Carswell Payroll Source Alert – March Alert Including the Federal Budget Bulletin 

2019 Federal Budget Bulletin: : No Changes to CPP or Income Tax Rates Announced

The budget did not propose any changes to Canada Pension Plan (CPP) contribution rates or to personal income tax rates or to tax brackets.

2019 Federal Budget Bulletin: EI Premium Rate Projected to Decrease

Budget documents state that the government expects to reduce the Employment Insurance (EI) premium rate for employees outside of Quebec from 1.62% to 1.61% for 2020.

The budget also proposes to provide a premium rebate for small businesses that pay employer EI premiums equal to or less than $20,000 a year, beginning in 2020.

2019 Federal Budget Bulletin: Stock Option Deduction to be Capped

The budget proposes to place an annual cap of $200,000 on the amount of employee stock options that are eligible for a stock option deduction permitted under the federal Income Tax Act. The deduction allows employees to deduct from their income one-half of the amount of the taxable benefit that results from stock options that they acquire from their employer. The proposed cap would not apply to all stock options, but only to those granted to employees who work for large, long-established companies. Stock option benefits would remain uncapped for employees of start-ups and rapidly growing Canadian businesses. Budget documents noted that most employees with stock option benefits in large, long-established companies would not be affected by the proposal.

The change, which would align Canada’s rules with those in the United States, would apply on a go-forward basis, meaning that they would not affect employee stock options granted before the government announces legislative changes to implement the proposals.

The government said it would provide further details on the proposal before the summer.

2019 Federal Budget Bulletin: New Training Benefit Proposed

The budget proposes to create a new Canada Training Benefit to help workers get training for new job skills. The benefit would include a new non-taxable training credit to help pay for training fees, and a new EI training support benefit to help workers financially when they need to take time off work to pursue training.

The training credit would provide $250 a year for eligible workers between the ages of 25 and 64, to a lifetime maximum of $5,000. Individuals would claim the credit when they filed their income tax returns. To be eligible, workers would need to have at least $10,000 in earnings from work (including maternity and parental leave benefits), an annual income under approximately $150,000, and they would have to file an income tax return. They could use the credit to help pay for fees at universities, colleges, and other eligible institutions, beginning in 2020.

The new EI benefit would provide up to four weeks of benefits, paid at 55% of average weekly earnings, taken within a four-year period. To be eligible for the benefit, individuals would need to have at least 600 hours of insurable employment in their qualifying period. Budget documents state that the government would launch the benefit in late 2020.

In addition to the new credit and EI benefit, the government proposes to consult on amendments to the Canada Labour Code and provincial/territorial employment/labour standards laws that would allow workers to take job-protected time off work for the training.

2019 Federal Budget Bulletin: FYI Proposals

Tax compliance: The government proposes to provide the Canada Revenue Agency (CRA) with an additional $150.8 million over five years, beginning in 2019–20, to invest in efforts to combat tax evasion. The CRA would use the funding for initiatives such as hiring additional auditors, conducting outreach, and building technical expertise to target non-compliance associated with cryptocurrency transactions and the digital economy. The budget would also provide additional funding to help the CRA create a new data quality examination team to ensure proper withholding, remitting, and reporting of non-resident income.

Service improvements: The budget proposes to provide $305.3 million over five years to Employment and Social Development Canada to modernize the way it delivers services. It also proposes to provide the CRA with $50 million over five years to improve client services and processing times for individual income tax returns.

Workplace pensions: The budget proposes to amend pension and bankruptcy legislation to better protect workplace pensions. One change would require that if a pension plan winds up, it would still have to provide the same pension benefits as it did when it was ongoing. Another change would allow defined benefit plans to fully transfer responsibility for providing the pension to a regulated life insurance company through the purchase of annuities.

CPP retirement pensions: The budget proposes legislative amendments that would allow the government to proactively provide CPP retirement benefits to CPP contributors aged 70 years and older who have not yet applied for the benefits. The change would occur in 2020. The government also proposes to extend the period under which individuals may choose not to receive a CPP retirement pension from six months to a year.

GIS exemption: The budget proposes to increase an earnings exemption for the Guaranteed Income Supplement (GIS) from $3,500 to $5,000 per year for recipients and their spouse and to extend the exemption beyond employment income to include self-employment income. It also proposes a partial exemption of 50% on annual employment and self-employment income of up to $10,000 beyond the full exemption of $5,000. The changes would apply beginning with the July 2020 to July 2021 benefit year.

