E-Source June 2015 - ISSUE 11.3

FEDERAL UPDATE

CRA Guide T4127 Payroll Deductions Formulas for Computer Programs

Canada Revenue Agency (CRA) Guide T4127-JUL, Payroll Deductions Formulas for Computer Programs, 101st Edition, Effective July 1, 2015, is now available on the CRA’s website.

There are no changes to the federal tax rates, income thresholds, or personal amounts required for July 1, 2015. However, some provincial changes have been announced for July 1, 2015. As a result, the CRA has not revised the entire guide. The updated edition contains the provincial changes for British Columbia, New Brunswick, Newfoundland and Labrador, and Yukon.

For formulas and factors not included in this edition, see Guide T4127, Payroll Deductions Formulas for Computer Programs – 100th Edition, effective January 1, 2015.

Legal Fees Incurred to Obtain a Retiring Allowance

The CRA has confirmed that legal fees incurred to obtain a retiring allowance, which are reimbursed by an employer directly to an employee, are subject to income tax at source when not supported by receipts or other documentation identifying that the fees were incurred to obtain a retiring allowance.

Summary of withholding and reporting requirements

  1. Legal fees are reimbursed to the employee without supporting documentation: Report the reimbursement in Box 028 of the T4A, and deduct withholding tax using the lump-sum rates. (The applicable lump-sum tax rate is determined in reference to the total legal fees reimbursed plus any severance and retiring allowances paid to the employee.)
  2. Legal fees are reimbursed to the employee with supporting documentation: Report the reimbursement amount in Box 028 of the T4A, but do not deduct withholding tax. (The employee should attach a receipt to his or her income tax return to offset legal fees reported on the T4A.)
  3. Legal fees are paid directly to the third party charging the fees: Do not report the amount on the T4A, as it is not taxable to the employee.

Taxable reimbursements of legal fees cannot be reported as part of a retiring allowance since an employee’s claim for legal fees on their personal income tax return is limited to the amount of an awarded retiring allowance. For example: if the retiring allowance paid to an employee is $5,000 and the employee incurred $6,000 in legal fees, the employee could only claim up to $5,000 of eligible legal fees. If the employer mistakenly included any reimbursed legal fees in boxes 66,67,68 and/or 69 of the T4, legal fees could be claimed in excess of the eligible amount.

For additional information, see CRA’s website on Retiring Allowances.

The Canadian Payroll Association will be working with Revenu Québec to advocate for adoption of this position for Quebec payroll purposes, in order to avoid the additional administrative burden on employers that would result from differing requirements. We will keep you posted as this develops.

ROE Web Formats to be Discontinued

This is a reminder that the following Record of Employment (ROE) Web formats will be discontinued on March 31, 2016:

  • 27 Week Flat file
  • 53 Week Flat file
  • 53 Week XML file version 1.0
  • 27 Week Online Form

Effective April 1, 2016, Service Canada will only be accepting the following ROE Web formats:

  • 53-Week Online Form
  • 53-Week XML Payroll Extract File XML Version 2.0
  • 53 Week Assistant Online form

PROVINCIAL AND TERRITORIAL UPDATES

Provincial/Territorial Budget Updates

Summaries of 2015 provincial and territorial budget measures impacting payroll for the following jurisdictions can be found on the Canadian Payroll Association website:

Prince Edward Island has not yet tabled its 2015/2016 Budget.

* Important Note: Previously Announced Alberta Income Tax Changes and Health Contribution Levy Will Not Come into Effect

The Alberta Budget presented on March 26, 2015 by the previous government is no longer valid due to the election held on May 5, 2015.

As a result, the Alberta Health Contribution Levy and personal income tax rate changes announced in the March 26, 2015 budget will not come into effect.

Indications in the media are that there will not be a new Alberta Budget until sometime in the fall. The Canadian Payroll Association will analyze and summarize payroll-related impacts when the new budget is tabled.

