If we require an employee to work on a Saturday do we have to pay overtime for the hours worked since this is not a normal work day for the employee? Are service awards or employee prizes taxable benefits?
Question: If we require an employee to work on a Saturday do we have to pay overtime for the hours worked since this is not a normal work day for the employee?
Answer: Overtime pay may or may not be necessary. The requirement for employers to pay overtime is based on whether or not employees work more than a specified number of hours per day or per week, based on employment/labour standards law in the jurisdiction in which the employee works.
If the daily or weekly hours are exceeded, the employer must pay overtime. If an employee does not work more than those number of hours, the employer is not required to pay overtime even if the employee is working on a normal day off. The following sets out the overtime standards across the country (overtime pay is required after employees have worked the following hours):
Canada Labour Code: Eight hours per day or 40 hours per week, whichever is greater.
Alberta: Eight hours per day or 44 hours per week, whichever is greater.
British Columbia: Eight hours per day or 40 hours per week (after working 12 hours in a day, overtime must be paid at 200 per cent of the employee’s regular rate).
Manitoba: Eight hours per day or 40 hours per week, whichever is greater.
New Brunswick: 44 hours per week.
Newfoundland and Labrador: 40 hours per week.
Northwest Territories: Eight hours per day or 40 hours per week, whichever is greater.
Nova Scotia: 48 hours per week.
Nunavut: Eight hours per day or 40 hours per week, whichever is greater.
Ontario: 44 hours per week.
Prince Edward Island: 48 hours per week.
Quebec: 40 hours per week.
Saskatchewan: Eight hours per day or 40 hours per week, whichever is greater
Yukon: Eight hours per day or 40 hours per week, whichever is greater.
Overtime is generally paid at 150 per cent of the employee’s regular wage rate. In New Brunswick and Newfoundland and Labrador, it is paid at 150 per cent of the provincial minimum wage rate.
Employers must comply with employment/labour standards rules for maximum daily or weekly hours. In addition, averaging agreements may affect overtime.
Taxability of long-service awards
Question: My employer has never acknowledged long-service employment with anything more than a letter of thanks. We now have a new HR manager who has implemented an awards program to recognize employees with five, 10, 15, 20 and 25 years of service. Our first awards will be given out this summer. From a payroll perspective, do I have to include the value of the awards in the employees’ pay? If so, how to I determine the value?
Answer: The Canada Revenue Agency (CRA) allows employers to give employees a tax-free non-cash anniversary or long-service award once every five years, as long as the award is worth no more than $500.
To be eligible, the award must be for a minimum of five years of service and it must be no less than five years since the employee last received a long-service or anniversary award from the employer.
Awards valued at more than $500 are a taxable benefit. Revenu Québec also allows employers to give employees non-cash gifts or awards tax-free for items valued up to $500. For both the CRA and Revenu Québec, cash or near-cash gifts or awards are fully taxable, regardless of the value. If taxable, the gift or award will also be subject to C/QPP contributions. Only cash gifts are subject to employment insurance (EI) and Québec Parental Insurance Plan (QPIP) premiums. Non-cash and near-cash gifts or awards are not insurable.
Use the item’s fair market value to determine the amount of the taxable benefit to include in the employee’s remuneration.
Taxable benefits must be reported in box 14 and in the “Other Information” area of the T4 (code 40) and in boxes A and L of the RL-1.
Taxable benefits and employees prizes
Question: This year at our company picnic, we will be holding a draw for prizes for our employees (for example, cameras, golf balls, gift cards, etcetera). 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 via a prize draw open only to employees, the prize is a benefit derived from employment and, therefore, taxable.
Since the prize is taxable, it is also subject to C/QPP contributions. Prizes paid in cash are insurable for EI and QPIP. 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 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. It is Revenu Québec’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.
Annie Chong is manager of the payroll consulting group at Carswell, a Thomson Reuters business, which publishes the Canadian Payroll Manual and operates the Carswell Payroll Hotline. She can be reached at [email protected] or (416) 298-5085.
