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Additions to Basic Pay

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November 1993

Table of Contents

  1. Purpose
  2. Allowances and other payments in addition to basic pay
  3. Taxable benefits
  4. Extra duty pay input codes
  5. Equalization adjustments
  6. Bilingualism bonus


1 Purpose

This chapter provides more detailed information on some of the allowances and other factors which result in additions to basic pay.

2 Allowances and other payments in addition to basic pay

Allowances and other payments in addition to basic pay and the deductions to which each payment is subject are listed in the entitlement control file in the on-line pay system.

3 Taxable benefits

This section enumerates various common types of "fringe benefits" and indicates whether or not their value should be included in income.

Most of the more common fringe benefits are included in the following comments, where they are classified as either taxable benefits or non-taxable privileges. In the second group there may well be a point beyond which the "privilege" concept is no longer valid; that is, the advantage to the employee no longer bears a casual or traditional relationship to the employment but has become a disguised form of extra remuneration. Then, the fringe benefit is viewed as a taxable benefit.

Where the value should be included, the employer should determine the value or make a reasonable estimate of it and include that value in the box provided on form T4 Supplementary (Statement of Remuneration Paid) under the heading "Total Earnings Before Deductions" and also in the box headed "Taxable Allowances and Benefits".

3.1 Amounts to be included as income

3.1.1 Board and lodging

(Refer to Interpretation Bulletin IT-470 - Employees' Fringe Benefits-After 1980.)

Where subsidized board and lodging is provided to an employee, the value of the benefit for "board" is the cost of the board less any payment by the employee.

The value of the benefit for "lodging" is the fair market value of the accommodation less any charge to the employee.

3.1.2 Employment at special and remote work sites

(Refer to Interpretation Bulletins IT-71R, 91R2 and 470.)

Where an employer pays employees' allowances (not in excess of reasonable amounts) to cover travelling expenses to, or board and lodging at, a "special and remote work site", such allowances may be exempt from tax provided that all the conditions of Subsection 6(6) of the Income Tax Act are satisfied. Similarly, where transportation, board and lodging are provided by the employer but not paid in cash, the employer will not report the equivalent value as remuneration paid to the employee on the T4-T4A Return.

To qualify for these exemptions, the employee must be working away from home under the following circumstances:

the work site must be a location at which duties performed by the employee are of a temporary nature.

Where an employee satisfies all of these requirements, the employee and the employer should complete form TD4 (Declaration of Exemption - Employment at Special Work Site), so that the relevant benefit or allowance may be excluded from income. Provided that form TD4 has been duly completed, the excluded amounts are not reported on the employee's T4 supplementary form.

If form TD4 is not completed, or if all the conditions described thereon are not met, the employer is required to treat the amounts as income of the employee, make the necessary deductions at source, and report the amounts on the employee's T4 supplementary form. This treatment also applies to that part of an allowance for board, lodging and transportation that is in excess of a reasonable amount.

In addition to the exemptions granted in the earlier paragraphs, effective for 1978 and subsequent years, a corresponding exemption is extended to employees working at "remote" work sites. These allowances are of two types and in order to qualify for tax exemption under Subsection 6(6) of the Income Tax Act, the following conditions must be met:

When transportation or board and lodging are provided by an employer under the above conditions but not paid in cash, the employer will not report the equivalent value as remuneration to the employee on the T4-T4A return. Form TD4 is not required in respect of exemption granted in respect of allowances paid at a remote work site. To determine whether a work site qualifies as remote, employers should contact their District Taxation Office.

Forms TD4 and Interpretation Bulletins IT-71R, IT-91R2 and IT-470 are available from any District Taxation Office. After completing form TD4 with the employee, the employer shall retain it with payroll records.

3.1.3 Rent-free and low-rent housing

(Refer to Interpretation Bulletin IT-470 - Employees' Fringe Benefits - After 1980.)