British Columbia

New Employer Obligations for Workplace Health and Safety

British Columbia Bill 9, Workers Compensation Amendment Act received Royal Assent on May 14, 2015, enacting changes to the Workers Compensation Act to increase employers’ obligations with respect to workplace health and safety and to strengthen enforcement measures for instances of non-compliance with legislative requirements.

Among the amendments, effective May 14, 2015, employers must undertake a preliminary investigation within 48 hours of workplace incidents, prepare a report and take corrective action as necessary. This preliminary investigation must be followed up with a full investigation and report to determine the cause(s) of the incident, identify any unsafe conditions, and determine any further corrective action necessary to prevent recurrence of similar incidents. To strengthen legislative compliance, the board may enter into written compliance agreements with an employer where the employer has contravened or failed to comply with the legislation. In addition, the circumstances in which the Board may issue an order to stop work have been expanded, and changes are made to administrative penalties that may be imposed by the Board.

Ontario

Canadian Payroll Association Successfully Advocates for Electronic Delivery of New Ontario Employment Standards Poster

In 2014, Ontario’s Employment Standards legislation was amended to require employers to provide every employee with a copy of the Rights and Obligations poster within 30 days of hire, effective May 20, 2015. At stakeholder engagement meetings in August and November 2014, the Canadian Payroll Association advocated that employers be enabled to provide an electronic version of the poster, similar to employment standards enabling employers to use electronic pay statements as the standard delivery method.

At a Ministry of Labour stakeholder event on April 16, 2015, it was announced that the new poster, available as of May 1, 2015, can be either distributed to all employees in hard format (letter sized instead of the old legal size), emailed to employers, or made available via a link (provided the employee has access to a computer) similar to electronic pay statements.

Other important information:

  • Effective May 20, all existing employees should be provided with either a physical or electronic version of the new poster within 30 days, i.e., June 18, 2015.
  • Employers must provide every employee with a copy of the new poster within 30 days of hire.
  • The poster should be made available in English. If an employee requests a translation of the poster into a language other than English, the employer must make enquiries as to whether the Ministry has prepared a translation of the poster into that language, and if the Ministry has done so, the employer must provide the employee with a copy of the translation.
  • Employers are required to replace the old poster in the work place with the new updated version.

To learn more about the new poster requirement and other recent amendments to Ontario employment standards, see the article Action Required: Ontario’s Employment and Labour Law Changes Affect All Employers in the May/June issue of DIALOGUE magazine (member login required) and/or visit the Ontario Ministry of Labour website.

Inspection Blitzes Target Precarious Employment Violations

The Ontario government is targeting minimum wage, overtime pay, meal breaks and other worker entitlement violations during enforcement blitzes to be carried out at workplaces across Ontario this spring and into early summer.

From May 1 to July 31, 2015, the Ontario Ministry of Labour employment standards officers will be visiting workplaces such as restaurants; janitorial, security and business services; fitness, amusement and recreation facilities; and other establishments that employ:

  • new, young and/or vulnerable workers engaged in "precarious employment" situations, and
  • temporary foreign workers engaged in all types of employment.

“Precarious employment” refers to work that is seasonal, part-time or temporary, and differs from traditional employment that typically involves a full-time, permanent arrangement with one employer.
During inspections, employment standards officers will check that employers are complying with key requirements of Ontario’s Employment Standards Act, 2000.

More information can be obtained from the Ontario Government News Room.

Public Consultations on Strengthening Ontario Labour Laws

The Ontario government will be holding public consultations on issues and trends affecting workers and employers in today’s workplace.

These consultations are intended to focus on how the Ontario Labour Relations Act,1995 and Employment Standards Act, 2000 could be amended to keep pace with the changing needs of workers and employers. Topics to be covered will include:

  • the increase in temporary jobs, part-time work, and self-employment;
  • the rising prominence of service sector jobs;
  • the effects of globalization and trade liberalization; and
  • accelerating technological change.

