Income tax
Employers are required to make deductions at source from the earnings of their employees for taxes imposed under the federal and provincial income tax acts. They are also required to have employees complete separate TD1 and TP-1015.3 forms which provide the information that determines the status of an employee for income tax purposes.
Québec Pension Plan
The Québec Pension Plan Act provides retirement pensions for contributors as well as survivors' benefits for widows and dependent children of contributors who die. It also provides certain disability benefits. This pension plan is compulsory. Québec residents do not participate in the federal Canada Pension Plan. Employees, employers and self-employed individuals are required to contribute. For the year 2017, each employer must deduct and remit 5.40% of each employee's wages, to a maximum annual contribution of $2,797.20, and contribute an equal amount on its own behalf. The contribution rate and both the employer's and the employee's maximum contribution are subject to change on a yearly basis. The employer's contribution is deductible for income tax purposes as a normal business expense.
Québec Health Services Fund
Québec provides free, comprehensive health care to its residents. This includes coverage for doctors and hospital services. All employers in Québec are subject to an employer health tax. The employer health tax is levied at a rate up to 4.26% on the gross amount of wages and benefits (i.e. the gross remuneration) received by employees who either report for work at a permanent establishment in Québec or are paid from a permanent establishment in Québec. Starting in 2017, the health services fund contribution rate applicable to an employer whose gross remuneration for a given year is less than $5 million will be gradually reduced over a period of five years.
Employment Insurance
The Employment Insurance Act requires an employer to make contributions based on the earnings of all employees, subject to certain exceptions. The contributions are made to the Employment Insurance Account maintained by the Government of Canada, from which unemployed insured contributors may draw benefits. Generally, each employer must deduct and remit 1.27% of each employee's wages, up to a maximum annual premium of $651.51 (in 2017), and itself contribute an amount equal to 1.4 times the employee's premium for the pay period. The employer's contribution is deductible for income tax purposes as a normal business expense.
An employer's premium can be reduced when it maintains a wage-loss plan that reduces employment insurance benefits payable in respect of unemployment caused by illness or pregnancy.
Québec Parental Insurance Plan
The Act Respecting Parental Insurance provides maternity, parental, and adoption benefits for residents of Québec. This plan replaces similar benefits received by other provinces' residents under the Employment Insurance Act. The Québec Parental Insurance Plan ("QPIP") is set up to pay benefits to all eligible employees – who either report for work at an establishment located in Québec or, if they are not required to report to an establishment to work, receive wages from such an establishment situated in Québec – as well as self-employed individuals. Employees, employers and self-employed individuals are required to contribute at different rates. For 2017, each employer must deduct and remit 0.548% of each employee's wages, up to a maximum annual contribution of $397.30 per employee, and contribute on its own behalf 0.767% of each employee's wages, up to a maximum annual contribution of $556.08 per employee.
Contribution related to Labour Standards
The Labour Standards Act provides that employers subject to contribution obligations are required to pay a contribution for the financing of labour standards. This contribution is equal to 0.07% of the total remuneration paid to their employees. For 2017, any portion of the total remuneration in excess of $72,500.00 is not subject to contribution. Since this contribution requires no withholding, the employer must calculate and remit the amount before the statutory deadline. Such payment can be made online, by mail, at a financial institution or by automated banking machine.
Workforce Skills Development and Recognition Fund
The Act to promote workforce skills development and recognition provides that every employer whose total payroll for 2017 exceeds $2 million is required to participate in workforce skills development for the year, by allotting an amount representing at least 1% of its total payroll to eligible training expenditures. Should an employer fail to do so, it will be required to pay a contribution equal to the difference between 1% of its total payroll and the amount of its eligible training expenditures. This contribution will be payable to the Workforce Skills Development and Recognition Fund. Since this contribution requires no withholding, the employer must calculate and remit the amount before the statutory deadline. Such payment can be made online, by mail, at a financial institution or by automated banking machine.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
