee who reports to work but finds work is not available?
Answer: The following lists sets out the minimum requirements set by employment and labour standards in each jurisdiction.
Keep in mind that if a company policy, contract of employment or collective agreement provides better than the minimum standards set out by employment and labour standards then the greater benefit will prevail.
•Canada Labour Code. An employee who reports for work must be paid call-in pay for three hours at her regular rate whether or not the employee performs any work.
•Alberta. An employee who reports for work must be paid call in pay of at least:
•three hours at minimum wage;
•two hours at minimum wage if employed on a part-time basis in a recreational or athletic program by a municipality, Métis settlement or a non-profit organization;
•two hours at minimum wage if employed as a school bus driver; or
•two hours at minimum wage if the individual is an adolescent employed on a day on which she is required to attend school.
•British Columbia. Employees who report to work and are scheduled to work eight hours or less must be paid for two hours at the regular rate or, if they worked more than the two hours, they must be paid for the hours they worked unless they are unfit to work.
Employees who report to work and are scheduled to work more than eight hours must be paid for four hours at their regular rate or, if they have worked in excess of the four hours, they must be paid for the entire period they worked unless they are unfit to work or the work is stopped for a reason beyond the employer’s control. In that case, employees must be paid at least two hours’ pay at their regular rate.
•Manitoba. Employees called in to work on a day that is not their regular work day must be paid at least three hours at their regular rate unless their regular hours of work on a regular day of work are three hours or less. This does not apply to employees of a restaurant, hotel or theatre in a rural area.
•New Brunswick. There is no legislation regarding call-in pay.
•Newfoundland and Labrador. Employees who are required to report for work must be paid at least three hours at the minimum wage or be allowed to work at least three consecutive hours.
•Northwest Territories/Nunavut. An employee who is required to report for work that was not scheduled in advance must be paid for four hours at her regular rate. If work was scheduled, then the employee is paid only for the hours actually worked.
•Nova Scotia. An employee who is required to report for work outside her scheduled working hours must be paid not less than three hours at the minimum wage. This does not apply to police officers, firefighters, hospital workers who must work in an emergency or farm workers.
•Ontario. An employee who is required to report for work must be paid not less than three hours at minimum wage unless the employee is a student or has been hired to work less than three hours per day. The legislation does not apply if the employer is unable to provide work for the employee because of fire, lightning, power failure, storms or other similar causes beyond the employer’s control.
•Prince Edward Island. An employee required to report to work must be paid not less than three hours at the regular hourly rate.
•Quebec. An employee who is required to report for work must be paid not less than three hours at the regular rate. This does not apply where an employee’s work requires her to be present several times in the same day for less than three hours at a time, such as a school bus driver.
•Saskatchewan. An employee required to report for work, other than for overtime, must be paid not less than three hours at the minimum wage.
•Yukon. An employee required to report for work must be paid at least two hours at her regular rate unless:
•the employee is unfit to carry out her job duties;
•the employer tried to give the employee reasonable notice not to report to work;
•inclement weather or another cause beyond the employer’s control prevents giving the employee reasonable notice;
•the employee works at least two hours of the shift; or
•the employer has been granted an exemption because the work the employees do is generally for less than two hours.
For more information visit www.carswell.com/payroll or call (800) 387-5164.
Question: We want to provide compensation to our employees for using their own vehicle for business use. This amount would be in addition to their regular salaries or wages. What are some of the options available to an employer and the tax implications for each of those options?
Answer: The following are some of the suggested methods of paying a car allowance and the associated tax implications for each of those methods:
•Reimburse a reasonable business per kilometre rate. If an employer pays an allowance based solely on the number of business kilometres driven in the year at a reasonable rate and the employee does not receive an additional reimbursement (such as gasoline), the allowance is deemed to be non-taxable and is not reported at year end.
The Canada and Customs and Revenue Agency (CCRA) has deemed a reasonable rate for 2003 to be 42 cents per kilometre for the first 5,000 kilometres and 36 cents per kilometre for additional kilometres. If the employee travels in the Northwest Territories, Yukon or Nunavut, employers can pay an additional four cents per kilometre.