Income security disputes: The budget proposes to invest $253.8 million over five years to improve recourse processes for individuals who do not agree with decisions relating to their claim for CPP, EI, or Old Age Security benefits.

Pay transparency: Budget documents stated that the government plans to amend federal employment equity legislation and regulations to introduce pay transparency measures for federally regulated workers. The measures are designed to reduce wage gaps between men and women.

Public servant pay: The budget proposes additional funding to help the government deal with problems related to its pay system for federal civil servants. The money would include $523.3 million over five years to address payroll errors and $9.2 million in 2019-20 for the CRA to help it more quickly deal with civil servant tax issues related to the government’s pay system errors. Budget documents reiterated an announcement last year that the government plans to replace its Phoenix pay system with a new one.

National Pharmacare: Building on an announcement in last year’s budget to study the feasibility of creating a national pharmacare program, this year’s budget proposes to create a national drug agency to negotiate prescription drug prices, develop a national formulary of prescription drugs, and create a national strategy to ensure that patients with rare diseases have more consistent treatment coverage. Budget documents stated that these measures would be initial steps while the government awaits a final report from an advisory council studying national pharmacare.

More information on these proposals can be found on the Ministry of Finance’s website at https://www.budget.gc.ca/2019/home-accueil-en.html?hootPostID=0aa8d23949eb2cad943581a4761edccd.

We will continue to monitor these proposals and will report on further developments in upcoming releases.

New CLC Compliance and Enforcement Rules in Effect

Effective April 1, 2019, the federal government implemented new rules around compliance and enforcement of the labour standards provisions in the Canada Labour Code.

The new requirements were included in Bill C-44, the Budget Implementation Act, 2017, No. 1, which received royal assent on June 22, 2017. The Code covers employers and employees who fall under federal jurisdiction.

The following provisions, published in the February 20, 2019 Canada Gazette Part II, are among the new rules now in effect:

• Labour Program inspectors have the power to determine wages and other amounts owed to an employee based on available evidence if an employer does not keep payroll records.

• The labour minister has the power to order employers to carry out internal audits to determine whether they are complying with federal labour standards rules. Employers have to report their findings to the minister, including steps taken to address situations where they were not in compliance.

• The period that may be covered by a payment order for unpaid wages has increased from one year to two years before the day on which a complaint was made, an employee’s employment was terminated, or an inspection was started.

• Labour inspectors have the authority to issue notices of voluntary compliance if an employer voluntarily pays amounts that an inspector has found it owes to an employee without the inspector having to issue a payment order.

• The Labour Program can charge administrative fees on payment orders issued to employers who fail to pay wages or other amounts to employees. The fees will be equal to either 15% of the amounts listed in the payment order or $200, whichever is greater.

• Employers requesting a review or an appeal of a payment order must pay an administrative fee, along with the amount shown in the payment order. Fees will be adjusted, with overpayments reimbursed to the employers, if the review or appeal changes the payment order.

• With the agreement of the labour ministry, employers and corporate directors may provide security (e.g., bond or irrevocable letter of credit) instead of a monetary amount when asking for a review of a payment order. Previously, they had to pay the full amount of the payment order before applying for a review.

• Labour Program regional directors have the authority to issue orders to any person indebted to a director of a corporation, ordering them to pay amounts owing to an employee directly to the minister.

“Some employers will face increased financial and administrative costs and burdens as a result of the overall compliance and enforcement package (primarily due to the addition of administrative fees on payment orders),” said a government statement in the Gazette.

“However, these costs should not affect law-abiding employers. The latter should also benefit from measures that will help ensure that they are not undercut by competitors who fail to comply with the Code’s requirements,” it said.

Government Appoints Panel to Study CLC Issues

The federal government has appointed an independent expert panel to study “complex” workplace issues affecting federally regulated employers and employees.

Minister of Employment, Workforce Development and Labour Patty Hajdu said the seven-member panel would examine and make recommendations on issues such as a federal minimum wage; labour standards protections for non-standard workers; the right to disconnect outside of work hours; collective voice for non-unionized workers; and access and portability of benefits. The panel will be headed by Sunil Johal, policy director at The Mowat Centre, a think tank in Toronto.

Hajdu said the government would announce the results of the panel’s work this summer. We will continue to monitor this story and will report on further developments in upcoming releases.

Reminder: NR4 Due Date Approaching

Just a reminder… Employers are required to file the NR4, Statement of Amounts Paid or Credited to Non-residents of Canada, with the Canada Revenue Agency by March 31 each year. Since March 31 falls on a Sunday this year, the filing deadline is Monday, April 1, 2019; however, as a best practice, employers should try to submit the slips by March 29, 2019.