Consultations will begin on June 16, 2015, in Toronto and will continue to be held throughout the summer in communities such as Toronto, Ottawa, Mississauga, Guelph, Windsor and London. The Canadian Payroll Association will be participating in these consultations to advocate for more efficient and effective legislation, regulations and administration for all stakeholders: employers, government and employees.

More information can be obtained from the Ontario Government News Room.

Proposed Changes to Legislation for Injured Workers, Firefighters, and Public Sector

On May 28, 2015, Ontario introduced Bill 109, Employment and Labour Statute Law Amendment Act, 2015, proposing changes to Workplace Safety & Insurance Board (WSIB) benefits, labour dispute resolutions for firefighters, and broader public sector workers’ protections.

Propose amendments to the Workplace Safety and Insurance Act include:

  • changes to the calculation of WSIB survivor benefits, based on the average earnings of the deceased worker's occupation at the time of diagnosis, which will potentially increase the  amount of support families receive;
  • a new prohibition on employers from trying to prevent workers reporting workplace injury or illness to the WSIB, ensuring that workers are protected from retribution; and
  • an increase maximum corporate penalties from $100,000 to $500,000 for conviction of an offence under the act, such as knowingly making a false or misleading statement to the Board or willfully failing to inform the Board of a material change in circumstance within 10 days.

Amendments to the Fire Prevention and Protection Act would allow labour relations disputes by fire services professionals to be heard by the Ontario Labour Relations Board rather than exclusively by Ontario courts.

Changes proposed to the Public Sector Labour Relations Transition Act would help reduce the potential for disruption and delay for workers in the broader public sector when there are changes to bargaining units following events such as amalgamations or restructuring.

For more information, employers can access the Ontario Government News Room.

Pooled Registered Pension Plans and Ontario Retirement Pension Plan

Ontario has passed new legislation to implement Pooled Registered Pension Plans and the Ontario Retirement Pension Plan.

The Ontario Pooled Registered Pension Plans Act, 2015 received Royal Assent on May 28, 2015. This new legislation creates a framework for Ontario businesses to offer Pooled Registered Pension Plans (PRPPs) to their employees, and makes PRPPs available to self-employed individuals.

The Ontario Retirement Pension Plan Act, 2015 received Royal Assent on May 5, 2015. This act provides the foundation for the government to establish the Ontario Registered Pension Plan (ORPP) by 2017, along with the creation of a body to administer the plan, as well as setting out basic requirements of the ORPP including maximum employer and employee contribution thresholds.

More information can be obtained from the Ontario Government News Room.

While the Canadian Payroll Association had advocated for a modest enhancement to the Canada Pension Plan in lieu of a separate plan that would increase the administrative burden for employers, payroll systems, government and employees, the Association has been meeting with Ministry of Finance employees to promote more efficient and effective administration of the ORPP and will advise our members of any new developments.

PRINCE EDWARD ISLAND

Proposed Tax Relief for Low-income Earners

The Prince-Edward Island government has introduced legislation that will result in lower income taxes for low-income earners such as seniors and single parents.

The changes, if passed, will be retroactive to January 1, 2015. Tax liability of eligible individuals will be adjusted accordingly when qualifying tax filers file their returns for 2015 in 2016. It is unlikely any changes will be required for payroll systems; however, the Canadian Payroll Association will confirm this once more details are available.

The changes will amend the P.E.I. Low Income Tax Reduction by

  • increasing the amounts of the basic credit and the spouse/equivalent-to-spouse credit by $50, to $300 (from the current $250) and the amount for each dependent child by $50 to $250 (from $200);
  • adding a new senior credit of $250 for individuals aged 65 and older; and
  • raising the income threshold at which someone will receive the full value of the credits to $17,000, from the current $15,000 (the value of each credit decreases by 5 per cent for every dollar of income earned above $17,000).

More information may be obtained from the P.E.I. Government News Release.