•A per-kilometre allowance that is not considered reasonable. If an employer pays an employee an allowance based on a per kilometre rate that is too low or too high in the CCRA’s view, it will not be considered reasonable. In this situation the allowance is included as income and will be considered taxable.
•A straight fixed allowance. If an employer pays an employee a straight fixed amount per month (for example $450), this flat amount would be considered taxable income as the payment was not calculated solely on the basis of business kilometres driven and this amount would be reported on the T4.
•Pay both a flat-rate allowance plus a reasonable per kilometre allowance. If an employer pays both a flat car allowance plus provide a reasonable per kilometre reimbursement, the total combined allowance is included in income and subject to all statutory deductions such as Canada Pension Plan (CPP), Quebec Pension Plan (QPP), Employment Insurance (EI) and federal and provincial income taxes.
Question: We pay employees a percentage of their vacationable earnings when they take vacation time. Are we required to include the previously paid vacation in the calculation of the vacation pay?
Answer: The provinces and territories vary on considering whether previously paid vacation should be included when calculating vacation pay for the following year. The following are guidelines for each jurisdiction:
•Canada Labour Code: The previously paid vacation is included when calculating vacation pay.
•Alberta: The previously paid vacation is included when calculating vacation pay. But there is an exception. If the employer pays vacation pay with each pay, the employer is not required to calculate the vacation pay on previously paid vacation pay. But in the employee’s fifth year, when the vacation entitlement is three weeks, the employer must add a one time adjustment of two per cent of the previous year’s gross regular earnings to the vacation pay. It must be paid no later than the next regularly scheduled pay day after the employee begins the vacation.
•British Columbia: The Employment Standards Act includes previously paid vacation when calculating vacation pay for the following year.
•Manitoba: The Employment Standards Code includes the previously paid vacation when calculating vacation pay for the following year.
•New Brunswick: The Employment Standards Act excludes previously paid vacation when calculating vacation pay for the following year.
•Newfoundland and Labrador: The Employment Standards Act includes previously paid vacation when calculating vacation pay for the following year.
•Northwest Territories and Nunavut: The Labour Standards Act does not clearly address this issue. Employers are advised to contact the Ministry of Labour.
•Nova Scotia: The Employment Standards Code excludes previously paid vacation when calculating vacation pay for the following year.
•Ontario: The Employment Standards Act excludes previously paid vacation when calculating vacation pay for the following year.
•Prince Edward Island: The Employment Standards Act excludes previously paid vacation when calculating vacation pay for the following year.
•Quebec: The Commission des normes du travail includes previously paid vacation when calculating vacation pay for the following year.
•Saskatchewan: According to the Employment Standards Act, previously paid vacation is included when calculating vacation pay for the next year.
•Yukon Territory: The Employment Standards Act excludes the previously paid vacation when calculating vacation pay for the following year.
Question: What is our responsibility as an employer if we hire an individual with a Social Insurance Number (SIN) beginning with nine?
Answer: SINs that begin with a nine are issued to individuals who are not Canadian citizens or permanent residents. They are issued a SIN for work purposes. The SIN will be valid for the length of their stay in Canada as determined by Citizenship and Immigration Canada. They are required to have an employment contract and a valid working permit that allows them to work for that employer.
Employers should be aware that all SINs beginning with a nine will now have an expiry date. If the SIN card does not have an expiry date, then the number will be valid until April 3, 2004.
Question: We will have an extra pay period in 2003. How should we calculate the statutory deductions for the extra period?
Answer: Employers with a weekly pay period will have 53 pays every seven years instead of the usual 52 pays. Employers who pay every two weeks will have 27 pays every 11 years instead of the usual 26 pays.
