Important role for payroll in terminations

When businesses cut costs by cutting staff, payroll’s role shouldn’t be overlooked
By Annie Chong
|Canadian Payroll Reporter|Last Updated: 01/14/2010

In tough economic times, businesses are faced with shrinking budgets and the need to cut costs. For many, this means temporary layoffs or terminations. HR departments must tackle the difficult task of planning terminations, but payroll departments have an equally important role to play. HR usually plans and negotiates termination settlements, but payroll makes the adjustments and executes them.

Employers are legally required to give reasonable notice of termination. Each Canadian jurisdiction has employment standards legislation setting the minimum requirements for individual terminations, group terminations and temporary layoffs. Unionized workplaces can also have collective agreements with dismissal terms.

The period of notice depends on where the employee worked and how long he was employed with the company. The employer can have the employee work the notice period or pay him wages in lieu of notice. The Canada Revenue Agency (CRA) also has regulations on the treatment of statutory deductions and year end reporting for termination pay. In Québec, payment in lieu of notice requires different rules for deductions and year end reporting.