QUEBEC

Legislation Introduced to Reorganize Certain Labour Institutions

On April 15, 2015, the Quebec government introduced Bill 42, An Act to group the Commission de l’équité salariale, the Commission des normes du travail (CNT) and the Commission de la santé et de la sécurité du travail (CSST) and to establish the Administrative Labour Tribunal. This Bill implements 2015 Quebec Budget measures to merge the Pay Equity Commission, CSST, and CNT and to establish the Administrative Labour Tribunal. Bill 42 has moved quickly in the Quebec legislature, being adopted in principle as of May 21, 2015 and referred before the Commission de l’économie et du travail for a detailed review.

Bill 42 establishes the Administrative Labour Tribunal to replace the Commission des lésions professionnelles and the Commission des relations du travail. Under this proposed legislation, rules are set out to define the new Tribunal’s jurisdiction, provide rules of procedure for tribunal hearings, establish a framework for Tribunal member recruitment and appointment, and govern the conduct of Tribunal business.

Furthermore, Bill 42 introduces amendments to group the activities of the Commission de l’équité salariale, the Commission des normes du travail and the Commission de la santé et de la sécurité du travail, renaming the latter body “Commission des droits, de la santé et de la sécurité du travail”.

Consequential amendments are made to a number of acts in light of these new institutions and their organization. Various transitional provisions are also made to ensure that grouped activities currently exercised by certain bodies can be continued by the new institutions. Until the Commission des droits, de la santé et de la sécurité du travail and the Administrative Labour Tribunal are fully in place, the Minister of Labour, Employment and Social Solidarity is granted a temporary power to issue directives with regard to the bodies to be grouped with them.

The Canadian Payroll Association will continue to monitor the progress of this legislation and report any administrative impacts employers will face as a result of its implementation.

Meals and Transportation for Employees Who Work Overtime

Through the work of its Quebec Government Relations Advisory Council, the Canadian Payroll Association has been advocating for more harmonious payroll administration between the Canada Revenue Agency (CRA) and Revenu Québec (RQ). The Association is pleased to announce that RQ has adopted the CRA’s two-hour overtime requirement for meals and transportation expenses paid by employers to be received by employees tax-free, instead of the previous requirement of three hours.

RQ has clarified the tax treatment of meals and transportation expenses provided to employees working overtime. If an employer provides a meal to an employee who works overtime, or reimburses the employee for meal or taxi expenses, the employee does not receive a taxable benefit provided the following conditions are met.

  • The overtime is done at the employer’s request and is expected to last for at least two consecutive hours. (Previously, the employee was required to work three consecutive hours.)
  • Overtime is done rarely or on an occasional basis (fewer than three times a week).
  • The meal and/or taxi expenses incurred by the employee are reimbursed (in whole or in part) upon presentation of receipts.
  • The meal expenses reimbursed or the value of the meal provided (as the case may be) is reasonable.
  • For taxi expenses, public transit is not available or it is reasonable to consider that the employee’s safety would be jeopardized because of the time of day the trip is made.

If these conditions are not met, the employer must include the value of a meal provided or reimbursed in boxes A and V of the employee’s RL-1 slip, and/or taxi expenses in box A and L, as taxable benefits.

Minimum wages across Canada

Minimum wage is the lowest hourly rate that an employer can pay an employee. It varies among jurisdictions. The following table shows the minimum wages in effect in all jurisdictions at the time of writing. You should also remember to check for exemptions from minimum wage requirements under legislation.

Jurisdiction

Rate per hour

Effective date

Federal
(Canada Labour Code, Part III)

Aligned with provincial/ territorial minimum wage in each jurisdiction

December 1996

Alberta

  • General
  • Liquor server

 

$10.20
$9.20

 

September 1, 2014
September 1, 2014

British Columbia

  • General

  • Liquor servers

 

$10.25
$10.45
$9.00
$9.20

 

May 1, 2012
September 15, 2015
May 1, 2012
September 15, 2015

Manitoba

$10.70
$11.00

October 1, 2014
October 1, 2015

New Brunswick

$10.30

December 31, 2014

Newfoundland and Labrador

$10.25
$10.50

October 1, 2014
October 1, 2015

Northwest Territories

$12.50

June 1, 2015

Nova Scotia

  • Experienced workers
  • Inexperienced workers

 

