The CRA recently revised its administrative policy for determining the payroll deduction table that applies for employees who are working fully remotely. In this article, we briefly consider the revised policy and its implications for employers.
When applying payroll deductions, the employee's province or territory of employment ("POE") must be determined so that the proper deductions are withheld. An employee's POE usually depends on where the employee physically reports for work. Where an employee did not physically report to work, the employee's POE was the province from which the employee was paid.
The new test:
Starting on January 1, 2024, where there is a full-time work agreement, the employer must determine if the employee is reasonably considered to be "attached to an establishment of the employer" in order to determine which jurisdiction relates to the source deductions.
See their updated guidance here.
A "full-time remote work agreement" exists where:
- The employer directs or allows employees to perform employment duties full time (100%) remotely, and
- The employment duties are to be performed at one or more locations that are not establishments of the employer.
Once it is established that there is a full-time remote work agreement, the CRA has set out primary and secondary indicators to determine if an employee may reasonably be considered to be "attached to an establishment of the employer".
If an employee cannot be considered to be "attached to an establishment of the employer", then the POE will continue to be determined under the existing rules as the province or territory from which the employee is paid.
The primary indicator to determine if an employee can reasonably be considered "attached to an establishment of the employer" is whether the employee would physically come to work to carry out duties at that establishment, were it not for the full-time remote work agreement.
Further, for employees who physically reported to an establishment of the employer immediately before entering a full-time remote work agreement, that establishment is the one to which they would be reasonably considered to be attached, unless the circumstances or the nature of their duties have changed.
Additionally, the following secondary indicators should be reviewed together in order to determine whether an employee is reasonably considered to be attached to an establishment of the employer:
- The establishment where the employee attends or would attend in-person meetings, through any type of communication.
- The establishment where the employee receives or would receive work-related material or equipment associated instructions and assistance.
- The establishment where the employee comes or would come in person to receive instructions from their employer regarding their duties, through any type of communication.
- The establishment that is responsible for or supervises the employee, as indicated in the contractual agreements between the employer and the employee.
- The establishment to which the employee would report based on the nature of the duties performed by the employee.
Applying these indicators allows an employer and CRA to determine the applicable jurisdiction where the employee is attached to the employer's establishment.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.