Provincial and Federal Budget Changes for Canadian Payroll in 2018

We go through which legislative and budget changes will and won’t impact Canadian Payroll. Subscribe to stay current, if you haven't already.

We have to say a big thank you to the Canadian Payroll Association for providing many of the legislative updates below. The CPA is the authoritative source on providing all of the most up-to-date Canadian Payroll legislation and if this area is of special interest to you, we definitely recommend you becoming a CPA member.

At the time of writing the following Canadian jurisdictions have released their 2018 budgets and/or legislative updates:

Federal

On February 27, 2018, the Federal Budget was presented by Finance Minister, Bill Morneau. The Budget has several areas that may impact payroll as proposed programs are approved, we have outlined the proposed EI changes below.

New EI Parental Sharing Benefit Proposed
In Budget 2018, the Government is proposing a new EI Parental Sharing Benefit to support equality in the home and the workplace by providing an additional five weeks of benefits when both parents agree to share parental leave.

Here is how the program would work:


Source: Government of Canada Budget 2018

Proposed Changes to Modernize the Employment Insurance (EI) Program

In addition to the new EI Parental Sharing Benefit, Budget 2018 proposes a number of measures to ensure EI continues to evolve to meet the needs of Canadians. As additional EI changes are announced we will update this document.

Proposed Changes to Taxable Benefits and Allowances

  • Effective 2018, the $25,000 home relocation loan deduction will be eliminated.
  • Effective 2019, the non-accountable allowance paid to municipal officers will be eliminated.

For more information on the Budget, please visit the Canada Budget 2018 website.

Non-Budget Changes that Impact Payroll

2018 Automobile Taxable Benefit Rate Changes

Per KM Amount (tax free, first 5,000 km $0.55 01/01/2018
Per KM Amount (tax free, after first 5,000 km) $0.49 01/01/2018
Per KM Amount (tax free, first 5,000 km) NWT, Nunavut and Yukon $0.59 01/01/2018
Per KM Amount (tax free, after first 5,000 km) NWT, Nunavut and Yukon $0.53 01/01/2018

The prescribed rate used to determine the operating cost taxable benefit to an employee for an employer-owned vehicle increased by 1 cent, to 26 cents per kilometer.

  • For taxpayers employed principally in selling or leasing automobiles, the prescribed rate is 23 cents per kilometer.
  • The standby charge taxable benefit for automobiles remain unchanged.

For more information on the Automobile Taxable Benefit rate changes, go here.

Alberta

Budget Update
On March 22, 2018, President of Treasury Board and Minister of Finance, the Honorable Joe Ceci, tabled the 2018 Budget in the Legislature. The Budget did not contain changes impacting payroll.

Income Tax Unchanged

There are no additional income tax increases in the Budget.

For more information about the Budget, visit Alberta Ministry of Finance website. 

Here are some additional payroll impacts you should be aware of as of January 1, 2018.

WCB Assessable Earnings Clarification

Upcoming legislative changes to the Alberta Workers’ Compensation Act removes the cap on the maximum compensable insurable earnings for injured workers with a date of accident of September 1, 2018, or later.

This means workers will be compensated with 90 percent of their total net earnings, with no limit. This change does not affect employers’ assessable earnings for 2018. The maximum insurable earnings cap used to determine employer premiums remains $98,700. 

British Columbia

Legislative Update
Premier John Horgan has announced that British Columbia’s Family Day will be moved to the third week in February to align this holiday with when other Canadian provinces celebrate it.

Learn more about these changes on the BC Government website

For more reading on this topic:

Vancouver Sun: B.C. Family Day will shift to third week of February in 2019 

CTV News: B.C. moves Family Day to align with other provinces

Budget Update
On February 20, 2018, the British Columbia Provincial Budget was presented by Finance Minister, Carole James. The Budget has the following impacts on Payroll:

Personal Income Tax Rates Unchanged
The budget does not include any changes to personal income tax rates.

Elimination of MSP (Medical Services Plan) Premiums
Starting January 1, 2018, MSP premiums were cut in half, the plan will be eliminated in full by January 1, 2020.

