Deadline for paying wages when there is a termination (Ask an expert)

Also: Source deductions after an out-of-court settlement with an employee

QUESTION: When an employee hands in his resignation, do we have to pay all amounts owing by his last day of work?

ANSWER: The rules for paying employees are governed by employment/labour standards laws in all provinces and territories and under the Canada Labour Code for federally regulated employers and employees. The table below highlights the requirements covering when to pay an employee if there is a termination of employment:

Jurisdiction

Deadline for paying amounts owing upon termination of employment

Canada Labour Code

The deadline is within 30 days of being earned. Vacation must be paid immediately.

Note: Amendments to the Canada Labour Code that have not yet come into force would require an employer to pay vacation pay within 30 days after the day the employee is no longer employed.

Alberta

For an employer-initiated termination with proper notice or pay in lieu of notice, the deadline is three consecutive days after the employee’s last day of work.

For an employer-initiated termination where no notice is required, the deadline is within 10 consecutive days after the last day worked.

For an employee-initiated termination with proper notice, the deadline is within three consecutive days after the last day worked.

For an employee-initiated termination without proper notice, the deadline is no later than 10 consecutive days after the date on which the notice would have ended had the employee given proper notice.

For an employee-initiated termination where no notice is required, the deadline is within 10 consecutive days after the last day of employment.

British Columbia

For an employer-initiated termination, the deadline is within 48 hours of the last day the employee worked.

For an employee-initiated termination, the deadline is within six calendar days of the date of termination.

Manitoba

The deadline is within 10 working days after the date of termination.

New Brunswick

All wages normally due to the employee on the regular pay day must be paid by then. All other amounts for outstanding wages, vacation pay, commissions and other benefits have to be paid on the next pay day, but no later than 21 calendar days after the employee’s last day of work.

Newfoundland and Labrador

All wages owing (including vacation pay and wages in lieu of notice) must be paid within one week of the date of termination.

Northwest Territories

The deadline is within 10 days after the date of termination.

Nova Scotia

The deadline is upon the expiry of the notice of termination. Vacation pay owing on termination must be paid within 10 days after termination.

Nunavut

All wages owing must be paid within 10 days after the date of termination.

Ontario

The deadline is the later date of either the employee’s next regular pay date or seven days after the termination date. Employers may make severance payments in instalments over a three-year period if the employer has written agreement from the employee or approval from the Employment Standards director. If the employer fails to make an instalment payment on time, all severance owing is immediately due.

Prince Edward Island

The deadline is no later than the end of the next regular pay period.

Quebec

The deadline is at the time the employment terminates or at the time the employee is laid off for a period expected to be longer than six months. It is also permissible to make the payment at the end of a six-month period following a layoff that was supposed to last less than six months, but actually went on longer, or a layoff for an unfixed period of time.

Note: On its website, the Commission des normes du travail states employers may pay the money to the employee at the next pay period.

Saskatchewan

The deadline is within 14 days after the date of termination.

Yukon

All wages owing, except for pay in lieu of notice, must be paid within seven calendar days from the date of termination. Employers may pay wages in lieu of notice in instalments equal to the amount the employer would have paid the employee had he or she worked the notice period. The instalments may be paid on the day that was the employee’s regular pay day, as long as the employee receives all the termination pay within the notice period set out in section 20.13.1, Required Notice — Individual Termination.



QUESTION:
I have to process a payment to a former employee that results from an out-of-court settlement (wrongful dismissal). Is the payment subject to regular source deductions?

ANSWER:
The payment is a retiring allowance rather than regular employment income. As such, do not deduct Canada Pension Plan/Quebec Pension Plan contributions, employment insurance premiums or Quebec Parental Insurance Plan premiums from it. If the individual has not requested that you transfer the payment to his or her registered pension plan (RPP) or registered retirement savings plan (RRSP), you have to deduct income tax from it using the lump sum tax rates.

If the individual has requested the transfer, you have to calculate how much of the payment is eligible for transfer to the RPP or RRSP.

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