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Meaning of ‘in kind’ for EI premiums, including director’s fees in workers’ compensation assessments, benefits for employees on compassionate care leave

Question: For calculating Employment Insurance  (EI) source deductions on taxable benefits, the Canada Revenue Agency (CRA) states that benefits paid in kind are not insurable and, therefore, not subject to EI premiums. What does "in kind" mean?

ANSWER: The term "in kind" refers to non-cash benefits. A non-cash benefit is one where an employer pays for or provides something to an employee. For example, an employer provides an employee with a membership at a fitness club. The membership is in the employee’s name, but the employer pays the club the membership fees. The employer is providing the employee with a benefit in kind.

The CRA considers a benefit to be in cash if an employer gives an employee money to buy a good or service or reimburses the employee for the cost of buying the good or service. For example, an employee buys a membership at a fitness club and the employer reimburses the employee for the cost of the membership. The employee is the one who is responsible for paying the membership fees regardless of whether the employer reimburses the employee for the cost. This is a benefit in cash.

The CRA only considers earnings to be insurable (i.e., subject to EI premiums) if an employer pays them fully or partially in cash. If a taxable benefit is not paid in cash, it is not subject to EI premiums. An exception applies for housing and board and lodging benefits provided to an employee. They are insurable if the employee is provided with the benefits and is paid remuneration in the same pay period.

Another exception applies for employer-paid contributions to an employee’s registered retirement savings plan (RRSP) if the employee can withdraw the funds. Generally, employer contributions to employees’ RRSPs are paid in cash and, as a taxable benefit, would be subject to EI premiums. However, the CRA states that if an employee cannot withdraw the amounts from a group RRSP before retirement or termination of employment (excluding withdrawals under the government’s Home Buyers’ Plan or Lifelong Learning Plan), it considers the employer’s contributions to be non-cash benefits and, therefore, not insurable.

It is important to note that the CRA considers the following items to be equivalent to cash because they can be converted into cash:

  • • cheques;
  • • postal money orders;
  • • promissory notes;
  • • traveller’s cheques;
  • • bank drafts;
  • • payments by credit card; and
  • • direct deposits.

For EI purposes, the CRA considers gift certificates or smart cards to be near cash. As a result, they are not included in insurable earnings.

Question: Do I need to include director’s fees in my assessable/insurable earnings for calculating workers’ compensation assessments/premiums?

ANSWER: The answer depends on the jurisdiction to which you are paying the assessments/premiums.

Director’s fees are not included in assessable/insurable earnings in Alberta, Northwest Territories, Nunavut, Prince Edward Island and Quebec.

They are included in assessable/insurable earnings in the following jurisdictions: British Columbia (exceptions apply where the director is not a part-time or full-time employee, is not an officer of the corporation and only goes to periodic board meetings), Manitoba (if coverage for the director has been applied for and approved),
New Brunswick, Newfoundland and Labrador, Nova Scotia and Yukon.

In Ontario and Saskatchewan, director’s fees are included only if the director is considered to be an employee of the company.

Question: Is an employee taking an eight-week unpaid compassionate care leave entitled to remain on the company benefit plan?

ANSWER: The answer depends on the jurisdiction in which the employee works since leaves of absence are covered under provincial/territorial employment standards laws and the Canada Labour Code for federally regulated employers and employees. Here is an overview of the requirements in each Canadian jurisdiction:

Canada Labour Code: Yes, if the employee continues to pay any contributions he or she would normally be required to pay.

Alberta: No.

British Columbia: Yes, the employer must continue to make payments if either the employer pays the total plan costs or, if the employer and employee share the cost, the employee opts to keep paying his or her portion.

Manitoba: No.

New Brunswick: No.

Newfoundland and Labrador: No.

Northwest Territories: No.

Nova Scotia: The employer must give employees the option to maintain benefits. To avoid an interruption of benefits, the employer must also give the employee written notice of the option and the date beyond which it may no longer be exercised at least 10 days before the option expires. If the employee chooses to maintain the plan, they may be required to pay the total cost. Nothing prevents an employer from contributing to the cost of the plan.

Nunavut: No.

Ontario: Yes, unless the employee notifies the employer in writing he or she does not want to continue making the contributions, if there are employee contributions.

Prince Edward Island: Employers must give employees the option of maintaining benefits. The employer will have to give written notice of the option and the date it will no longer apply at least 10 days before the last day. Employees opting to continue will have to pay the cost plus the employer’s share. The employer is responsible for processing the documents and the payment as arranged.

Quebec: Yes, if the employee continues to pay any contributions he or she would normally be required to pay.

Saskatchewan: Yes, if the employee continues to pay any contributions he or she would normally be required to pay.

Yukon: No.

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