Employers can choose from the following options to calculate CPP and QPP deductions when there is an extra pay period in a year:
•prorate the yearly basic exemption amount of $3,500 over 53 pay periods for a weekly pay (instead of the usual 52) and 27 pay periods for a biweekly pay period (instead of the usual 26); or
•apply the regular pay period exemption of $67.30 ($3,500 divided by 52 pay periods) for a weekly pay period and $134.61 ($3,500 divided by 26 pay periods) for a biweekly pay period throughout the course of the year. For the extra pay period in a year, multiply the pensionable earnings by the current year’s CPP or QPP contribution rate of 4.95 per cent provided the employee has not reached the yearly maximum contribution of $1,801.80 for 2003
EI premiums are calculated on a first dollar earned basis. When there is an extra pay in a year, simply apply the current year’s EI rate of 2.1 per cent to the insurable earnings in the 53rd or 27th pay period provided the employee has not reached the 2003 annual maximum of $819.
For federal and provincial or territorial income tax deduction, use the regular pay period deduction tables.
Question: What is the minimum call-in pay for an employee who reports to work but finds work is not available?
Answer: The following lists sets out the minimum requirements set by employment and labour standards in each jurisdiction.
Keep in mind that if a company policy, contract of employment or collective agreement provides better than the minimum standards set out by employment and labour standards then the greater benefit will prevail.
•Canada Labour Code. An employee who reports for work must be paid call-in pay for three hours at her regular rate whether or not the employee performs any work.
•Alberta. An employee who reports for work must be paid call in pay of at least:
•three hours at minimum wage;
•two hours at minimum wage if employed on a part-time basis in a recreational or athletic program by a municipality, Métis settlement or a non-profit organization;
•two hours at minimum wage if employed as a school bus driver; or
•two hours at minimum wage if the individual is an adolescent employed on a day on which she is required to attend school.
•British Columbia. Employees who report to work and are scheduled to work eight hours or less must be paid for two hours at the regular rate or, if they worked more than the two hours, they must be paid for the hours they worked unless they are unfit to work.
Employees who report to work and are scheduled to work more than eight hours must be paid for four hours at their regular rate or, if they have worked in excess of the four hours, they must be paid for the entire period they worked unless they are unfit to work or the work is stopped for a reason beyond the employer’s control. In that case, employees must be paid at least two hours’ pay at their regular rate.
•Manitoba. Employees called in to work on a day that is not their regular work day must be paid at least three hours at their regular rate unless their regular hours of work on a regular day of work are three hours or less. This does not apply to employees of a restaurant, hotel or theatre in a rural area.
•New Brunswick. There is no legislation regarding call-in pay.
•Newfoundland and Labrador. Employees who are required to report for work must be paid at least three hours at the minimum wage or be allowed to work at least three consecutive hours.
•Northwest Territories/Nunavut. An employee who is required to report for work that was not scheduled in advance must be paid for four hours at her regular rate. If work was scheduled, then the employee is paid only for the hours actually worked.
•Nova Scotia. An employee who is required to report for work outside her scheduled working hours must be paid not less than three hours at the minimum wage. This does not apply to police officers, firefighters, hospital workers who must work in an emergency or farm workers.
•Ontario. An employee who is required to report for work must be paid not less than three hours at minimum wage unless the employee is a student or has been hired to work less than three hours per day. The legislation does not apply if the employer is unable to provide work for the employee because of fire, lightning, power failure, storms or other similar causes beyond the employer’s control.
•Prince Edward Island. An employee required to report to work must be paid not less than three hours at the regular hourly rate.
•Quebec. An employee who is required to report for work must be paid not less than three hours at the regular rate. This does not apply where an employee’s work requires her to be present several times in the same day for less than three hours at a time, such as a school bus driver.
•Saskatchewan. An employee required to report for work, other than for overtime, must be paid not less than three hours at the minimum wage.
•Yukon. An employee required to report for work must be paid at least two hours at her regular rate unless:
•the employee is unfit to carry out her job duties;
•the employer tried to give the employee reasonable notice not to report to work;
•inclement weather or another cause beyond the employer’s control prevents giving the employee reasonable notice;
•the employee works at least two hours of the shift; or
•the employer has been granted an exemption because the work the employees do is generally for less than two hours.
For more information visit www.carswell.com/payroll or call (800) 387-5164.
