Canadian Payroll Reporter

CPR | May 2014 ASK AN EXPERT Annie Chong 7 Canadian HR Reporter, a Thomson Reuters business 2014 MANAGER OF CARSWELL'S PAYROLL CONSULTING GROUP annie.chong@thomsonsreuters.com | (416) 298-5085 Filing CPT30 with multiple employers QUESTION: We have recently hired an employee who is 67 years old. She has told us that she filed a form CPT30, Election to Stop Contributing to the Canada Pension Plan or Revocation of a Prior Election, with her former employer to stop CPP deductions. Does she have to file another form now that she is working with us? If so, do we keep deducting CPP contributions until she gives us the form? ANSWER: The employee must file only one CPT30 form in a calendar year. She needs to give you a copy of the CPT30 that she previously sent to the Canada Revenue Agency (CRA) and gave to her former employer. Until she does that, you must deduct CPP contri- butions from her pensionable earnings. Once she gives you a copy of the form showing she has elected to stop CPP con- tributions, you will likely have to make some payroll adjust- ments. If she gives you a copy of the form in the same year that you made the payroll deductions, you will have to reimburse her for any CPP contributions you took. You can reduce your next re- mittance to the CRA to recap- ture the CPP that you deducted and paid. You will also have to revise your payroll records. If the employee does not give you the form until next year, do not reimburse her for the out- standing amount or reduce a remittance in 2015 to make up for the contribution. Instead, the employee can receive a re- fund when filing her personal income tax return. To recover the employer share, file form PD24, Application for a Refund of Overdeducted CPP Contri- butions or EI Premiums, with the CRA. If the employee cannot find her copy of the form, advise her to contact the CRA. The agency will send her a copy of the form that it has on file. The employee has to contact the CRA, not the employer. Retiring allowances and employment with an affiliate QUESTION: Our company is terminating the employment of an employee because his position has been eliminated. We are pay- ing him severance pay for the loss of the job. The employee has been hired in a different position by a company affiliated with us. Will this employment affect whether the severance payment qualifies as a retiring allowance? ANSWER: It may. A retiring allowance is a sum of money paid, on or after termination of employment, to recognize an employee's long service or to compensate for loss of office or employment. In Interpretation Bulletin IT-337R4, Retiring Al- lowances, the CRA states that a loss of an office or employment does not include situations where an employer terminates an employee's employment and the employee is then re-em- ployed full- or part-time by the employer or an affiliate of the employer if this was arranged before the termination. Despite this, there may be situations where the termina- tion would be considered a loss of office or employment (al- though the CRA says these situ- ations are rare). In the bulletin, the CRA provides the example of an employee retiring from a full-time job with a government department. Before retiring, the employee obtains on his own a part-time job with another gov- ernment department. In a situation like this, the CRA says it may consider a sev- erance payment paid to the em- ployee to be a retiring allowance if the following conditions ap- ply: the duties and responsibili- ties of the new job are different and unrelated to those of the previous job; benefits from the previous job are not transferred to or recognized with the new job; the employee is entitled to a pension based only on the full- time position and cannot accrue more benefits under the pen- sion plan for the part-time job; and the employee found the new job on his own without the pre- vious department being aware of or involved in it. The CRA will decide whether an exception like this will apply to an employee working for an affiliate on a case-by-case basis. Readers are advised to the con- tact the CRA for more informa- tion. at the end of the year saying, 'Here's the vacation pay we paid this person. Here's four per cent of their total earnings. Do the two match? Have we paid them at least four per cent of their to- tal earnings or more? If not, we should be making up the differ- ence.'" Although some employers may feel that separating vacation time from vacation pay in their policies is an extra administra- tive challenge, Sargeant says it has benefits. This is particularly the case with employees coming back to work after a long, unpaid leave. "Let's take a maternity leave, for example, where someone is off from January 1 to December 31 and you don't pay them," she says. "At the end of that year, yes, they would be entitled to their three or their four — whatever the case may be — weeks of vaca- tion time, but it could be unpaid. There is no vacation pay that you owe them. Six per cent or eight per cent of zero is zero." If employers want to do this, she advises that they make sure their vacation policies clearly state that vacation time is treated differently than vacation pay. Ball says it is imperative that employers properly communi- cate vacation policies to employ- ees. Employers should strive for "clearly written vacation policies that are consistent and applied fairly, making sure they are avail- able in an employee handbook, for instance. The employee should acknowledge in writing that they understand the poli- cies," she says. Clear communication should extend to pay statements and payroll records. Payroll practi- tioners should specifically refer to vacation pay on pay state- ments when it is paid to employ- ees and ensure that the payment is properly recorded in the em- ployer's records, says Ball. "You don't want to ever have a situation where an employee gets a little confused if you have no other outside information on their vacation accruals and their time taken. Someone may say, 'Well, I don't see any vaca- tion on my pay statement. I didn't take any time this year.' So, marrying the two together is important." These are just some of the va- cation issues facing employers and payroll departments. Future articles will look at other vaca- tion-related topics. from VACATION on page 2 Separate vacation time from vacation pay

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