For information on the NR4, please see 9.2.3, Reporting Income for Non-residents.

BC Government Looking to Make ESA Changes

The British Columbia government says it is planning to make changes to its Employment Standards Act as early as this spring.

In late February, the government released a consultation paper on areas where it is considering making amendments and asked for public feedback by the end of March. The areas include hours and work overtime; unpaid leaves of absence; minimum age for employment; termination rules; wage recovery for employees; and Employment Standards Branch policies around compliance and enforcement.

The government says the consultations will build on a recent review of the Act by the BC Law Institute and on recommendations for change that the Ministry of Labour has received from employers, workers, and groups such as the BC Employment Standards Coalition and the BC Federation of Labour.

We will continue to monitor this story and will report on further developments in upcoming releases.

Manitoba Retail Sales Tax Rate Going Down

Manitoba Finance Minister Scott Fielding released the province’s 2019 budget on March 7, 2019.

The budget proposes to lower the rate for the province’s retail sales tax from 8% to 7%, effective July 1, 2019.

Reminder: Minimum Wage Rates Rising on April 1st

Just a reminder… Minimum wage rates will be rising in a number of Canadian jurisdictions to the following amounts on April 1, 2019:

New Brunswick:                                   $11.50/hour (currently $11.25)

Newfoundland and Labrador:              $11.40/hour (currently $11.15)

Nova Scotia—experienced workers:   $11.55/hour (currently $11.00)

                   —inexperienced workers: $11.05/hour (currently $10.50)

Prince Edward Island:                          $12.25/hour (currently $11.55)

Yukon:                                                  $12.71/hour (currently $11.51)

Reminder: Good Friday Statutory Holiday Occurs in April

Just a reminder... Friday, April 19, 2019, Good Friday, is a statutory holiday under employment/labour standards law in all Canadian jurisdictions. In Quebec, employers may designate either Good Friday or Easter Monday (April 22, 2019) as the statutory holiday.

For information on statutory holidays, please refer to the applicable jurisdiction in chapter 19, Statutory Holidays.

Reminder: Deadline Approaching for Filing Health-related Tax Returns

Just a reminder… Employers who are required to pay the Manitoba Health and Post Secondary Education Tax Levy must file a Health and Education Tax Levy Annual Report with the provincial Finance Department by April 1, 2019. The report is normally due by March 31, but since that date falls on a Sunday this year, the return is due on the next business day.

Employers who are required to pay the Ontario Employer Health Tax must file an Annual Return with the Finance Ministry no later than March 15, 2019.

Reminder: Ontario WSIB Reconciliation Form Due by March 31st

Just a reminder… Employers who pay their Workplace Safety and Insurance Board (WSIB) premiums monthly must file a Reconciliation Form with the WSIB no later than March 31, 2019. Online filing is available. For more information on online services, refer to the eWSIB section on the board’s website at www.wsib.on.ca/. For more information on the Reconciliation Form, please see 22.8.3, Employer's Statement.

Reminder: Quebec CNESST Statement of Wages Due this Month

Just a reminder… The Commission des normes, de l’équité, de la santé et de la sécurité du travail (CNESST) requires employers to submit a Déclaration des salaires form before March 15, 2019. Employers must file it online. More information on online filing is available at www.csst.qc.ca/employeurs/assurance/declaration-salaires/production-transmission/Pages/production-transmission.aspx.

Payroll Q & A

Question: We recently received a ruling from the Canada Revenue Agency (CRA) on some workers that began doing work for us last year. The ruling states that these workers are employees, not independent contractors, as we had been treating them. As a result, the CRA requires us to remit CPP contributions and EI premiums—both the employer’s and the employees’ portions—going back to the date they were hired. Are we allowed to recover any portion of the outstanding CPP and EI from payments we make to the workers?

Answer: Yes, employers may recover the employees’ portion from them, provided that the outstanding CPP contribution or EI premium does not go back more than 12 months. The amount deducted for the outstanding contributions/premiums cannot exceed the amount the employer should have deducted from each payment. The employer is responsible for paying its share of the outstanding CPP contribution and EI premium. Similar rules apply for QPP contributions and QPIP premiums for employers who must remit outstanding amounts to Revenu Québec.

In cases where employers should have made a deduction in a previous year and they recover it through a deduction in the current year, they should not report the recovered amount on the current year’s T4 (and RL-1 for Quebec employers). Instead, amend the previous year’s T4 (and RL-1, if applicable). The recovered amount will not affect the current year-to-date C/QPP contributions or EI premiums.