Special payments chart

This chart will help you determine whether or not to deduct Canada Pension Plan (CPP) contributions, employment insurance (EI) premiums, and income tax on the special payments you make to your employees or recipients. If the payment you are looking for is not in this chart, go to the Calculating deductions alphabetical index.

List of special payments and their respective deductions (CPP, EI and tax)

Special payments
CPP contributions [Note 1] EI premiums [Note 1] Tax deductions
Advances Yes  Yes Yes
Benefits under the Employment Insurance Act No No Yes
Bonuses and retroactive pay increases or irregular amounts Yes Yes Yes
Casual employment if it is for a purpose other than your usual trade or business (even if there is a contract of employment) No No No
Compassionate care benefits – amounts paid to cover the waiting period or to increase the benefit Yes Yes/No
(Note 2)
Yes
Corporate employee who controls more than 40% of the corporation's voting shares receiving salary, wages or other remuneration Yes No Yes
Directors' fees paid to residents of Canada or non-residents – Fee only Yes
(Note 3)
No Yes
(Note 4)
Directors' fees paid to residents of Canada or non-residents – Fee in addition to salary Yes/No
(Note 5)
Yes/No
(Note 5)
Yes
Employees profit sharing plan (EPSP) No No No
Employment in Canada by a foreign government or an international organization Yes/No
(Note 6)
Yes/No
(Note 7)
Yes
(Note 8)
Employment in Canada of a non-resident person if the unemployment insurance laws of any foreign country require someone to pay premiums for that employment Yes/No
(Note 9)
No Yes
(Note 8)
Employment in Canada under an exchange program if the employer paying the remuneration is not resident in Canada Yes/No
(Note 10)
No Yes
(Note 8)
Employment of your child or a person that you maintain if no cash remuneration is paid No No No
Employment that is an exchange of work or service (even if there is a contract of service) Yes/No
(Note 11)
No Yes/No
(Note 12)
Employment under the "Self-employment assistance" or "Job creation partnerships" benefit program established under section 59 of the Employment Insurance Act, or under a similar benefit program that a provincial government or other organization provides and is part of an agreement under section 63 of the Employment Insurance Act. Yes/No
(Note 13)
No Yes/No
(Note 14)
Employment when employment insurance premiums have to be paid according to the unemployment insurance laws of any state of the United States, the District of Columbia, Puerto Rico, or the Virgin Islands, or according to the Railroad Unemployment Insurance Act of the United States Yes/No
(Note 10)
No Yes
Entertainment activity, employment in Yes Yes Yes
Furlough, amounts received when on Yes Yes Yes
Honorariums from employment or office Yes Yes Yes
Incentive payments Yes Yes Yes
Job creation Employment and Social Development Canada approved project, additional amounts that you as an employer pay while participating in a project Yes/No
(Note 15)
No Yes
Lost-time pay from a union, amounts received as Yes Yes Yes
Maternity benefits – amounts paid to cover the waiting period or to increase the benefit Yes Yes/No
(Note 2)
Yes
Overtime pay, including banked overtime pay Yes Yes Yes
Parental care benefits – amounts paid to cover the waiting period or to increase the benefit Yes Yes/No
(Note 2)
Yes
Payments under Part 2 of the Canadian Forces Members and Veterans Re-establishment and Compensation Act – amounts received on account of an earnings loss benefit, supplementary retirement benefit or permanent impairment allowance payable to the taxpayer No No Yes
Qualifying retroactive lump-sum payments (Note 17) Yes Yes Yes
Retirement compensation arrangements (RCA) No No Yes
Retiring allowances (also called severance pay) No No Yes
(Note 18)
Sabbatical, remuneration received while on Yes Yes Yes
Salary Yes Yes Yes
Salary deferral – non-prescribed plans or arrangements – on amounts earned Yes Yes Yes
Salary deferral – prescribed plans or arrangements – on amounts received Yes/No
(Note 16)
Yes/No
(Note 16)
Yes
Sick leave, amounts received while on sick leave, sick leave credits, payments for Yes Yes Yes
Spouse or common-law partner, employment of, if you cannot deduct the remuneration paid as an expense under the Income Tax Act No Yes/No
(Note 19)
Yes
Teacher on exchange from a foreign country, employment of No Yes/No
(Note 20)
Yes/No
(Note 21)
Tips and gratuities (controlled by employer) Yes Yes Yes
(Note 22)
Tips and gratuities (direct tips or gratuities – not controlled by the employer) No No No
(Note 22)
Vacation pay and public holidays, and lump-sum vacation payment Yes Yes

Yes

(Note 1)

Vow of poverty – employment of a member of a religious order who has taken a vow of poverty. This applies whether the remuneration is paid directly to the order or the member pays it to the order. No No Yes/No
(Note 23)
Wages Yes Yes Yes
Wages in lieu of termination notice Yes Yes Yes
Wage-loss replacement plans – Paid by the employer Yes Yes Yes

