Fall is in the air, along with several federal and provincial changes that may impact how you pay your employees. With year-end right around the corner, you can expect more regular updates from the Canada Revenue Agency (CRA) and Revenu Québec. We’ve summarized the updates below so you have everything you need to make sure your employees are paid correctly and on time.
This month’s roundup includes:
- 2024 EI premium rates announced
- Simplification of determining province of employment
- CRA extends non-taxable treatment of gift cards to long-service awards
- CRA low-interest and interest-free loan taxable benefit policy update
- 2024 maximum assessable earnings updates
Read on for more details on this month’s Canadian payroll updates.
2024 EI premium rates announced
FEDERAL
The Canada Employment Insurance Commission announced the following rates for 2024:
- EI premium rate will increase from 1.63% to 1.66% outside of Québec
- The EI premium rate in Québec will increase from 1.27% to 1.32%
- Maximum insurable earnings will increase from $61,500 to $63,200
Employer EI Reduced Rates
Employer EI Reduced Rates (within Québec)
For these changes and more, see the CRA’s Summary of the 2024 Actuarial Report on the Employment Insurance Premium Rate.
Stay up to date on employment insurance (EI) program changes with our Canadian Payroll Guide. Find the latest EI and QPIP rates, maximums, and reduction rates here.
Simplification of determining province of employment
FEDERAL
Many organizations assume that the province of employment is the same as the employee’s province of residence, which in remote environments is rarely the case. The CRA’s new administrative policy on the province of employment clarifies this for employees who are not required to physically report to work at an employer’s establishment.
Before this policy change, the province of employment for a fully remote employee was determined based on the province where the business is located and from where their salary is paid. The province of residence was not a factor in determining the province of employment.
Effective January 1, 2024, the new policy enables employers to determine the province of employment based on indicators to consider for the employee to be reasonably considered "attached to an establishment of the employer."
Primary indicator
- Whether the employee would physically come to work to carry out the functions related to their employment duties at that establishment if it was not for the full-time remote work agreement
- For employees who physically reported to an establishment of the employer immediately before entering a full-time remote work agreement, that establishment is the one to which they would be reasonably considered to be attached unless the employee's circumstances or the nature of their duties have changed
Secondary indicator
- The establishment of the employer where the employee, if it was not for the full-time remote work agreement, would physically come to work to carry out the functions related to their employment duties:
- The establishment where the employee attends or would attend in-person meetings, through any type of communication
- The establishment where the employee receives or would receive work-related material or equipment or associated instructions and assistance
- The establishment where the employee comes or would come in person to receive instructions from their employer regarding their duties, through any type of communication
- The establishment that is responsible for or supervises the employee, as indicated in the contractual agreements between the employer and the employee
- The establishment to which the employee would report based on the nature of the duties performed by the employee
For more information, check out the CRA’s interactive tool to help employers determine their employees' province of employment.
CRA extends non-taxable treatment of gift cards to long-service awards
FEDERAL
The CRA recently announced a change to its administrative policy related to gift cards for long-service awards. Previously, the CRA considered gift cards given for long-service awards a taxable benefit that did not fall under the $500 exemption.
Under the updated CRA's administrative policy, if you provide your employee with a long-service award, the benefit is not taxable if all of the following apply:
- The gift card is provided to recognize five or more years of service with the employer
- It has been at least five years since the last long-service award was presented to the employee
- The FMV of the award is $500 or less (including taxes)
- It is a non-cash gift or award, including gift cards that meet all conditions for the card to be considered non-cash
If the long-service awards you provide to your employees do not meet all of the conditions above, it is a taxable benefit.
The amendment to this administrative policy on long-service awards is retroactive to January 1, 2023. For more information, see the CRA’s policy on gifts, awards, and long-service awards.
Employers should update their gift policy on long-service awards to highlight the changes based on this new policy.
CRA low-interest and interest-free loan taxable benefit policy update
FEDERAL
The CRA announced a new administrative policy on loans and employee debt and how employers determine the rise of a taxable benefit. For more information see the CRA’s page on loans.
Generally, if a low-interest or interest-free loan is provided or a debt is incurred because of employment or shareholdings, the interest benefit is taxable. Depending on your situation, the interest benefit may not be taxable under the CRA's administrative policy.
Forgiven loans you provide to your employees or a shareholder are always taxable.
Under the new CRA policy, retroactive to January 1, 2023, if the loan is received or debt is incurred because of employment, the interest benefit is not taxable if all of the following apply:
- The total amount of all loans received is $10,000 or less per calendar year (this includes loans of different term durations and principal amounts)
- The term of the loan(s) is 60 days or less
- The loan is not received because of shareholdings
If the term of the loan spans two calendar years, the loan will count as part of the $10,000 limit for the year in which the loan was received.
If the loan is considered received because of shareholdings, the new CRA administrative policy does not apply.
Taxable situation
If the loan does not meet all of the conditions above, the interest benefit is taxable.
If the full principal of the loan is not repaid within 60 days, the interest benefit is taxable. You will need to report the amount of the benefit on a T4 slip in the year the loan is received by calculating the value of the benefit using the prescribed interest rates.
Forgiven loans you provide to your employees are always taxable and reported on the T4 slip boxes 14 & 40.
Employers must determine if:
- The benefit was received from the loan or debt
- The interest benefit received from the loan must be calculated
- The interest benefit is taxable
Employers must withhold the Canada Pension Plan (CPP) contributions, Employment Insurance (EI) premiums (on cash benefits), and income tax on the interest benefits and use the T4 slip boxes 14 and 36 for year-end reporting.
2024 maximum assessable earnings updates
PROVINCIAL
Provinces have started to announce the maximum assessable earnings for 2024, including British Columbia and New Brunswick. Québec has released a tentative increase that will be confirmed in October 2023:
- The 2024 British Columbia maximum assessable earnings have been confirmed, and the amount will increase from $112,800 to $116,700.
- The 2024 New Brunswick maximum assessable earnings have been confirmed, and the amount will increase from $74,800 to $76,900.
- The 2024 Québec maximum assessable earnings will increase from $91,000 to $93,500. The increase is to be confirmed in October 2023.
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