Introduction of Employer Health Tax for January 1, 2019

  • Small business with payroll less than $500,000 will not pay any employer health tax
  • Business with payrolls between $500,000 and $1.5 million will receive a reduced rate
  • Businesses with payroll over $1.5 million will pay the full rate of 1.95%

Additional Details on Employer Health Tax Released

The BC Government recently released Notice 2018-001, regarding the Employer Health Tax (EHT).

Employers in British Columbia with a payroll greater than $500,000 will be subject to the EHT.

For charities and non-profit employers, the EHT will apply to locations with payrolls greater than $1.5 million.

BC Employers
The employer health tax will apply on remuneration paid to employees who:

  • report to an employer’s establishment in British Columbia; or
  • are not required to report to work at any permanent establishment of the employer but who are paid from an establishment in British Columbia.

Remuneration
The remuneration on which the EHT will be calculated includes all forms of cash employment income such as salary, wages, overtime pay, commissions, bonuses, vacation pay and statutory holiday pay. Non-accountable allowances and taxable benefits will also be included in the total remuneration.

Generally, the total employment income reported in Box 14 of the T4 slip for BC employees will be subject to the EHT.

Tax Rate: Regular Employers

If the total annual remuneration is Tax payable is calculated as follows
$500,000 or less Exempt
Between $500,000.01 and $1.5 million Assessable remuneration less $500,000 x 2.925%
Over $1.5 million Assessable remuneration x 1.95%

The following are examples of how the EHT will be calculated on different amounts of annual BC remuneration:

Annual Payroll EHT Calculation Tax Due
$250,000 Annual payroll is less than exemption $0.00
$750,000 ($750,000 - $500,000) x 2.925% $7,312.50
$1,500,100 $1,500,100 x 1.95% $29,251.95

Remittance Due Dates
Registration for filing and paying EHT will start in January 2019. Employers with a BC payroll greater than $500,000 but less than $600,000.01 will be required to remit once per year.

Employers with payrolls than greater than $600,000 will be required to remit quarterly as illustrated below.

The installment payment due dates are:

  • June 15
  • September 15
  • December 15
  • March 31 – Final payment with annual return 

These installments will be based on estimates equal to 25% of payroll for the first three installments and the final payment will be a ‘true up’ for the whole year.

For more information on the Employer Health Tax, visit the BC Government website.

For more information on the Budget, visit the British Columbia Ministry of Finance website.

Manitoba

Budget Update
On March 12, 2018, the Honorable Finance Minister, Cameron Frieson, tabled the 2018 Budget. The Budget contained 1 item that impacts payroll.

Basic Personal Amount (BPA) to Increase

The Budget includes the following enhancements to the BPA over the next two years:

  • Effective for the 2019 tax year, the BPA will be increased from $9,382 to $10,392
  • Effective for the 2020 tax year, the BPA will be increased from $10,392 to $11, 402

For more information about the Budget, visit Manitoba Ministry of Finance website. 

New Brunswick

Budget Update
On January 30, 2018, Finance Minister, Cathy Rogers tabled the 2018-2019 Budget in the New Brunswick Legislative Assembly. The Budget contained no impacts on Payroll.

Personal Income Tax Rates Unchanged
The budget does not include any changes to personal income tax rates.

For more information on the Budget, visit the New Brunswick Ministry of Finance website.

Newfoundland

Budget Update
On March 27, 2018, Minister of Finance and President of Treasury Board for Newfoundland and Labrador, the Honorable Tom Osbourne, delivered the 2018 budget. The Budget contained 2 changes that will impact payroll.

HAPSET Threshold to be Increased

Effective on January 1, 2019, the government will reduce the Health and Post-Secondary Education Tax (Payroll Tax) on employers. This will be achieved by increasing the threshold from $1.2 million to $1.3 million.

New Search and Rescue Volunteer Tax Credit

Starting January 1, 2019, eligible search and rescue volunteers can claim a $3,000 non-refundable tax credit on their provincial income tax through the government's new Search and Rescue Volunteer Tax Credit. 

