Understanding social security agreements; Summer students and vacation pay; Summer students and statutory holidays
Question: We are sending some employees to work overseas later this year. I have been asked to look into social security agreements for the countries to which they will be assigned. What are these agreements and why are they important?
Answer: Given the complexity of social security legislation, employers that want to fully understand an agreement with a particular country are advised to read the text of the agreement and consult with a tax and social security planning expert. What follows below is a general overview of social security agreements.
Social security agreements allow countries with similar plans for old age, retirement, disability and survivor benefits to co-ordinate programs for employees who are temporarily assigned to work in those countries. In Canada, the programs covered under the social security agreements are the Canada Pension Plan (CPP) and Old Age Security (OAS) program.
To date, the Canadian government has signed social security agreements (and social security conventions) with more than 50 countries, although some of the agreements are not yet in force. (Quebec, which administers the Quebec Pension Plan, has also signed social security agreements with many countries.)
Canada enters into the agreements to:
•ensure that Canadians who work outside the country temporarily continue to pay into only the CPP and not into both the CPP and the host country’s social security plan for the same work
•reduce restrictions based on nationality that may stop Canadians from receiving benefits under the social security laws of another country
•make it easier for Canadians to be eligible for benefits by allowing them to combine all pension credits they earned in Canada and in other countries where they lived or worked
•reduce or eliminate barriers on paying pensions abroad.
The first point, which enables Canadians temporarily working abroad to avoid "double taxation" is also important for employers since they, too, would only have to make contributions to the CPP rather than having to make employer contributions to both plans for the same work.
To ensure that a social security agreement will apply to an employee going to work in another country, the Canadian employer must fill out and file with the Canada Revenue Agency (CRA) a Certificate of Coverage form applicable to the country to which the employee is going to work temporarily.
The forms are used to certify the employee is covered under the CPP and is, therefore, exempt from the other country’s social security laws.
The forms are available on the CRA’s website and can be filled out online. Once approved, the CRA issues a certificate. It is valid for the length of time noted in the document, provided that the employee’s employment situation remains the same.
If an employer is sending an employee to work in a country where there is no social security agreement, there are still steps it can take to ensure the employee remains covered under the CPP, although the employee and the employer may have to pay into both Canada’s and the host country’s social security plan.
If the employee is on a short-term assignment to another country, he can continue to be covered under the CPP, as long as:
•the employment qualifies under the Canada Pension Plan Regulations as employment that would be pensionable employment if it were in Canada
•the employee ordinarily reports for work at the employer’s place of business in Canada
•the employee is a resident in Canada and paid at or from the employer’s workplace in Canada.
Employers in Canada that want to cover employees under the CPP while they are working in a country that has not signed a social security agreement with Canada can do so by filing form CPT8, Application and Undertaking for Coverage of Employment in a Country Other Than Canada under the Canada Pension Plan with the CRA. Certain conditions will apply.
More information about social security agreements, including the text of all the agreements, is available at
www.servicecanada.gc.ca/eng/isp/ibfa/intlben.shtml.
The Certificate of Coverage forms are available on the CRA website at
www.cra-arc.gc.ca/menu/AFAF_C-e.html.
Summer students and vacation pay
Question: We have hired students to work for us over the summer. Are they entitled to vacation pay?
Answer: None of the jurisdictions in Canada specifically exclude summer students from vacation pay standards.
Unless the students are excluded from vacation standards for some other reason under the legislation, they are entitled to vacation pay, just like other employees.
Summer students and statutory holidays
Question: Are we required to pay summer students for statutory holidays that occur while they are working for us?
Answer: Summer students are entitled to statutory holiday pay if they meet employment standards minimum eligibility requirements and are not excluded under employment standards law for some other reason.
Many jurisdictions have minimum eligibility requirements that set out the number of days that an employee must work before being eligible for a paid statutory holiday.
