Canadian HCM compliance trends for employers to watch in 2021

In order to provide meaningful 2021 predictions to Canadian employers, it’s necessary to refer back to the many program announcements of 2020 for some insight.

Provincially and federally, Ceridian tracked nearly 70 initiatives in 2020 on behalf of employers. Impact assessments were performed to determine what programs required action, what could be supported with payroll reporting or product changes, and what communications were needed so that employers could stay informed — without being overloaded.

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There were weekly huddles both internally at Ceridian and between the Payroll Service and Software Provider Subcommittee of the Canadian Payroll Association, chaired by Ceridian.

No one wanted to miss an announcement, and no one wanted to misunderstand the requirements of any of the existing, and sometimes evolving, programs.

The Canadian experience

The COVID-19 pandemic hit Canada in earnest in March 2020. Workers were sent home and Canadians looked to the government for assurances. There was a flurry of analysis and activity as announcements were made. Programs were launched quickly to bring relief to individuals and to businesses that were only beginning to face a disrupted economy.

That spring, over the course of three short weeks, Canadians were introduced to a number of new programs:

• Employers were offered the federal government's Temporary Wage Subsidy (TWS) program, which provided a 10% reduction in income tax remittance for small business. It was announced on Mar. 18, 2020.
• The Canada Emergency Response Benefit (CERB) which paid individuals $500/week was announced in a Mar. 25, 2020 news release.
• The Canada Emergency Wage Subsidy (CEWS) for employers initially offered 75% of payroll as a subsidy incentive to keep and return employees to payroll. It was announced on Mar. 27, 2020.

All three programs involved nuances, and it wasn’t always possible to get reliable guidance that was both accurate and timely. The CEWS Q&As were still being updated in May. Despite the support provided by CRA, significant effort was required for employer applicants to keep up.

Looking back on 2020:

• Workers' Compensation: Workers' Compensation Boards (WCB) across Canada were quick to put in place administrative relief deferring the payment of employer premiums. Québec’s CNESST, rather than deferring CSST premium payment, excused employers participating in CEWS from paying premiums on any wages received by employees on paid leave.
• Provincial Employer Health Taxes: Ontario increased its employer health tax (EHT) exemption from $490K to $1M and announced an EHT tax deferral. Manitoba, British Columbia and Newfoundland followed suit with their own tax deferrals. Québec and British Columbia both offered a credit from their payroll taxes (QHSF and BC EHT) on any payments employers participating in CEWS made to employees on paid leave.

The dates of many of the programs above were extended, and some of them were extended more than once.

Between the federal TWS program and the provincial payroll tax deferrals, approximately 42% of Ceridian’s small business employers used Powerpay to participate. That figure was closer to 16% for employers using Dayforce.

At this point, there have yet to be announcements confirming plans for any similar allowances for 2021.

• Debt Recovery Deferred: Debt collection efforts by Canada Revenue Agency (CRA) and Revenu Québec (RQ) were both suspended temporarily beginning in March 2020. Québec resumed its program in October whereas the federal government has yet to announce when collection under its garnishment orders will resume. 
• Taxable Benefits Relief Extended: Late in 2020 CRA and RQ confirmed that certain benefits that would typically be considered taxable may not be in 2020. For example, when an office was closed due to COVID-19, the agencies agreed that otherwise taxable parking should not be treated as taxable (since spots were not available for employee use). Both agencies will also permit individuals to qualify for a reduced automobile standby charge in 2020 and 2021 based on their 2019 eligibility (if they had the same employer in those years).

In 2020, legislation was amended and entirely new programs were launched to protect employees’ jobs, recognize the importance of Canada’s essential workers and to anticipate/incentivize a return to work:

• Unpaid Leaves: Before the end of March, Yukon, British Columbia, Alberta, Saskatchewan, Ontario and Newfoundland & Labrador had passed COVID-19 related unpaid job protected leaves for employees. Nova Scotia already had an emergency leave category. Manitoba, New Brunswick and Prince Edward Island passed retroactive bills and Québec released a decree in September, that included anti-reprisal provisions.  Some jurisdictions selected a 14-day period of leave and others chose a more open-ended leave period. Some were specific to COVID-19, while others contemplated time off being related to any infectious disease or emergency.