For more information about the Budget, visit Newfoundland Ministry of Finance website. 

Northwest Territories

Budget Update
On February 8, 2018, Finance Minister, Robert C. McLeod tabled the 2018 Budget in the Northwest Territories Legislative Assembly. The Budget contained only 1 item impacting Payroll.

Personal Income Tax Rates Unchanged
The budget does not include any changes to personal income tax rates.

Minimum Wage Increase
On April 1, 2018, the minimum wage will increase to $13.46 from $12.50 per hour.

For more information on the Budget, visit the Northwest Territories Ministry of Finance website.

Nova Scotia

Budget Update
On March 20, 2018, Finance Minister, Karen Casey, tabled the 2018-19 budget. The Budget contained no changes that will impact on payroll.

For more information about the Budget, visit Nova Scotia Ministry of Finance website. 

Nunavut

Budget Update

The Honourable David Akeeagok, Minister of Finance for Nunavut, delivered the 2018-19 Budget for Nunavut on May 28, 2018.

The Budget included no changes to provincial tax rates or any other areas that would affect payroll.

More information on the Budget can be obtained from the Ministry of Finance’s website.

Ontario

Legislative Update *new* June 2018

We previously reported:

On April 14, 2018, the Ontario Government announced that the public holiday pay calculation for Ontario will revert to the old formula. This revision will not result in retroactive pay changes.

Please note, with the recent change in the Ontario government that is no longer the case. There is a new update on the calculation of public holiday pay as follows:

On May 7, 2018, the Ontario government announced that it will be conducting a review of the public holiday system following feedback and discussions with stakeholders.

As an interim measure, the Ontario Ministry of Labour has introduced a new temporary regulation, O. Reg. 375/18, which reinstates to the old public holiday pay formula effective July 1, 2018 until December 31, 2019, as follows:

The employee’s public holiday pay for a given public holiday shall be equal to the total amount of regular wages earned and vacation pay payable to the employee in the four work weeks before the work week in which the public holiday occurred, divided by 20.

Learn more about these changes on the Ontario government website.

For more reading on this topic:

HRMOnline Article

Retail Council of Canada Article

Budget Update
On March 28, 2018, the Honorable Charles Sousa delivered the 2018 Budget. The Budget contained the following items impacting payroll.

Adjusting Ontario’s Personal Income Tax (PIT)

The budget includes changes to PIT that will be in effect for the 2018 tax year, which are to eliminate the surtax and replace it with new rates and brackets. By removing the surtax, the Ontario Government is estimating that 83% of Ontario’s 11 million tax filers (9.2 million individuals) will not see an increase in their PIT and many will pay less.

Currently, Ontario has five statutory PIT rates plus two surtax rates calculate separately. The proposed budget would create seven statutory PIT rates, directly applied to taxable income.

Employer Health Tax (EHT) Exemption

As announced in the 2017 Budget, the Ontario government will propose measures to better target the EHT exemption to individuals, charities, not-for-profit organizations, private trust and partnerships, and Canadian-controlled private corporations.

Legislation for these proposed changes, if passed, would become effective January 1, 2019.

Tax-Free Savings Account (TSFA) contribution towards Personal Support Workers (PSW)

Ontario will pilot a program that provides an initial contribution to a group TFSA on behalf of PSW, one of the largest groups in Ontario’s health care workforce.

Employers will match additional contributions made by PSW’s to a maximum of 2.5% of their earnings.

Pensions

  • Pooled Registered Pension Plans: To further harmonize Ontario’s Pooled Registered Pension Plan (PRPP) legislation with the federal Pooled Registered Pension Plans Act, the government intends to amend Ontario’s PRPP by incorporating the federal process for entering into or amending an existing agreement set out in the federal act.
  • Pension Benefits Act: To amend the Pension Benefits Act, the government intends to facilitate partial asset transfer between plans in the Ontario Public Sector (OPS) and commuted value transfers arising as a result of reorganizations and divestments.

Employer Partnership Training Fund

Effective April 1, 2018, the Employer Partnership Training Fund, as part of the Ontario Training Bank, will replace the Canada Ontario Job Grant.

