Paying non-eligible employees who work on a statutory holiday; Reporting PAs for employees on unpaid leave; Source deductions on overtime lump-sum payments
QUESTION: What are the rules for paying employees who are not eligible for a paid statutory holiday, but who work on the holiday? The employee would not be working any overtime hours.
ANSWER: Statutory holidays are governed by provincial and territorial labour standards laws and the Canada Labour Code for federally regulated workers. The following requirements apply to employees covered by the statutory holiday provisions of the legislation:
Canada Labour Code: Pay non-eligible employees 1.5 times their regular rate for the hours worked. If the employees work in a continuous operation, pay them their regular rate of wages for the time worked.
AlbertA, B.C.: Pay non-eligible employees their regular rate for the hours worked.
Manitoba, New Brunswick: Pay non-eligible employees 1.5 times their regular rate for the hours worked.
Newfoundland and Labrador: Pay non-eligible employees either two times their regular rate for the hours worked or give them an additional day off with pay within 30 days or an extra vacation day, depending on what the employee chooses.
Northwest Territories, Nova Scotia, Nunavut: Pay non-eligible employees their regular rate for the hours worked.
Ontario: Pay non-eligible employees 1.5 times their regular hourly rate for any hours worked on the holiday.
Prince Edward Island: The Employment Standards Board advises that employers pay non-eligible employees their regular rate for the hours worked.
Quebec: All employees covered by the statutory holiday provisions of the province’s Act respecting labour standards are entitled to paid statutory holidays unless they are absent without consent or valid cause on their last scheduled working day before the holiday or their first scheduled working day after the holiday. If the employee works on a holiday, the employer must either pay the employee his or her regular rate for the hours worked plus pay 1/20th of the wages earned during the four complete weeks before the week of the holiday (called a compensatory indemnity) or pay the employee his or her regular rate for the hours worked plus give the employee a day off with a compensatory indemnity within three weeks before or after the holiday.
Saskatchewan: All employees covered by the Saskatchewan Employment Act’s statutory holiday provisions are entitled to paid statutory holidays. Pay employees who work on a holiday statutory holiday pay plus 1.5 times their regular daily wages for the hours worked. Different payment rules may apply for employees working in certain industries.
Yukon: The Employment Standards Board advises that employers pay all employees who work on a statutory holiday either 1.5 times their regular rate for the hours worked plus statutory holiday pay or pay their regular rate for the hours worked plus another day off. The day may be added to the employee’s vacation.
Reporting PAs for employees on unpaid leave
QUESTION: We have some employees who are on unpaid leaves of absence. They are still taking part in the company pension plan and earning benefits under the plan. Do we have to report a pension adjustment (PA) for these employees?
ANSWER: Yes, you must report a PA for these employees. A PA is the measure of the benefit or accrual an individual earns in a year within a registered pension plan or deferred profit-sharing plan that an employer sponsors. The PA is important because it can reduce the amount that an individual can contribute to a registered retirement savings plan.
For employees on an unpaid leave of absence who continue to accrue a pension benefit, report the PA in box (52) on a T4 even if the employee did not earn employment income in the year.
Administrators of multi-employer plans may report the benefit on a T4A, but must first apply to the Canada Revenue Agency’s (CRA’s) Registered Plans Directorate to do so.
If the PA is zero, leave the box blank.
For information, refer to the CRA’s Pension Adjustment Guide (T4084).
Source deductions on overtime lump-sum payments
QUESTION: We are paying out banked overtime in a lump sum payment to some employees. How do we calculate the source deductions?
ANSWER: Overtime pay is subject to source deductions for Canada/Quebec Pension Plan (C/QPP), employment insurance (EI), Quebec Parental Insurance Plan (QPIP) and income tax.
When overtime pay is paid in a later pay period than the one in which it was earned, calculate the C/QPP contributions by multiplying the payment by the current percentage rate (the 2015 CPP rate is 4.95 per cent and the QPP rate is 5.25 per cent), provided the employee has not reached the maximum C/QPP contribution for the year ($2,479.95 for CPP and $2,630.25 for QPP).
For EI and QPIP, multiply the payment by the current (2015) premium percentage rates for EI (1.88 per cent for employees outside of Quebec and 1.54 per cent for employees in Quebec), up to an annual maximum insurable earnings of $49,500 for 2015 and for QPIP (0.559 per cent for 2015), provided the employee has not reached the annual maximum insurable earnings of $70,000. (The maximum employee EI premium for 2015 is $930.60 for employees outside Quebec and $762.30 for employees in Quebec.
The maximum employee premium for the QPIP for 2015 is $391.30.)
To calculate income tax deductions, use the bonus method of taxation. The bonus method is a formula used to calculate the amount of income tax to deduct from a bonus, incentive or award. The formula is T = P (B – A), where:
T =income tax due on bonus, incentive, or award
P = number of pay periods in a year
A = tax on usual earnings for the pay period
B = tax on usual earnings for the pay period, plus the amount of the bonus (incentive or award) divided by the number of pay periods in the year.