$10.60
$10.10

 

April 1, 2015
April 1, 2015

Nunavut

$11.00

January 1, 2011

Ontario

  • General

  • Students under age 18 working 28 hours/week or less

  • Serving alcohol on licensed property

 

$11.00
$11.25
$10.30
$10.55
$9.55
$9.80

 

June 1, 2014
October 1, 2015
June 1, 2014
October 1, 2015
June 1, 2014
October 1, 2015

Prince Edward Island

$10.35
$10.50

October 1, 2014
July 1, 2015

Quebec

  • General
  • Employees receiving tips

 

$10.55
$9.05

 

May 1, 2015
May 1, 2015

Saskatchewan

$10.20

October 1, 2014

Yukon

   $10.86

April 1, 2015

The Top 5 ROE Errors & How to Avoid Them

By Service Canada

Employers must issue a Record of Employment (ROE) when

  • an employee experiences an interruption of earnings of seven consecutive calendar days; or
  • his or her salary falls below 60% of regular weekly earnings because of illness, injury, quarantine, pregnancy, the need to care for a newborn child or a child placed for the purposes of adoption, the need to provide care or support to a family member who is gravely ill with a significant risk of death, or the need for a parent to care for a critically ill child.

The ROE, whether in electronic or paper format, is the most important document required to process an employee’s Employment Insurance (EI) claim. The Service Canada system generates an automated decision on an employee’s eligibility and entitlement to EI benefits based on this form.

ROE errors affect both employers and employees. When the form is completed incorrectly, an employee’s EI claim calculation cannot be automated, and the employer is inconvenienced by calls from Service Canada to clarify or correct the information on the form. This causes delays in processing the employee’s claim, and prevents EI benefits from being issued in a timely manner. Fewer Service Canada calls will save employers time and money, and ensure employees’ claims are processed efficiently and effectively.

Service Canada has identified the five most common errors employers make when completing an ROE form and provides tips on how to avoid them.


Error #1:
Consecutive Pay Periods Inconsistent with the Period of Employment (Block 15C)

Of the over eight million ROEs received by Service Canada each year, this error occurs in 13% of paper ROEs filed by employers and in 8% of electronic ROEs filed via ROE Web. When there are too many or not enough pay period amounts completed on the ROE, the employee’s EI claim cannot be calculated using the Service Canada automated system, resulting in delays in processing the claim.

This error applies only to employers who complete Block 15C Insurable Earnings by Pay Period. The number of consecutive pay periods entered in Block 15C must equal the period of employment, and the employer must provide payroll information for the required number of pay periods in the period of employment. The period of employment is determined by the dates entered into Blocks 10, 11 and 12. The maximum number of consecutive pay periods required to be filled in is determined by these dates and the Pay Period Type selected in Block 6. There is a difference in the required number of pay periods between the paper ROE and the electronic ROE.

For example, on a paper ROE, if the Pay Period Type in Block 6 is Weekly, the maximum number of most recent consecutive pay periods for which payroll information must be entered in Block 15C is 27 pay periods. On an electronic ROE, if the Pay Period Type in Block 6 is Weekly, the maximum number of most recent consecutive pay periods that must be completed in Block 15C is 53 pay periods.

For more information on required number of pay periods to be completed on the ROE, please refer to the “Calculating Total Insurable Earnings” charts in the section “Block 15C, Insurable earnings by pay period” in Chapter 2 of How to Complete the Record of Employment Form, available on Service Canada’s website at http://www.servicecanada.gc.ca/eng/ei/employers/roe_guide.shtml.

Error #2:
Overlapping ROEs

This error occurs in 19% of paper ROEs and in 8% of electronic ROEs received via ROE Web.