The Employer Partnership Training Fund will incentivize employers to team up to deliver higher value training across a number of employers to support hiring and skills needs. Budget documents state that administrative burdens will be reduced by simplifying current contribution requirements.

For more information about the Budget, visit Ontario Ministry of Finance website.

Here are some additional payroll impacts you should be aware of as of January 1, 2018.

Prince Edward Island

Legislative Update

Bill 116 Receives Royal Assent
On May 15, 2018, the Government of Prince Edward Island introduced Bill No. 116, An Act to Amend the Employment Standards Act (No.3). The bill received Royal Assent on June 12, 2018 and is awaiting proclamation prior to coming into force.

Become a member of the Canadian Payroll Association or subscribe for updates from Avanti to learn when this law comes into force.

Budget Update

On April 6, 2018, Minister of Finance, the Hon. J Health MacDonald, tabled the 2018-2019 Budget. The Budget contained 1 item impacting payroll.

Basic Personal Amount (BPA) Increase

Currently, the BPA is $8,160, and the Budget includes the increase of the BPA by $1,000 over the upcoming two years. In 2018 it will increase by $500.00 and in 2019 there will be an additional increase of $500.00.

For more information about the Budget, visit Prince Edward Island Ministry of Finance website. 

Québec

Legislative Update

Changes to QPIP Rates for 2019 Announced

On June 19th 2018, the Québec government announced the following QPIP rate changes to come into effect on January 1, 2019.

The rates will change as follows:

  • Employee rate from 0.548% to 0.526%
  • Employer rate from 0.767% to 0.736%

Tentative Change to CNESST Maximum Assessable Earnings for 2019 Announced

The CNESST has recently announced that the CNESST maximum assessable earnings will increase to $76,500 for 2019.The weekly maximum for the construction industry will change to $1,467.20. These changes will be confirmed towards the end of October 2018.

New Reduction of the Health Service Fund Contribution for SMBs as of 2018

On August 15, 2018, the Quebec Ministry of Finance announced a new reduction of the health services fund contribution rate.

Increase in total payroll threshold for the reduced contribution rate
For 2018, the total payroll threshold for the reduced health services fund contribution rate will increase from $5 million to $5.5 million.

It will then rise gradually from 2019 to 2022 and be indexed annually as of 2023.

Decrease in health services fund contribution rate
If you are an employer other than a public-sector employer and your total payroll is less than $5.5 million, you can qualify for the reduced contribution rate, subject to certain conditions. Employers must use the contribution rate for their sector of activity to calculate your health services fund contribution for the year.

See the tables below for for the health services fund contribution rates for 2018 for each sector of activity.

Primary and Manufacturing Sectors - Contribution Rate for 2018

 
Total payroll (TP) Salaries or wages paid before March 28, 2018 Salaries or wages paid between March 28 and August 15, 2018 Salaries or wages paid after August 15, 2018
$1,000,000 or less 1.50% 1.45% 1.25%
$1,000,001 to $5,499,999 0.8867% + (0.6133% x TP/1,000,000) 0.8256% + (0.6244% x TP/1,000,000) 0.5811% + (0.6689% x TP/1,000,000)
$5,500,000 or more 4.26% 4.26% 4.26%

Service and Construction Sectors - Contribution Rate for 2018

Total payroll (TP) Salaries or wages paid before March 28, 2018 Salaries or wages paid between March 28 and August 15, 2018 Salaries or wages paid after August 15, 2018
$1,000,000 or less 2.30% 1.95% 1.75%
$1,000,001 to $5,499,999 1.8644% + (0.4356% x TP/1,000,000) 1.4367% + (0.5133% x TP/1,000,000) 1.1922% + (0.5578% x TP/1,000,000)
$5,500,000 or more 4.26% 4.26% 4.26%

Reduction of the health services fund contribution for the creation of specialized jobs
Form LE-34.1.12-V, Reduction of the Contribution to the Health Services Fund: Creation of Specialized Jobs, will be updated to incorporate the new rates for 2018. In addition, the denominator in the fraction used in the formula to determine your reduction rate if your total payroll is over $1 million has increased from $4 million to $4.5 million.