Where an employer provides a house, apartment, or similar accommodation to an employee rent-free or for a lower rent than the employee would have to pay someone else for such accommodation, the employee receives a taxable benefit. The employer is responsible for reasonably estimating the amount of such a benefit which would normally be considered to be the fair market rent for equivalent accommodation had the employee rented from a third party, less any rent paid.

3.1.4 Personal use of employer's automobile

Refer to Interpretation Bulletins IT-63R (Employee's Personal Use of Automobile Supplied by Employer) and IT-470 (Employee's Fringe Benefits - After 1980).

3.1.5 Incentive awards

Refer to Interpretation Bulletin IT-470 (Employees' Fringe Benefits - After 1980).

Where an employee receives a prize or a work incentive award from the employer, the amount received is included in income under Section 5 of the Income Tax Act.

3.1.6 Premiums under provincial hospitalization and medical care insurance plans, and certain Government of Canada plans

Refer to Interpretation Bulletin IT-470 (Employees' Fringe Benefits - After 1980).

Where an employer pays all or a part of the premiums or contributions an employee is required to make to a provincial hospital insurance plan, a provincial medical care insurance plan, or both, the amount paid is a taxable benefit to the employee.

Where an employer pays an amount to an employee in respect of the employee's premium under a provincial hospital or provincial medical care insurance plan, the amount paid is a taxable benefit to the employee.

A taxable benefit arises through amounts paid by the Government of Canada in respect of premiums under its hospital or medical care insurance plan for its employees serving outside Canada and their dependants. This also applies to dependants of members of the RCMP and Canadian Forces serving outside Canada.

3.1.7 Tuition fees, scholarships, and bursaries

Refer to Interpretation Bulletins IT-470 (Employees' Fringe Benefits - After 1980), and IT-75R2 (Scholarships, Fellowships, Bursaries, Prizes and Research Grants).

Where an employer has paid tuition fees on behalf of an employee or has reimbursed an employee, in whole or in part, for tuition fees paid by the employee personally, the amount paid should be reported as income of the employee for the year in which the payment was made.

An exception to this rule can be made where the course for which the fees were paid was undertaken on the employer's initiative and for the employer rather than the employee. This is usually presumed where a course is taken during normal working hours with the employee being given time off with pay for that purpose. On the other hand, if the course is taken on the employee's own time, the presumption is that the course is primarily for the employee's own benefit. In addition, where an educational institution provides free tuition to its staff members or their children outright, the benefit may ordinarily be considered a non-taxable privilege and no related deduction would be allowable under the Income Tax Act.

An amount which is included in the employee's income is, in most cases, deducted by the employee as tuition fees.

Where a student, immediately before, during, or immediately after employment by an employer, has made an agreement by which the employer will pay for the student's education on condition that the student will enter or return to employment with the employer after the course, the amounts so paid are income to the student under the Income Tax Act. However, for 1974 and subsequent taxation years, any reasonable allowance received by an employee from the employer to cover the away-from-home education of the employee's child will not be included in the employee's income so long as the education provided is in the official language of Canada primarily used by the employee and the school is the closest available for that official language from the place where the employee is required to live.

3.1.8 Travelling expenses of employee's spouse

Refer to Interpretation Bulletin IT-470 (Employees' Fringe Benefits - After 1980).

Where a spouse accompanies an employee on a business trip, the payment or reimbursement by the employer of the spouse's travelling expenses is a taxable benefit to the employee unless the spouse goes at the request of the employer and the main purpose of the spouse going is to assist in attaining the business objectives of the trip.

3.1.9 Wage loss replacement plans

Refer to Interpretation Bulletin IT-428 (Wage Loss Replacement Plans).

Where an employer pays, on behalf of the employee, the premium under a non-group plan that is:

the payment of the premium is regarded as a taxable benefit to the employee.

3.1.10 Executive benefits - Public Service Management Insurance Plan (P.S.M.I.P.)

Deputy Ministers, certain other appointees of the Governor in Council, and employees classified in the Executive (EX) Group are entitled to payment by the employer of the premiums for basic life insurance coverage equivalent to twice their salary.

The premiums for insurance in excess of $25,000 are a taxable benefit to the employee on whose behalf the premiums are paid.

