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Canadian HR Reporter, a Thomson Reuters business 2016 Canadian HR Reporter, a Thomson Reuters business 2016
News CPR
|
August 2016
Tipping rules require attention to detail
Employers must comply with both labour standards and source deduction rules
BY SHEILA BRAWN
WHILTE MOST Canadian ju-
risdictions do not have rules
covering employee tips in their
labour standards laws, a grow-
ing number are adding them. In
June, Ontario became the latest
province to do so.
As of Jun. 10, the Employment
Standards Act, 2000 prohibits
employers in Ontario from tak-
ing employees' tips and other
gratuities unless another law
or a court order allows it or the
employer is collecting and redis-
tributing the money among em-
ployees under a tip-sharing (also
called tip-pooling) policy.
Ontario joins New Brunswick,
Newfoundland and Labrador,
Prince Edward Island and Que-
bec in writing into law that tips
are the property of the employees
who earn them and that employ-
ers cannot require employees to
share their tips with them.
While the laws vary, they all
stipulate tips are not part of em-
ployee wages and employers can-
not use them when calculating
whether they are paying workers
at least the minimum wage rate.
New Brunswick, Ontario, P.E.I.
and Quebec also specify employ-
ers may set up tip-pooling poli-
cies in their workplaces, although
the rules for them differ among
the provinces. Ontario, for exam-
ple, allows employers to decide if
there will be tip pooling, which
employees will take part and how
the money will be distributed.
By contrast, Quebec prohib-
its employers from imposing tip
pooling. Instead, employees who
want to take part may ask their
employer to manage it. Employ-
ees who are hired after a tip-
pooling policy is in place must
participate in it.
Quebec also requires employ-
ers to include tips that employees
have to report to them and tips
that employers have to attribute
to employees under the prov-
ince's Taxation Act when calcu-
lating statutory holiday pay, va-
cation pay and any wages in lieu
of notice. It is the only province
that requires employees to re-
port tips to their employer.
Beyond labour standards
rules, employers have to comply
with Canada Revenue Agency
(CRA) requirements for tips.
Under CRA rules, some tips are
employment income and are
subject to Canada Pension Plan
(CPP), employment insurance
(EI) and income tax source de-
ductions and some are not.
It depends on whether the
CRA considers the tips to be
controlled (i.e., the employer
pays them to the employee) or
direct (i.e., the client pays them
to the employee). The CRA
states that employers control
tips when they:
• automatically add a service
charge or a percentage to a cus-
tomer's bill to cover gratuities
or tips
• have a policy requiring employ-
ees to pool their tips or turn
their tips over to the employer
and the employer later shares
them with employees based on
a formula the employer estab
-
lishes
• include tips or gratuities in their
business income and later ex-
pense and redistribute them to
employees
• have cash tips deposited into
their bank account and later pay
them out to employees.
If an employer controls the tips,
see PAYROLL page 8