Periodic payments of the health services fund contribution
The employer’s periodic payments after August 15, 2018, may be adjusted to take into account the total payroll threshold increase for 2018.

The links below illustrate the rates in the primary and manufacturing sector and service and construction sectors for 2018 through to 2022.

Additional information may be obtained from the Québec Ministry of Finance’s and Revenu Québec’s websites.

Budget Update
On March 27, 2018, Finance Minister, Carlos Leitão, released the 2018 Budget. The Budget contained 3 items impacting payroll.

Québec Health Services Fund reduces contribution rates and increases thresholds

As of March 28, 2018, there will be a gradual reduction in the Quebec Health Services Fund contribution rate for all Québec organizations in the private sector with a payroll of $1 million or less. This includes reduced rates for primary and manufacturing sectors, and service and construction sectors.

The budget includes a $2 million increase in the payroll threshold that will gradually rise from the current $5 million to $7 million in 2022. This increase in the payroll threshold gives entitlement to the reduced contribution rate.

  Pre Budget Post Budget 2019 2020 2021 2022
Rate for primary and manufacturing sectors 1.50% 1.45% 1.40% 1.35% 1.30% 1.25%
Rate for service and construction sectors 2.30% 1.95% 1.80% 1.75% 1.70% 1.65%
Payroll threshold giving entitlement to reduced rate $5 million $5 million $5.5 million $6 million $6.5 million $7 million

Tax Credits to be maintained for the acquisition of shares in Fondaction

The Budget includes that the rate of tax credits will be maintained at 20% for eligible shares acquired in the next three fiscal years.

Adjustments to the Compensation Tax for Financial Institutions

The Budget includes a reduction in the compensation tax for financial institutions. The budget also includes a limit on the total payroll that is subject to this tax. This will be effective as of April 1, 2018.

The Budget includes the deadline to eliminate the compensation tax for financial institutions by March 31, 2024.

Québec Pension Plan (QPP) Unchanged

The budget did not include any changes to the QPP.

For more information about the Budget, visit Québec Ministry of Finance website. 

Saskatchewan

Legislative Update

Minimum Wage Increase
The minimum hourly wage will be increasing from $10.96 to $11.06, effective October 1, 2018.

On August 1, 2017, the Saskatchewan government introduced the addition of PST to life and health insurance premiums.

As of July 1, 2018, the PST exemption to life and insurance premiums was re-instated.

Learn more about these changes on the Saskatchewan government website.

For more reading on this topic:

National Post: Saskatchewan government announces PST exemption for some insurance premiums

Morneau Shepell: Saskatchewan eliminates provincial sales tax insurance premiums

Budget Update
On April 10, 2018, Minister of Finance, the Honorable Donna Harpauer, delivered the first Provincial 2018/19 Budget. The Budget contained 2 items impacting payroll.

Income Tax Rate Cuts will be paused while current rates will remain in effect

In the 2017/2018 Budget, the government announced income tax rate cuts that were to continue until 2020. These cuts will be paused, and the current rates will remain in effect.

Indexation of Brackets will be paused

The budget includes the pause indexation of Brackets.

For more information about the Budget, visit Saskatchewan Ministry of Finance website. 

Yukon

Budget Update
On March 1, 2018, Yukon Premier and Minister of Finance, Sandy Silver tabled the 2018-2019 Budget.

Personal Income Tax Rates Unchanged

The budget does not include any changes to existing territorial income tax rates.

For more information about the Budget, visit the Yukon Ministry of Finance website. 

Minimum Wage Announcements

For updates on the minimum across each province, please visit our 2018 Canadian Payroll Deductions Guide.

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About the Author

Marlo Hertling

Marlo Hertling has worked with leading HCM organizations and has been helping Canadian companies implement HCM solutions for more than 15 years. She is the Vice President of People & Culture at Avanti Software Inc and serves as Avanti's HCM subject matter expert.

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