3.1.11 Employee share of employer premium reduction

Section 64(4) of the Unemployment Insurance Act provides for reduction of the premium payable by an employer in respect of insured employees who are covered under an income maintenance plan that provides benefits which would have the effect of reducing the benefits payable under the Unemployment Insurance Act in the event of unemployment caused by illness. The reduction in the premium is granted only if the insured employees will receive a benefit equivalent in value to five-twelfths of the amount of the reduction. In the Public Service, this reduction is currently granted on the basis of the existence of the sick leave provisions for employees; the Treasury Board has authorized the payment of the five-twelfths share of the employer premium reduction due to eligible employees as a direct supplement to their remuneration. Deductions are made from this payment for income tax as well as any necessary contribution to the Canada or Quebec Pension Plans or Unemployment Insurance (PMM 680-2).

3.1.12 Commuting allowance

Refer to Interpretation Bulletin IT-470 (Employees' Fringe Benefits - After 1980).

Revenue Canada Taxation has ruled that commuting allowances are personal and consequently should be included in the employee's income as a taxable benefit.

3.2 Amounts not to be included in income

Refer to Interpretation Bulletin IT-470 (Employees' Fringe Benefits - After 1980).

3.2.1 Discounts

Where it is the practice of an employer to sell merchandise to employees at a discount, the benefits that an employee may derive from exercising such a privilege are not regarded as taxable benefits. However, this does not extend to an extraordinary arrangement with a particular employee or a select group of employees nor to an arrangement by which an employee is permitted to purchase merchandise (other than old or soiled merchandise) for less than the employer's cost. Furthermore, this treatment does not extend to a reciprocal arrangement between two or more employers whereby the employees of one can exercise such a privilege with another by whom the employees are not employed.

3.2.2 Transportation passes

Where, in the transportation industry, an employee is given the privilege of a free pass on vehicles operated by the employer, the pass is not regarded as being a taxable benefit. This does not extend to a cash payment that an employee receives in exchange for the surrender of the entitlement to the free pass.

3.2.3 Subsidized meals

Subsidized meals provided to employees will not be considered to confer a taxable benefit provided that the employee is required to pay a reasonable charge.

A reasonable charge is one that covers the cost of food, its preparation and service. The value of the benefit is that cost less any payment by the employee.

3.2.4 Uniforms and special clothing

Employees supplied with distinctive uniforms which they are required to wear while carrying out the duties of their employment, or provided with special protective clothing, are not regarded as receiving a taxable benefit. Payments made by an employer to a laundry or drycleaning establishment for laundry or drycleaning expenses of uniforms and special clothing, or directly to employees in reimbursement of such expenses, do not constitute a taxable benefit to the employees.

3.2.5 Subsidized school services

In remote or unorganized areas employers frequently assume, initially at least, responsibility for essential community services of a kind normally borne by a municipal organization. Where the employer provides free or subsidized school services for children of the employees, a taxable benefit is not deemed to accrue to the employees. This does not extend to a payment of an educational allowance directly to the employee by the employer, which is a taxable benefit unless excepted by sub-paragraph 6(1)(b)(ix) of the Income Tax Act.

3.2.6 Transportation to the job

Employers sometimes find it expedient to provide vehicles for transporting their employees from pick-up points to the location of the employment at which, for security or other reasons, public and private vehicles are not welcome or not practicable. In these circumstances, the employees are not regarded as receiving a taxable benefit.

3.2.7 Recreational facilities

Normally, where an employer maintains and makes available recreational facilities for use of the employees generally, free of charge or upon payment of a nominal fee, the value of any benefit derived by an employee from taking advantage of such a privilege is not taxable. However, if the employee is furnished with board or lodging, as at a summer hotel or hunting lodge maintained by the employer, the value of board and lodging received by the employee must be included in income.

Similarly, where the employer pays the fees required for an employee to be a member of a social or athletic club, where it is to the employer's advantage for the employee to be a member of the club, the employee is not deemed to have received a taxable benefit.

