Sources deduction rules for top-up payments; Taxing employee prizes; Coverage under EI versus QPIP
Answer: Yes, top-up payments are subject to C/QPP contributions and income tax deductions. The payments are insurable for EI (and the Quebec Parental Insurance Plan, if applicable) unless the following two conditions apply: the total amount of the payment, including the EI weekly benefits, is not higher than the employee’s normal weekly gross salary and the top-up payment does not reduce the employee’s banked sick leave, vacation leave credits or retiring allowance. Benefits may be paid during the EI waiting period without affecting the start date of EI benefits, provided it is part of the employer’s plan.
Benefits may be paid during the EI waiting period without affecting the start date of EI benefits, provided it is part of the employer’s plan.
Taxing employee prizes
Question: This year at our company picnic, we will be holding a draw for prizes for our employees (such as cameras, golf balls and gift cards). The contest is open to all employees who will be attending. Are the prizes taxable benefits for the employees who win them?
Answer: Yes, they are. The CRA states that if an employer gives an item to an employee from a prize draw that only employees can take part in, the prize is a taxable benefit. Since the prize is taxable, it is also subject to C/QPP contributions. If you pay the prize in cash, you must deduct EI and QPIP (for Quebec) premiums. Non-cash and near-cash prizes are not subject to EI or QPIP. Remember to include the GST/HST or the combined GST/QST (for Quebec) for a non-cash or near-cash prize. Report the taxable benefit in box 14 and in the "Other Information" area of the T4 (code 40) and in boxes A and L of the RL-1.
Note: It is Revenu Quebec’s policy that if an employer gives the employee a plaque, trophy or something similar that is of nominal value for which there is no market, there is no taxable benefit.
Coverage under EI versus QPIP
Question: We are sending some employees to work for two months in Quebec. While they are there, do we contribute to employment insurance (EI) or the Quebec Parental Insurance Plan (QPIP)?
Answer: You must deduct premiums from the employees’ insurable earnings and pay the employer premiums for both plans. The QPIP provides temporary financial maternity, paternity, parental and adoption benefits to eligible Quebec residents who take time off work and have an interruption of earnings.
As a result, Quebec residents are covered under the QPIP rather than EI for maternity, paternity, parental, and adoption benefits. They are covered under EI for other types of benefits (such as regular, sickness and compassionate care). The EI rate that you and the employees will pay will be lower than the rate for employers and employees in other parts of Canada because of the QPIP.
In general, employees who are not Quebec residents at the end of the year are not required to pay QPIP premiums; however, if an employer pays insurable earnings to an employee in Quebec, the employer must deduct the QPIP premium (and pay the employer premium) if the employer pays salary or wages to an employee who reports for work at one of its locations in Quebec or, if the employee is not required to report for work at any establishment, the employer pays the employee from one of its locations in the province.
If the employee’s earnings are also covered under EI, the employee may be eligible for a refund of excess premiums when filing a federal personal income tax return.
Here are the current EI and QPIP rates and maximums:
