As 2020, finally, comes to a close there are a few items on your year end checklist that may be a little bit different this year. Along with the items on your usual annual benefits checklist, here are a few compensation related matters that you may need to address before year end.
Have employees used their vacation?
Due to the pandemic, many employees were reluctant to take their full allotment of vacation days and many employers allowed them to carry this vacation forward. However, it is important to remember that employers must comply with the Employment Standards Act in the applicable province(s), which sets out mandatory minimums for vacation each year.
If your employees have not taken the required statutory minimum in 2020, you must either require them to do so prior to December 31st or pay them for those unused days, if the applicable act allows.
If you have allowed your employees to defer 2020 vacation days into 2021, confirm with an employment law specialist that you are in compliance with the regulations prior to the end of the year.
Taxable and non-taxable work from home benefits
The Federal government granted employers the ability to reimburse employees up to $500 on a tax-free basis in order to purchase items for the establishment of home offices which were required due to the pandemic. Ensure that reimbursements for amounts over the $500 limit and items that do not meet CRA guidelines are to be included as taxable benefits on your employee’s T-4’s
With respect to employee’s ability to deduct home office expenses on their 2020 tax returns, the federal government is working on a new set of guidelines specific to the pandemic. This week the financeminister announced a $400 tax deduction related to home office expenses for workers required to establish offices at home. While the particulars have not been released, there are already requirements in place for employers to issue tax forms for commissioned employees and tradespeople. It is likely that a simplified version of this form or another reporting method will be developed in time for the 2020 tax season. For more information regarding deductibility of home office expenses, please refer to our recent guest blog from Baker Tilly WM Vancouver.
Remember the adjusted tax deferral deadlines
Throughout 2020, Federal, Provincial, and Territorial governments allowed employers to defer payment of a number of taxes. The change in schedule may cause some employers to be caught by surprise if deadlines are not extended again. During 2020 most deferrals were related to the filing and payment of taxes related to 2019. However, some filings related to 2020 will extend into 2021.
One such example is the extension of installment payment dates for the new BC Employer Health Tax (EHT) as part of British Columbia’s Covid-19 Action Plan. Employers should be aware that the change may have an impact on cash flow as deferred installments are due in successive months rather than in successive quarters.
The deferral schedule is as follows:
Installment payment due June 15, 2020 extended to December 31, 2020
Installment payment due September 15, 2020 extended to January 31, 2021
Installment payment due December 15, 2020 extended to February 28, 2021
Final installment payment for 2020 remains unchanged at March 31, 2021
The filing date for the EHT return remains unchanged and is due on March 31, 2021.
New T-4 Filing Requirements
The federal government introduced new reporting requirements for T-4s in 2020. The new rules apply to all employers and will help the CRA confirm entitlements under the Canada Emergency Wage Subsidy (CEWS), the Canada Emergency Recovery Benefit (CERB), and the Canada Emergency Student Benefit (CESB).
Offer to put employee’s year end bonuses towards their retirement
If your company has been fortunate enough to enjoy a successful year, consider allowing your employees to contribute all or part of their bonuses directly into their retirement plans via payroll deduction. As an employer, you can facilitate payroll deduction on your employee’s behalf into either the company sponsored group retirement plan or into their personal account.
Remind employees about taxes on emergency benefits
Remind employees who collected CERB or other benefits during their temporary layoff that those benefits are taxable and will need to be included in the calculation of their income. It’s anticipated that many people will not have set aside sufficient funds to pay the tax in April. Consider offering financial education sessions or a payroll deduction savings plan to your staff so that they can set aside funds during the first part of 2021 to pay the taxes. Doing so will help reduce the financial stress associated with a surprise tax bill in the spring.
Understanding Your Benefits Renewal
Your benefits renewal is not calculated using a simple formula or a single factor. Watch our free webinar and learn how to determine whether your renewal is fair.