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Tax laws vary from country to country. Canadian income tax laws are among the most complex when it comes to issuing Bonuses, Retroactive payments, and Lump Sum payments to employees. Generally Canadians are some of the world’s highest taxed individuals. Income taxes paid on bonuses/retroactive payments range from 27%-48% of the gross amount depending on the employees’ annual remuneration or total compensation including employer paid benefits. Lump sum payouts referred to as severance or retiring allowance command personal income tax rates between 10%-30% nationally and between 21%-35% in Quebec. It is important to understand:
i) how these special payments are taxed when using annualized or lump sum taxing methods
ii) if these payments can become income tax exempt and how. Some employees will automatically qualify for tax exemptions based on hire date with the organization and some will apply to the government for the exemptions.
Although your organization may never pay out bonuses, you could potentially owe employees retroactive payments because of a ratified collective agreement or a delayed salary increase. The principles remain the same. These two payments are both taxed using the annualized taxation method. At some point we all have had to or will be faced with terminating the relationship between you and an employee. Special taxation (lump sum taxes) is required for payments made to an employee as a result of the relationship ending.
Employees will look to you for an explanation. This will give you the basics to answer their questions quickly using terminology they will comprehend. Won’t it be great to sound like the expert!
Who Should Participate
HR and Compensation Leaders, People Managers with employees in Canada
Extra Learning Material
All Registered HR.com members are also eligible for:
www.cra.gc.ca/tx/bsnss/tpcs/pyrll/clcltng/spcl/bnns-eng.html www.servicecanada.gc.ca 1-800-OCanada www.payroll.ca
Staffing and Recruitment
Core HR: Payroll for HR and HRIS
Incentives, Rewards and Recognition
Rewards and Recognition
HR in Canada
Canadian Masters In HR Strategy & Execution
What You Will Learn
Bonus basics: Work related vs. Discretionary Annualized Taxation: Bonuses and Retroactive payments Tax Exemptions: Can an employee avoid paying income tax, Form T1213, RRSP transfers, Impact on CPP and EI, T4 Reporting Lump Sum Taxes: Severance vs. Salary Continuance, T4 reporting
Who is Eligible
This webcast is available to all registered HR.com members for free. You are currently subscribed to HR.com as a Free Member.
Click the button to access this webcast. Archives, MP3 and PowerPoint slides
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