Canadian Payroll Reporter

2 Canadian HR Reporter, a Thomson Reuters business 2015 News December2015 | CPR Big challenge as 3 statutory holidays fall together manage that properly and find time to do some quick runs to make sure that everything is set up properly for the first pay of the year," she says. "At the same time, you need to close off the year and you are going to have to get all the infor- mation necessary from your in- ternal departments and maybe your employees (for taxable benefits) so that you can prop- erly balance your year end." Friday paydays This year may present some ad- ditional challenges for employ- ers with Friday paydays. The statutory holidays for Christmas and New Year's Day both fall on a Friday. As a result, employers may need to adjust pay schedules to ensure they pay employees within the timeframes required by employment standards laws. Being late with a payday because of a holiday is not an excuse. Employers with Friday pay- days that have Quebec payrolls will have no choice but to pay employees by the working day before the Friday statutory holi- days. Quebec employment stan- dards rules require it. Quebec is the only jurisdiction with this obligation, but Chong suggests that, as a best practice, employers in all provinces and territories do this to ensure em- ployees have no interruption in paydays. Employers that opt to change paydays to accommodate the Jan. 1 statutory holiday need to keep in mind the decision may affect statutory deductions and year- end reporting and will need to be communicated to employees. Since the Canada Revenue Agency (CRA) requires that statutory deductions be based on the date employees are paid, rather than when they earn the pay, any earnings paid in 2015 will be subject to 2015 statutory deductions and will have to be reported on a 2015 T4 even if they include pay for days in 2016. This has implications for em- ployee and employer maximum annual Canada/Quebec Pension Plan contributions and employ- ment insurance and Quebec Pa- rental Insurance Plan premiums. The best way to manage the hectic nature of the month is to plan for it well in advance. Ide- ally, Chong says this should be done at the beginning of the year. "If you are able to do that early in the year, you can establish what the end of the year is go- ing to look like in terms of pay- ing employees and meeting the minimum requirements under (employment standards)." Leaving the decision until De- cember can leave payroll depart- ments scrambling to change pay dates, issue cheques on time to employees who do not use direct deposit, and to communicate the change to employees. Boxing Day holiday Even for employers that do not have a payday falling on the De- cember or January statutory hol- idays, the days can still present a challenge for payroll, especially in jurisdictions where Dec. 26 (Boxing Day) is also a holiday. "A big issue is that the three stats fall together, so (holiday pay) calculation is an issue," says Theodora Lindsey, a consultant with Carswell's Payroll Consult- ing Group. In most jurisdictions, holi- day pay is based on the amount of wages paid to an employee within a specified number of days or weeks before the holiday. For example, many jurisdictions require employers to include wages paid or owing within four weeks or 30 days before the holi- day. The calculation can be even more complicated in jurisdic- tions that mandate employers to include statutory holiday pay paid or owing within that time- frame when calculating pay for another statutory holiday in the same period. In addition, some employ- ees take vacation in December, which can further complicate employee pay. "(You have to) manage pay- ing vacation pay to an employee while they are on vacation and separating out the days that are deemed vacation days versus the stat holidays," says Chong. Bonuses, gifts, parties December can also be challeng- ing for payroll because of the extra bonuses, gifts and holi- day parties employers provide. Lindsey says she gets a lot of calls about company Christmas par- ties and gifts. "We get all kinds of questions (such as) 'We're giving some gifts through the social committee, would those be subject to taxable benefits?' We get questions about (paying for) taxis, hotels, flying family over from other countries and putting them up and paying their expenses," she says. Under Canadian tax rules, employer-paid Christmas par- ties are not a taxable benefit to employees if the party costs no more than $100 per person. If it costs more than that, the entire cost is a taxable benefit, not just the amount that exceeds $100. When calculating the per per- son cost, the CRA does not allow employers to include items such as taxi fares or hotel accommo- dations. If the employer pays for these items, they are taxable to employees. "Most people are quite shocked that there is that $100 allowance. They are quite shocked that if they pay some- body's spouse's plane fare (to get to a party), that it is a taxable benefit to the employee," Lind- sey says. When it comes to employer gift giving at Christmas, Lindsey and Chong say payroll depart- ments need to be aware of the gifts being given and the possible income tax implications. Some gifts will be taxable, while others will not. The CRA's policy is that non-cash gifts will not be taxable as long as they are for a special occasion, such as Christmas or another religious holiday, and the total value of gifts given to the employee in the year is not more than $500. Cash and near-cash gifts are always taxable benefits. Near- cash gifts include gift certifi- cates, gift cards and items that can be easily converted to cash, such as gold nuggets, securities, or stocks. Another issue to consider is who pays for the gifts. If a social committee buys the gifts and the committee is completely funded by employees, the gifts would not be taxable. However, if the employer funds the committee, the gifts may be taxable depend- ing on the conditions already mentioned. Payroll has to look at all of the circumstances surrounding gift giving to determine if there will be a taxable benefit, says Lind- sey. "It is a lot of monitoring. You have to monitor how much it is. If it is a specific Christmas gift and if it is non-cash, is it going to be over $500?" Chong adds that, "You have got to isolate each of these case scenarios and fit them accord- ingly within the legislation in order to determine whether it is taxable or non-taxable." Taxing gifts can also be chal- lenging because in some cases payroll may not even know that the employer is giving gifts to employees. "It is common for an organization to make purchases through AP (accounts payable)," says Chong. "They use a corporate credit card and one of the employees goes to the Bay and picks up a non-cash item. We (payroll) do not know what the values look like. We are not paying for it. If AP doesn't tell payroll, how would we know?" she adds. "Payroll always complains about how they are always the last people to know about any- thing because things are being done through HR or finance," Chong says. "Payroll does not get any of that information. If we are not aware of it, we can't accurately report or assess the deductions." "In the event of an audit, do you think the CRA is really go- ing to care that payroll doesn't talk to HR? No. As far as they are concerned, they want their money and if you haven't been in from YEAR-END on page 1 Taxing gifts can be challenging because, in some cases, payroll may not even know that the employer is giving gifts to employees. see DISCUSS page 8

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