3.2.8 Removal expenses

Where an employer reimburses an employee for the expenses incurred by the latter in moving, either because the employee has been transferred from one establishment of the employer to another or because the employee has accepted employment at a place other than where the employee's former home was located, this reimbursement is not considered as conferring a benefit on the employee.

In addition, where the employer pays the expense of moving an employee and the employee's household out of a remote place at the termination of employment there, no taxable benefit is imputed.

In ordinary circumstances, if an employee is required by an employer to move to another locality or retires from employment in a remote area, and suffers a loss in selling his or her house which the employer reimburses, the amount so reimbursed is not income of the employee if it is not greater than the actual loss to the employee, calculated as the amount by which the cost of the house to the employee exceeds the net selling price received for it. Similarly, if there is a guarantee whereby the employer reimburses the employee for any excess of the independently appraised fair market value of the house over the actual price received, the reimbursement is not income of the employee. Should the employer buy the house from the employee at a price that does not exceed the greater of the cost of the house to the employee and the current fair market value of comparable houses in the same area, no amount is included in the employee's income.

An employee who is not, or is only partly, reimbursed for removal expenses, may be able to claim certain of the expenses incurred as a deduction from income under Section 62 of the Income Tax Act.

3.2.9 Premiums under private health service plans

Where an employer makes a contribution to a private health service plan in respect of an employee, no taxable benefit arises to the employee.

Benefits provided to an employee under a private health service plan are not subject to tax in the employee's hands.

3.2.10 Volunteer firemen - Expenses allowance

Income of not more than three hundred dollars, received as an expense allowance from a government, municipality or other public authority, is not a taxable benefit. Amounts in excess will be included in income.

3.2.11 Workers' compensation

Refer to Chapter 4-2 of the Insurance and Related Benefits volume.

4 Extra duty pay input codes

4.1 Purpose

The purpose of this section is to clarify for departments and agencies the more frequently used extra duty pay input codes and their definitions.

4.2 Definitions

Following are some examples of instances where errors have occurred or where further clarification is required:

009 Call back pay:
Compensation payable to an employee on standby who must report to work or to an employee who is recalled to work and such recall has not been scheduled in advance and is outside the employee's normal working hours. The entitlement due is the greater of the minimum guarantee or the actual hours worked at the applicable overtime rate (indemnité de rappel au travail).

Collective agreements specify how call-back pay is to be calculated and this is how the entitlement should be reported on the pay input document (e.g. straight time, time and one-half, etc.).

032 Meal allowance:
An entitlement due to employees for reimbursement of meal expenses when they are required to work a minimum specified period of overtime immediately before or immediately following the regularly scheduled hours of work. Reference should be made to the relevant collective agreement for the qualifying period and the amounts (indemnité de repas).
040 Overtime accumulated - compensatory leave paid in cash:
Earned overtime that the employee had opted to take as compensatory leave but which is now being paid in cash (heures supplémentaires accumulées - congé compensateur payé en argent).
043 Premium pay for work on a holiday:
Compensation payable to an employee whose normal scheduled hours of work fall on a statutory holiday and who is required to work on the designated paid holiday. The entitlement payable is in addition to the amount that would have been paid had the employee not worked on the holiday (rémunération majorée pour le travail effectué un jour férié).
050 Reporting pay:
Compensation paid to employees who report for work on a scheduled shift and find no work available or as directed on a day of rest or a designated paid holiday. There is normally a minimum number of hours guaranteed with only the minimum guaranteed portion being reported under this code. If the minimum guarantee is exceeded, then all hours are to be reported under the applicable entitlement code (e.g. basic pay, overtime, etc.). Entitlement code 050 is restricted to those collective agreements which make specific reference to reporting pay as a separate article (indemnité de rentrée au travail).

Collective agreements which refer to reporting pay under an overtime or standby article must have any entitlement payable reported under the applicable entitlement code (e.g. call-back, standby, overtime, etc.).

