Overtime pay rates, ROEs for salary continuance, CPP/QPP coverage for work outside of Canada
Determining overtime pay rates
QUESTION: I have heard that for overtime pay, employment standards rules require only that employers pay employee’s 1.5 times the current minimum wage rate, not the employee’s regular wage rate. Is this true?
ANSWER: The answer depends on the jurisdiction in which an employee works since overtime pay rules are governed by labour standards laws in each province/territory and under the Canada Labour Code for federally regulated workplaces.
In almost all jurisdictions in Canada, employers are required to pay employees at least 1.5 times their regular wage rate for each hour of overtime that they work. In some cases, their regular rate will be the minimum wage rate.
In other cases, it will be higher than the minimum wage rate.
Only New Brunswick and Newfoundland and Labrador have set the minimum overtime rate at 1.5 times the current minimum wage rate.
Completing an ROE for a salary continuance
QUESTION: When do I complete a Record of Employment (ROE) for an employee whose employment is being terminated, but who will receive a salary continuance for two months?
ANSWER: Employers have to issue ROEs when there is an interruption of earnings. Since an employee receiving a salary continuance will continue to be paid their earnings (and have their company-registered pension plan contributions maintained) for a certain period (two months in this case), an interruption of earnings does not occur until the salary continuance ends. As a result, do not issue an ROE until then.
When preparing the ROE, report in block 11 (last day for which paid) the final day of the period in which the employee received the salary continuance, not the last day that the employee worked.
CPP/QPP coverage for work outside of Canada
QUESTION: We are a Canadian employer and we are soon going to send some employees to work at our new work sites outside of the country. I am confused about whether we will have to deduct Canada/Quebec Pension Plan (CPP/QPP) contributions from the workers’ earnings while they are working there. What are the rules for CPP/QPP contributions for work outside of Canada?
ANSWER: The Canada Revenue Agency (CRA) requires Canadian employers to deduct CPP contributions (and pay the employer’s CPP contribution) from pensionable earnings paid to employees working outside of the country if the employees usually report for work at the employer’s place of business in Canada or if they are Canadian residents who are paid from the employer’s place of business here.
If these conditions do not apply, the earnings are not subject to CPP contributions. However, a Canadian employer can choose to continue CPP coverage for Canadian employees working outside of Canada.
To do so, the employer must complete and file with the CRA form CPT8, Application and Undertaking to Cover Employment Outside Canada under the Canada Pension Plan. The employer must also agree to pay both the employer and the employee CPP contributions for all of its employees working in the applicable country. If the CRA approves the application, the employer cannot cancel the CPP coverage. Employers cannot use the form to apply for coverage if the type of work the employees are doing outside of Canada would not be covered under the CPP if they were working here.
Employers also cannot use the form if the employee works in international transportation, the employee is covered under the QPP before leaving Canada or if the employee is going to work in a country with which Canada has signed a social security agreement.
It is important for an employer to find out if Canada has signed a social security agreement with the country where the employees will be working. This is because the agreement will determine whether the employment in that country is covered under the CPP. In general, the agreements will allow an employee to continue to be covered under CPP as long as the employment is not excluded from coverage under CPP regulations, the employer operates in Canada and the employer agrees to pay both the employer and the employee CPP contributions and to file T4s for the employees.
In general, the agreements also stipulate the following requirements: the type of work the employee does should be covered under the CPP while the employee was working in Canada, the employee is working outside of the country because the employer requires it and the period of work outside of Canada does not exceed the maximum set out in the agreement. Employers must refer to the specific agreement for more information. Canada has signed agreements with close to 60 countries.
For more information on the agreements, refer to the CRA’s website at www.cra-arc.gc.ca/menu/SSAF-e.html.
For the QPP, if employees will only report for work at an employer’s work location that is outside of Canada, the employer will have to deduct QPP contributions from pensionable earnings paid to the employees (and pay the employer contribution) only if the employer is paying the employees from one of its places of business in Quebec and the employer has signed an agreement with Retraite Québec for the work to be covered.
If the employer has not signed an agreement with Retraite Québec, it must contact Revenu Québec for a determination on QPP contributions.
Employment outside of Canada is also subject to QPP contributions if the employee is temporarily working in a country with which Quebec has signed a social security agreement and the employee was a Quebec resident at the time he or she went to work in the other country. For a listing of countries with which Quebec has signed social security agreements, refer to Revenu Québec’s Guide for Employers: Source Deductions and Contributions (TP-1015.G-V).
Paying employees who work outside of Canada (and taking source deductions) can be complicated. Employers are advised to discuss their particular situation with a tax expert/consultant, as well as the CRA and Revenu Québec (if applicable).