Uniquely, Yukon established a 10-day paid sick rebate to reimburse employers who chose to continue to pay employees who were unable to work due to COVID-19.

• Pandemic pay: Pandemic pay took on a variety of forms. Although the qualifying criteria of the programs were subject to some debate, they were intended to recognize the contributions of frontline essential workers. Some provinces tied eligibility to a specific income level. Some provinces made one-time payments (i.e. to all CERB-eligible workers in British Columbia, to low income essential workers in Saskatchewan, and to seniors in Manitoba).
• Incentives to retain workers / return them to work:
  • Québec launched the Incentive Program to Retain Essential Workers (IPREW) to encourage essential employees to continue to work rather than receive federal benefits. Employees were offered wages earned plus $400 per month for a period of 16 weeks.
  • Manitoba encouraged employers to bring employees back on payroll by offering to reimburse employers 50% of total wages (to a maximum of $5,000 per worker) for 20 workers.
  • British Columbia announced a refundable 15% tax credit based on employers’ increase in payroll from 2020 Q3 to 2020 Q4.

Throughout 2020 there was a great deal of refinement and pivoting. Although CERB was an important program, one that was extended beyond its initial three-month run, it was ultimately replaced by more robust EI Recovery Benefit programs in the fall of 2020.

In contrast, there are a number of programs that continued beyond the end of 2020.

• Although the features of the CEWS were redesigned over the summer of 2020, the program has been extended to be available until the end of June 2021.
• The Canada Emergency Rent Subsidy (CERS) program is similarly available for qualifying renters and property owners from September 27, 2020, until June 2021 up to the maximums for eligible expenses.

Although it is difficult to say whether any of 2020’s other programs may be revived in 2021, each budget that is released has the potential to include more initiatives. For that reason, as we enter budget season, Ceridian will continue to monitor the federal and provincial announcements.

The safe prediction for 2021 is an increase in CRA and RQ’s audit interactions with taxpayers:

“The CRA is resuming a full range of audit work and adapting our practices to reflect the health and economic impacts of COVID-19. We are prioritizing actions that are beneficial to the taxpayer or where taxpayers have indicated there is an urgency to advancing their audit. In prioritizing our resumption, we are also focusing on higher dollar audits first, audits close to completion, and those with a strategic importance to the Government of Canada, provinces and territories, or our tax treaty partners. In addition, efforts to combat suspected fraud and other criminal activity are advancing.” (CRA, Audits)

Even as program benefits were being delivered, the government reminded recipients that there would be checks and balances in place to maintain and validate program integrity.

Ceridian customers were warned to save a copy of any materials they relied on as part of their applications, to take the steps necessary to restart their remittances after a deferral, to pay the deferred amounts promptly and to be prepared to defend their maximum income tax reduction calculations under the TWS.

As a reminder, all employers who participated in the TWS should be familiar with and have completed a PD27 Self-identification Form.

It was important in 2020, more so than in most years, for employers to diligently track and document their activities.

By mid-2021, the government’s audit activities will not be limited to detecting program abuse by Canadian employers. After personal returns have been processed, individuals who did not adequately validate their entitlements can also reasonably expect to face repayment consequences. At the time of writing, most employers have already begun to do their part by reporting T4 amounts paid to employees between Mar. 15 and Sept. 26, 2020.

It was a struggle for HR and payroll professionals alike to keep up with the pace of 2020’s changes. With vaccine distribution and attempts to return to work on 2021’s horizon, the outlook is good that this year will introduce its own unique challenges. Ceridian will continue to track what’s coming and look for opportunities to ease employers’ compliance burdens.

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Disclaimer: The information provided in this post is provided for informational purposes only and should not be relied upon or construed as legal advice and does not create an attorney-client relationship. You should review with your legal advisors how the laws identified in this post may apply to your specific situation.