055 Shift premium - evening or second shift:
Compensation paid to employees on shift work when they are required to perform the duties of their position during the hours immediately following the normal hours of day work.

(Note: Reference should be made to the relevant collective agreement for the actual hours of work of the different shifts.) (prime de poste - poste du soir ou deuxième poste).

058 Shift premium - night or third shift:
Compensation paid to employees on shift work when they are required to perform the duties of their position during the hours immediately following the normal hours of the second or evening shift.

(Note: Reference should be made to the relevant collective agreement for the actual hours of work of the different shifts.) (prime de poste - poste de nuit ou troisième poste).

064 Standby - first rate:
Compensation an employee is entitled to receive for being available to return to work outside the normal hours of work at the employer's request for a specified period according to the relevant collective agreement. The employee receives standby pay whether or not he or she returns to work. If the employee returns to work the compensation payable in addition to the standby is reported as entitlement code 009 Call-Back Pay, (disponibilité - premier taux).
065 Standby - second rate:
Compensation an employee is entitled to receive for being available to return to work on a day of rest or designated holiday at the employer's request for a specified period according to the relevant collective agreement. The employee receives standby pay whether or not he returns to work. If the employee returns to work the compensation payable in addition to the standby is reported as entitlement code 009 Call-Back Pay (disponibilité - deuxième taux).
071 Supervisory differential - overtime:
Employees in receipt of a supervisory differential are entitled to be compensated at the applicable overtime rate on the differential whenever they are required to work overtime. This additional entitlement is to be reported separately from the regular overtime payment and coded as 071 (prime de surveillance - heures supplémentaires)
072 Travel on a day of rest - designated holiday:
Compensation an employee is entitled to receive when at the employer's request, the employee is required to travel outside of the headquarter's area on government business on the employee's normal day of rest or designated paid holiday. Collective agreements normally stipulate a maximum number of hours that can be paid (déplacement pendant un jour de repos ou un jour férié désigné).
086 Schedule or shift change premium:
Compensation an employee on day work (Monday to Friday incl. and between the hours of 7:00 a.m. and 6:00 p.m.) is entitled to when the employer changes the employee's scheduled hours of work without providing the advance notice required by the applicable collective agreement. The extra compensation payable is for the first day or shift worked on the new schedule, with subsequent days or shifts on the new schedule paid at the employee's straight time rate of pay;

Compensation due an employee when the employer changes the employee's scheduled shift hours or days of work without giving the specified advance notice as required by the applicable collective agreement. The additional compensation is for the first full shift;

Compensation due an employee when the employer changes the employee's scheduled shift hours or days of work without giving the specified advance notice as required by the applicable collective agreement. The additional compensation is for only those hours on the new shift which are outside of the hours of the former shift (prime de changement d'horaire ou de poste).

Reference should be made to the relevant collective agreement for the compensation due and the circumstances under which the entitlement can be paid.

089 Travel on a normal working day:
Compensation an employee is entitled to receive for the hours in excess of the employee's standard daily hours when, at the employer's request, the employee is required to travel outside the headquarter's area on government business on a normal workday and the number of travel hours or working hours, or both, exceed the specified period as defined in the applicable collective agreement. Collective agreements normally stipulate a maximum number of hours that can be paid (déplacement un jour normal de travail).
092 Premium for lieu day:
Compensation an employee is entitled to receive when the employee has not taken all of his or her lieu days prior to the end of the fiscal year or by the time specified in the collective agreement;

Lieu days are established for every designated holiday for those organizations which, due to continuous operation, do not shut down on a holiday (taux majoré pour les jours de congé compensateur).

138 Premium for change in shift or employee status (BUD 404):
An entitlement due an employee in the Electronics group who changes shift hours or days of work to accommodate the unanticipated absence of another employee whose absence was not initiated by the employer;

An entitlement due an employee in the Electronics group when required to change his or her status from operating to non-operating or vice versa without receiving the specified advance notice as required by the applicable collective agreement;

An entitlement due an employee in the Electronics group when assigned to shipboard duty without being given the specified advance notice as required by the applicable collective agreement (taux majoré pour les changements dans le poste ou la situation de l'employé (IUN 404)).

