Upcoming minimum wage changes planned for 2016; Reporting retiring allowances on an ROE; Lump-sum payment for a terminating employee
Upcoming minimum wage changes planned for 2016
QUESTION: Are there any minimum wage changes planned for 2016? We have employees in most provinces and territories.
ANSWER: Here is a list of the minimum wage changes that we are aware of so far:
Alberta: The provincial government has promised to raise the general minimum wage rate to $15 an hour by 2018. It took the first steps towards this last October, when it raised the rate to $11.20. We expect the government to increase the rate again this October, but it has not yet provided any details on possible rate hikes. The government has promised to eliminate a separate minimum wage rate for liquor servers as of Oct. 1.
British Columbia: On Sept. 15, the government will index provincial minimum wage rates using increases in the consumer price index for B.C. for the previous year (rounded to the nearest nickel). The government says it will announce rate changes in March each year to give businesses time to adjust to the new rates.
Manitoba: The province is phasing in a higher minimum wage rate for security guards. Effective Oct. 1, the minimum wage rate for security guards who hold a licence issued under the Private Investigators and Security Guards Act will be paid $1.50 more than the general minimum wage rate. As of Oct. 1, 2017, the rate will be $2.25 an hour higher than the general minimum wage rate. The government has not yet announced if it will raise the general minimum wage rate on Oct. 1.
New Brunswick: On Apr. 1, the provincial government will raise the general minimum wage rate from $10.30 per hour to $10.65. It has previously promised to increase the rate to $11 per hour by 2017 and thereafter by the rate of inflation.
Nova Scotia: Minimum wage changes are indexed to the consumer price index (CPI). Any minimum wage changes will occur on April 1. At publication time, the government had yet not announced changes for this year.
Nunavut: The territorial government is proposing to raise the minimum wage rate from $11 per hour to $13 on April 1.
Ontario: Minimum wage changes are tied to the consumer price index for Ontario. Any minimum wage changes will occur on Oct. 1, with the government announcing rate changes by April 1.
Prince Edward Island: The minimum wage rate will go up twice this year. On Jun. 1, the rate will rise from $10.50 an hour to $10.75. On Oct. 1, it will increase to $11.
Quebec: At publication time, it was not yet known if the Quebec government would increase the minimum wage rates this year. In the past, it has raised the rates on May 1.
Saskatchewan: The government has announced it intends to annually index the minimum wage rate based on percentage changes to both the consumer price index and the average hourly wage for the previous year. Future minimum wage changes will occur on Oct. 1, with the government announcing rate changes by June 30 each year.
Yukon: The territory adjusts its minimum wage rate on April 1 every year based on changes in the consumer price index. At publication time, the government had not yet announced any changes for this year.
Reporting retiring allowances on an ROE
QUESTION: When completing a Record of Employment (ROE), do we have to report a retiring allowance if the entire amount of the payment is transferred to the individual’s registered retirement savings plan (RRSP)?
ANSWER: Yes. When completing an ROE, you must report the full amount of a retiring allowance in Block 17C (Other monies), even if all of the payment is eligible for tax-free transfer to a registered pension plan or RRSP. Since retiring allowances are not insurable earnings, do not include the payment in Blocks 15B (Total insurable earnings) or 15C (Insurable earnings by pay period).
Lump-sum payment for a terminating employee
QUESTION: We are paying a terminating employee a lump-sum payment equivalent to 18 months of salary. All benefits will be maintained for the 18-month period, including membership in the company’s registered pension plan. Does this payment qualify as a retiring allowance?
ANSWER: No. The money does not qualify as a retiring allowance because the individual’s continued participation in the company’s registered pension plan is indicative of an ongoing employer-employee relationship.
For source deduction purposes, the payment is considered a salary continuance.
If you are paying the lump-sum payment with the employee’s regular pay, regular deductions apply for Canada/Quebec Pension Plan (C/QPP) contributions.
If you are paying the lump-sum payment separately, use the current fixed-contribution percentage rate (4.95 per cent for CPP and 5.325 per cent for QPP) to calculate C/QPP contributions, provided that the employee has not reached the maximum C/QPP contribution the year ($2,544.30 for CPP and $2,737.05 for QPP).
To calculate employment insurance (EI) premiums, multiply the lump-sum payment by the current premium rate (1.88 per cent for employees outside Quebec and 1.52 per cent for employees in Quebec), provided that the employee has not reached the maximum premium for the year ($955.04 for employees outside of Quebec and $772.16 for employees in Quebec).
For Quebec workers, you must also calculate Quebec Parental Insurance Plan premiums by multiplying the lump-sum payment by the current premium rate (0.548 per cent), provided that the employee has not reached the annual maximum premium amount ($391.82).
To calculate income tax deductions, use the manual tax calculation.
For more information, refer to the instructions that the Canada Revenue Agency provides in section A of its Payroll Deductions Tables (T4032) at www.cra-arc.gc.ca/tx/bsnss/tpcs/pyrll/t4032/2016/menu-eng.html.
