With the Holidays fast approaching it is important to discuss employee gifts & bonuses. As with most things for payroll, employee gifts have specific rules to follow.
We will start with the disclaimer that this post is only going to cover the basics of the gifting policy outlined by the Canada Revenue Agency that has to do with the holidays. We will be posting another blog in early 2019 that goes into more of the specifics of this policy overall, keep checking back for that!
If you have any questions concerning this policy please give On-Core a call, or check out the policy on the CRA website, here.
Holiday Parties are a common occurrence at this time of year. You may be thinking to yourself, “this is a post about employee gifts, what does a holiday party have to do with that?” What you may not realize is the CRA has determined an acceptable amount of money you may spend on your employees for a party. An employer is allowed to spend up to $150 per employee on an event. This must include everything, the food, drinks, ticket prices, cab fare home, etc. If you have stayed within this limit then the party is free to the employee, however if you spend over the $150 per employee the entire amount becomes a taxable benefit to your employees.
A gift is defined by the CRA as being given to an employee for a special occasion such as a religious holiday, a birthday, a wedding, or the birth of a child. Therefore, gifts for the holidays will fall into this policy.
Cash or Cash Equivalent Gifts
Cash bonuses are always a taxable benefit to your employee and must be added to their income. It always needs to go through your payroll, and therefore your payroll professional must be notified if you have given these monies outside of the normal payroll run.
One thing to note is that gift cards or certificates are referred to as a cash equivalent and must be treated as cash.
All cash benefits are pensionable, and insurable. This means that in addition to income taxes you must deduct CPP & EI.
A non-cash gift is something that the employer has bought and given to the employee; this could include items like concert tickets or a turkey for the holidays. An employer has more leeway with non-cash gifts, as long as they fall into the definition laid out by the CRA mentioned above.
You can give an employee a total of $500 worth of gifts in the year before they become taxable. This means you need to be keeping track of the gifts you give out. At the end of the year if you have gifted more than the $500, this amount must be included in the employee’s income. For example, you have given $650 worth of non-cash gifts, $150 ($650 – $500) is the taxable benefit.
All non-cash benefits are pensionable, this means that in addition to income taxes you must deduct CPP & EI.
Some good news, the CRA doesn’t completely nickel and dime your employee gifts, non-cash items of minimal value do not need to be added to $500 calculation. CRA gives the following examples of minimal value items:
Coffee or tea
T-shirts with employer’s logos
Plaques or trophies
We know this can be complicated to follow but we are here for you if you have any questions.