Coming January 2024, new CRA Policy will impact remote employee payroll deductions
New CRA Administrative Policy Will Affect Payroll Administration for Completely Remote Work Arrangements. As a result of the new regulation, the payroll tables used for employees who work entirely remotely in 2024 and beyond may need to be modified. The new policy will be effective January 1, 2024
Current CRA Guidance
- Payroll deductions for employees are calculated by their province of employment, which is based on the location where the employee physically reports for work.
- If the employee does not report to their employer’s establishment,
the employee’s province of employment is considered to be the location from which the employee receives their income and wages.
- For example, a remote worker who lives and works from home in Calgary, Alberta and is paid from the employer’s head office in Toronto, Ontario. The province of employment is considered to be Ontario and the Ontario payroll table is applied to determine appropriate withholdings.
Determine the province of employment (POE)
The employee’s province of employment (POE) has to be determined when paying employment income such as salaries, wages, or commissions so that the appropriate deductions can be made.
The POE is determined by:
- The employer’s location where the employee reports for work
- The employee’s residency status
- The type of income
“Generally, an employee’s home office is not considered an establishment of the employer.”
New Administrative Policy
This new policy will only apply to “full-time remote work agreements,” which are agreements between employers and employees that include the following features:
- The employer either directs or permits employees to fulfil their employment tasks 100% remotely.
- The agreements may be temporary or permanent.
- The job duties must be carried out at one or more locations that are not the employer’s establishments.
If there is a full-time employment agreement, the employer then has to decide if the worker is deemed to be “attached to an establishment of the employer”.
Primary & Secondary Indicators
The CRA has established primary and secondary indicators to ascertain if an employee may reasonably be considered to be attached to an employer establishment. The employee will be expected to report for work at the employer’s establishment.
The primary indicator is whether, in the absence of the full-time remote work agreement, the employee would physically report to work at one of the employer’s establishments to do tasks associated with their job responsibilities.
In the case of employees who physically reported to an employer establishment right before signing a full-time remote work arrangement, that establishment would still be considered to be tied to that establishment if the employee’s nature of circumstances of their work hasn’t altered.
Secondary indicators consist of,
Whether the establishment is mentioned in the employment agreement as the employee’s supervising establishment;
Whether the employee would report to the establishment based on the nature of the duties performed;
Whether the employee would report to the establishment for in-person meetings; to pick up materials or equipment; or to receive instructions.
The employee’s circumstances and loyalty to a specific establishment must be validated. Conclusions that a remote worker is employed by a company in a certain province or territory only to get around paying employer contributions or source deductions in another province are not acceptable.
“Before January 1, 2024, employers should assess their payroll procedures to make sure they comply with the new policy.”