Overlapping ROEs occur when an ROE is issued for an employee and the pay period shown on that ROE (either the First Day Worked shown in Block 10 or the Last Day for Which Paid shown in Block 11) overlaps with another ROE previously issued for that same employee.

Information provided on an ROE should represent a specific period of employment. The date entered in Block 10, First Day Worked, should be the first day the employee worked after his or her last interruption of earnings. That is, the first day the employee returned to work after the Last Day for Which Paid in Block 11 of the previous ROE.

The only time ROEs should overlap is if a prior ROE is being amended. When an amended ROE is issued to correct information already provided on an original ROE, Block 2 must be completed with the same serial number as the original ROE.

Error #3:
No Earnings in the Period Containing the “First Day Worked” (Block 15C and Block 10)

This error is not commonly seen with paper ROEs, but occurs in 7% of electronic ROEs received via ROE web. Where it appears this error may have occurred, a Service Canada agent will contact the employer to verify the form information.

In some cases, the First Day Worked in Block 10 is included in the most recent consecutive pay periods in Block 15C, which means that the pay period that the First Day Worked falls into contains insurable earnings.

When the pay period containing the First Day Worked shows no earnings, Service Canada agents will contact the employer to determine whether the First Day Worked entered on the ROE is correct or whether it needs to be corrected.

Error #4:
Invalid Final Pay Period Ending Date (Block 12)

This error occurs in 26% of paper ROEs and 3% of electronic ROEs received via ROE Web. If the Final Pay Period Ending Date on the ROE is blank or incorrect, the employee’s EI claim is not eligible for automated calculation by Service Canada, and the employer will be contacted by a Service Canada agent to correct the information.

The Final Pay Period Ending Date in Block 12 must be the date of the final pay period in which the Last Day for Which Paid (Block 11) falls. The Pay Period Type selected in Block 6 and the dates entered in Blocks 10, 11 and 12 are used to determine the period of employment and the number of consecutive pay periods to fill in Block 15C.

For example, if a Weekly pay period type is specified, the Final Pay Period Ending Date cannot be more than six days after the indicated Last Day for Which Paid (Block 11).

Error #5:
Comments (Block 18)

This error occurs in 4% of paper ROEs and in 25% of electronic ROEs received via ROE Web. Comments should only be entered on the ROE in exceptional circumstances.

Whenever a comment is entered by an employer in Block 18, the ROE is removed from Service Canada’s automated processing system and an agent reviews it manually. Manual treatment delays processing of the ROE and any associated claim for EI benefits. Comments should therefore only be entered in Block 18 in exceptional circumstances requiring clarification for Service Canada. It is not necessary to reiterate information in Block 18 that is already provided elsewhere on the form.

For example, if you enter Code A in Block 16 Reason for Issuing this ROE, there is no need to enter a more detailed comment in Block 18, such as “temporary shutdown of operations,” “employee layoff” or “end of term.”


Errors cause inconveniences for employers and delays for employees. It is the employer’s responsibility to understand how to complete ROEs correctly and ensure compliance with the legislation, even if your service provider is processing the forms for you.

You can use the following ROE checklist to help ensure accuracy.

ROE Completion Checklist

Did I review all of the payroll information?

Yes     No

Did I include the dates on the ROE correctly?

Yes     No

Did I review the pay period type in Block 6?

Yes     No

Did I total all insurable hours and only include the number of hours in the
required maximum number of pay periods?

Yes     No

For the insurable earnings, did I review the number of pay periods that are
required to be shown, according to the chart in Service Canada’s guide
How to Complete the Record of Employment Form?

Yes     No

Did I review which earnings Blocks I am required to complete: 15B and/or 15C?
(Complete 15C only if there is a pay period with no insurable earnings for paper
ROEs; for Web ROEs, 15C is always completed.)

Yes     No

Did I include insurable earnings paid at termination in Block 15B and the first
pay period in Block 15C, if applicable?

Yes     No

Did I report all payments on separation, or payments that will be paid to
the employee while off, in Block 17?

Yes     No