154 Weekend premium - first day (Saturday):
An additional entitlement due employees when, as a result of the continuous operation of the organization they work for, they are required to work on a Saturday as part of their regularly scheduled hours or days of work (prime de fin de semaine - premier jour (samedi)).
155 Weekend premium - second day (Sunday):
An additional entitlement due employees when, as a result of the continuous operation of the organization they work for, they are required to work on a Sunday as part of their regularly scheduled hours or days of work (prime de fin de semaine - deuxième jour (dimanche)).
186 Additional compensation - designated holiday (BUD 604):
The compensation payable, in addition to their regular entitlements, to Couriers (Diplomatic), Towermen (Fire Lookout) and Harbour Managers for any designated holiday whether or not the designated holiday falls on a workday (rémunération supplémentaire - jour férié désigné (IUN 604)).
236 Meal period payments (BUD 404):
An entitlement due employees in the Electronics group when as a result of the nature of their work they are required by the employer to remain at the Air Traffic Control Centre and to be available to return immediately to duty during the one-half hour unpaid meal break (paiement des périodes de repas (IUN 404)).
260 Overtime - on a regular working day:
The compensation payable to employees when they are required to work in excess of the standard daily or weekly hours of work (heures supplémentaires - un jour de travail normal).
261 Overtime - on first day of rest:
The compensation payable to employees when they are required to work on the first normally scheduled day of rest (heures supplémentaires - un premier jour de repos).
262 Overtime - on second and subsequent day of rest:
The compensation payable to employees when they are required to work on the second and subsequent normally scheduled days of rest (heures supplémentaires - un deuxième jour de repos ou un jour de repos ultérieur).
263 Overtime - on a statutory holiday:
The additional compensation payable to employees when they are required to work on a designated paid holiday or on a day which has been proclaimed by law (or custom) as a day free of work when the employees are not ordinarily required to perform the duties of the position (heures supplémentaires - un jour férié légal).
268 Overtime - while on training:
This is a new entitlement code established for compensation due to employees when employees are required to work overtime while attending courses, training sessions, conferences, seminars, etc. at the employer's request (heures supplémentaires - pendant la formation).

5 Equalization adjustments

5.1 General

Equalization adjustments are payments applicable to specific groups of employees. The payment equalizes wages on a total compensation basis between these employees and those of another group who are performing work of equal value.

5.2 Eligibility

Equalization adjustments apply to employees for whom the Treasury Board is the Employer, including employees not subject to collective bargaining, in departments and agencies listed under Schedule I, Part I of the Public Service Staff Relations Act (PSSRA).

Employees means those persons employed for a specified period (over and under six months), or on an indeterminate, part-time or seasonal basis. It does not include individuals working under contract or employed through an agency or separate employer.

5.3 Implementation

In general, equalization adjustments form part of an employee's salary and must be considered in calculating all entitlements and deductions which are based on the rate of pay. This means calculations for promotions, transfers, acting pay, cash-outs, overtime, severance pay, payment of unused annual leave, 4% in lieu of vacation leave, superannuation, maternity leave allowances, etc.

The steps to be followed for employees who are promoted, transferred, or receiving acting pay into or out of groups to which equalization adjustments apply are described in Chapter 4 of this volume.

6 Bilingualism bonus

6.1 General

The bilingualism bonus consists of an annual payment of $800, calculated on a monthly basis and paid on the same basis as regular pay.

An eligible employee shall be entitled to receive the bilingualism bonus for the full month for any month in which the employee receives a minimum of ten (10) days' pay in a position(s) to which the bilingualism bonus applies.

Part-time employees who work more than one-third of the normal period are paid the bonus on a prorata basis to be calculated in reference to the normal hours these employees are expected to work.

6.2 Pay considerations

The bilingualism bonus is considered part of an employee's salary only in respect of the following:

The bilingualism bonus is not considered part of an employee's salary nor is it used to compute an employee's salary entitlements for the following:

 


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