Vacation pay deadlines outlined, EI board abolished, overseas employment tax erased, some insurance a taxable benefit
While the federal Jobs and Growth Act, 2012, better known as Bill C-45, continues to make headlines for legislative changes regarding native policies, the environment and the economy, the act also introduces new rules employers must adhere to.
After receiving royal assent on Dec. 14, 2012, employers should be aware of changes to the Income Tax Act, the Canada Labour Code, the Public Service Superannuation Act and the overseas employment tax credit, according to Janet Spence, manager of compliance programs and services at the Toronto-based Canadian Payroll Association (CPA).
Income Tax Act
Effective January 2013, employer-paid premiums toward accidental death and dismemberment (AD&D) insurance and critical illness (CI) insurance are to be treated as taxable benefits, says Spence.
If invoices were paid prior to 2013 and did not include the employer-paid premium, employers will have to complete a reconciliation payment with the Canada Revenue Agency (CRA), she says.
“Employers must ensure that employees already receiving employer-paid premium for AD&D and critical illness are correctly set up for the first pay of 2013,” she says. “If you’re looking at it in terms of group term life insurance, the taxable benefit for AD&D and CI must include seven per cent for Manitoba employees, eight per cent for Ontario employees and nine per cent for Quebec employees.”
Canada Labour Code
The Jobs and Growth Act changes the Canada Labour Code to provide a deadline for when accrued vacation must be paid out after an employee is terminated. The new rules dictate payments must be made within 30 days following the final date of the employee’s last day with the company. Prior to this amendment, there were no deadlines outlined in the legislation, which meant it was up to employers to interpret the act on their own.
This often led to confusion, says Lucas Lukasz Granosik, chair of the Canadian federal labour and employment team at law firm Norton Rose in Montreal.
“It’s a good thing to bring more certainty to employers,” he says. “This certainly helps to manage your business if you know the time limits and your obligations.”
The act also contains provisions regarding general holidays, according to Granosik.
Holiday pay is now calculated as five per cent of the wages earned by an employee during the four weeks before the week of the holiday. This does not include overtime pay. For commission-based employees, they are now entitled to holiday pay equaling 1.67 per cent of their wages earned during the 12 weeks prior to the week of the holiday.
“If it’s commissioned-based and you have up and down weeks, it’s fair… having this type of an average,” says Granosik.
Complaints relating to unpaid wages now need to be brought up within six months following the last pay period. This applies to all wage complaints, except those affiliated with a wrongful dismissal claim.
“I think that what one needs to retain from this is that now it’s clear,” he says. “I think it’s always better to have a limitation period and preset time limits so that everybody knows where he or she or the employer stands.”
Refunding EI premiums to small businesses
The hiring credit for small business is a program that was implemented in 2011 and is being carried over to 2012. If small businesses meet certain criteria and saw total EI premiums increase in 2012, they are again eligible for the credit, which can total $1,000 for employers who create new jobs. As of Sept. 30, 2012, more than $200 million has been credited to about 500,000 eligible employers, according to the CRA.
Receiving the credit will soon be easier because the CRA is creating a portal on its website to allow employers the option of applying for the credit online.
“Eligible employers could receive a credit sooner and they will not have to wait for future remittances to apply the credit,” Spence says. “It also… mitigates any risk of a cheque being lost or stolen, so the funds will actually be deposited same-day.”
Public Service Superannuation Act
The Public Service Superannuation Act has been amended with respect to the maximum current service costs of the plan paid by contributors. The pensionable age has also been raised to 65 from 60.
“If you’re a payroll practitioner and you’re working with the department of public services of Canada, you need to be aware of these changes and work with your pension group to communicate and implement these changes within your respective organization,” says Spence.
Overseas employment tax credit
Currently, an overseas employment tax credit (OETC) can be claimed by an individual Canadian resident who works abroad for at least six consecutive months for an employer conducting business regarding a resource, construction project, installation project, agricultural project or completing an engineering contract.
“In general terms, the credit equals the individual’s tax payable on 80 per cent of their qualifying foreign employment income or $80,000, whichever is less,” says Spence. “(This) will be phased out between 2013 and 2016 and eliminated for 2016 and subsequent years.”
Employment insurance
While it doesn’t affect payroll professionals directly, it’s interesting to note the Canada Employment Insurance Financing Board (CEIFB) has been dissolved, says Spence. The CEIFB was established in 2009 and responsible for establishing premiums that would ensure EI revenues and expenditures would break even over time.
As a result of its abolishment, an interim means of establishing premium rates will be set up to replace the work of the board, according to the Department of Human Resources and Skills Development Canada, which is responsible for EI benefits.
“The suspension of CEFIB is a result of the economic action plan for 2012, which ensures stable and predictable rates for premium rates, which will be limited to a five cent increase each year until the EI account is balanced,” Spence says, adding payroll professionals can actually prepare their estimated budget for the next year.
Knowing the rate in advance also has other benefits, she says.
“Payroll software providers and programmers will have the rates sooner for programming.”
