Quebec’s one per cent training obligation — la loi sur les compétences, originally known as Bill 90 — became law in 1996. To date, the legislation remains unique in Canada.
It requires firms with an annual Quebec payroll of $1 million or more to allocate one per cent of their Quebec payrolls to the training of their workforce, or to pay an equivalent sum into a national government fund to support the development of workforce training.
However, this amount is not considered a tax — officially, it is considered a contribution to the Quebec government training fund. In addition, the one per cent training obligation has become a highly specialized and technical area of audit by Revenu Québec.
On the positive side, this law has highlighted the need for improved organization of the training marketplace in Quebec. To this end, the government created a process for trainer certification to provide structure in the training market. This process validates the skills of private providers.
Consequently, more than 4,000 trainers have been certified in the province. Furthermore, continuing education at public institutions such as school boards, colleges and universities has expanded to provide a better response to the training needs of employers.
On the negative side, Quebec companies are by far the most heavily taxed in Canada and the United States, according to an October 2012 study from the HEC Centre for Productivity and Prosperity at the University of Montreal. And Quebec companies pay 26 per cent more in taxes than the Canadian average, with payroll taxes mainly responsible for the higher tax burden.
“It seems quite clear that reducing the business tax burden generally (in particular payroll taxes), and paying for it by cutting the amount of government assistance for businesses, would benefit all businesses in Quebec and could foster productivity growth,” says Robert Gagné, director of the HEC Centre.
How it all works
Quebec is the first jurisdiction in North America to have a law that forces employers to invest in employee training. The act empowers the government to make regulations specifying how the act is to be applied — and the devil is certainly in the details.
To be recognized by the government, training expenditures must meet certain criteria as set out in the act and the regulations enacted for that purpose. These can be broken down into the following broad categories:
• course fees and the salary or wages of those taking courses
• costs related to those who provide training by a training service accredited by the government or in consultation with an employer’s in-house committee
• costs related to a training plan
• contributions paid by an employer in the construction industry to a training fund administered by the Commission de la construction du Québec.
There are two components of a claim for eligible training expenditures. The first is the monetary component, which consists of the cost reported. The second is the actual training itself. Moreover, the training activity must qualify as eligible training before any claim is acceptable.
In a given calendar year, an employer that spends less than one per cent of total payroll on eligible training is required to pay the difference between the one per cent and the amount actually spent into the Fonds national de formation de la main-d’oeuvre.
The contribution is payable on or before the day on which the employer is required to file its annual return in relation to salary or wages paid for that year, meaning the last day of February in each year in respect of the preceding year.
Therefore, it is the minister of revenue who collects the contributions payable by employers that have not met the minimum one per cent requirement. For this purpose, the minister has all the same rights and privileges he has in connection with the collection of taxes owed. So he may proceed by way of notice of assessment to claim the amounts he believes are owed to the fund by employers.
It is also the auditors at the Ministry of Revenue who audit employers. In the event of an audit, the necessary records must be kept on file for inspection by the minister of revenue. The documents include invoices for training taken with certified training institutions, time sheets for employees participating in the training, management committee approvals and verifications, and training plans in the case of in-house training.
Where eligible training expenditures exceed the one per cent minimum requirements, the excess is allowed as a carry-forward for future years. There is no time limit attached to this carry-forward, unless the employer’s annual payroll does not reach the threshold of $1 million for two consecutive years.
Noble idea but extra red tape
The act to foster the development of manpower training was intended to improve labour qualifications and,
thereby, foster employment, labour adjustment, integration into the workforce and labour mobility. Although the spirit of the legislation is noble, recession-battered companies are having enough trouble meeting payrolls without having to battle through a plethora of government red tape. Business executives are complaining about yet another set of rules and regulations to obey.
Whether you agree or disagree with Quebec’s one per cent training obligation, the one constant regarding this obligation appears to be its ever-changing evolvement and amendments. Prudence dictates the use and informed guidance of a third party specialist with a view to limiting the exposure to a Revenu Québec notice of assessment.
Like death and taxes, the manpower training contribution is inevitable. Early planning and proper direction will help mitigate the financial risk.
Larry Weiser is president and CEO of LIW Consultants in Montreal, specializing in government compliance programs and registered as an accredited training firm with the Commission des partenaires du marché. He can be reached at email@example.com or for more information visit www.liwconsultants.ca.