Wage-loss replacement plans – Paid by third party/trustee and the employer:

  • funds any part of the plan; and
  • exercises a degree of control over the plan; and 
  • directly or indirectly determines the eligibility for benefits
Yes Yes Yes
Workers' compensation claims – Employee's salary paid before or after a workers' compensation board claim is decided Yes Yes Yes
Workers' compensation claims – Advances or loans equal to the workers' compensation benefits awarded No No No
Workers' compensation claims – Amount paid in addition to an advance or loan before the claim is accepted Yes Yes
(Note 24)
Yes
Workers' compensation claims – Top-up amounts paid after the claim is accepted Yes No Yes
Workers' compensation claims – Top-up amounts paid as sick leave after the claim is accepted Yes No Yes

Note 1 If you have already deducted the total yearly maximum contributions from the employee's income, do not deduct more contributions. Do not consider amounts deducted by previous employers during the same year unless there was a restructure or reorganization.

Note 2 Do not deduct EI premiums if the following two conditions are met:

  • the total amount of your payment and the EI weekly benefits combined do not exceed the employee's normal weekly gross salary; and
  • your payment does not reduce any other accumulated employment benefits such as banked sick leave, vacation leave credits, or retiring allowance. 

Note 3 Do not deduct CPP contributions when the employment is performed totally or partly outside Canada.

Note 4 Do not deduct income tax if you estimate that the total fee paid in the year is less than the total claim amount on Form TD1.

Note 5 Whether to deduct CPP, EI or both depends on the status of the resident director's employment. See Directors' fees.

Note 6 Deduct CPP contributions when the international organization or the foreign government agrees to cover their employees. A list of the international organizations and foreign countries can be found under schedule V and VII of the Canada Pension Plan Regulations (except for employment listed in schedule VI and VIII). 

Note 7 Deduct EI premiums when the foreign government or international organization agrees to cover its Canadian employees under Canada's EI legislation (in this case, the employment is insurable if Employment and Social Development Canada agrees). 

Note 8  For more information on non-resident employees, see Rendering services in Canada.

Note 9 Deduct CPP contributions unless the worker has a certificate of coverage from the competent authority of his or her country confirming that the worker is contributing to a pension plan in his or her country. Do not deduct CPP contributions if the employer is not residing in Canada and does not have an establishment in Canada, unless the employer has filed a Form CPT13, Application for an Employer Resident Outside Canada to Cover Employment in Canada Under the Canada Pension.

Note 10 Do not deduct CPP contributions unless the employer has filed a Form CPT13, Application for an Employer Resident Outside Canada to Cover Employment in Canada Under the Canada Pension.

Note 11 Deduct CPP contributions, unless the employment does not require CPP deductions, as indicated in Chapter 2 of Guide T4001, Employers' Guide – Payroll Deductions and Remittances.

Note 12  For more information about bartering, see archived Interpretation Bulletin IT-490, Barter Transactions. Do not deduct income tax unless the taxpayer is an employee and makes a regular habit of providing services for cash. 

Note 13 Do not deduct CPP contributions on benefits paid by Employment and Social Development Canada or a provincial government. Deduct CPP contributions on payments made by an employer unless the individual is working as a self-employed individual or the employment does not require CPP contributions, as indicated in Chapter 2 of Guide T4001, Employers' Guide – Payroll Deductions and Remittances.

Note 14 Deduct income tax if the payment is considered government financial assistance. But if the payment is considered an inducement to earn business income, do not deduct income tax.

Note 15 Deduct CPP contributions on payments made by an employer unless the individual is working as a self-employed individual or the employment does not require CPP contributions, as indicated in Chapter 2 of Guide T4001, Employers' Guide – Payroll Deductions and Remittances.

Note 16 To determine if you have to deduct CPP, EI or both, see Prescribed salary deferral plans or arrangements.

Note 17 Qualifying retroactive lump-sum payments may require CPP or EI deductions in addition to income tax.

Note 18 Do not deduct income tax on the amount of retiring allowance that is transferred directly to the recipient's RPP or RRSP (up to the amount of the employee's available RRSP deduction limit). See Retiring allowances for details.

Note 19 Deduct EI premiums if you would have negotiated a similar contract with a person that you deal with at arm's length.

Note 20 Deduct EI premiums, unless the worker is remunerated by an employer residing outside Canada.

Note 21 You have to deduct income tax on Canadian earnings, unless provisions of an income tax convention or treaty say otherwise.

Note 22 For more information on determining if the tips and gratuities are controlled or direct, see Tips and gratuities.

Note 23 Deduct income tax, unless the employer pays the remuneration directly to the order or the employee provides the employer with a letter of authority approved by a tax services office.

Note 24  An amount you pay in addition to an advance or loan is not a top-up amount if you pay it while waiting for a decision on a workers' compensation board claim. This amount is considered as employment income.

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