Special Payments

Special payments CPP Contributions1 EI Contributions1 Tax deductions
1.) Advances Yes Yes Yes
2.) Bonuses and retroactive pay increases Yes Yes Yes
3.) Director's fees paid to residents or non-residents      
- Fee Only Yes2 No Yes3
- Fee in addition to salary Yes/No4 Yes/No4 Yes
4.) Employees profit sharing plans (EPSP) No No No
5.) Overtime pay, including banked overtime payment Yes Yes Yes
6.) Prescribed plans or arrangements-on amounts received Yes/No5 Yes/No5 Yes
7.) Qualifying retroactive lump-sum payments6 Yes Yes Yes
8.) Retirement compensation arrangements (RCA) No No Yes
9.) Retiring allowances (also called severance pay) No No Yes7
10.) Salary deferral arrangements-on amounts received Yes Yes Yes
11.) Vacation pay, public holidays and lump-sum vacation payment Yes Yes Yes
12.) Wages in lieu of termination notice Yes Yes Yes
13.) Wage Loss Replacement Plans      
- Payments from uninsured plans No Yes Yes
- Payments from insured plans No No No8
14.) Worker's compensation awards      
- Employee's salary paid before or after a worker's compensation board claims is decided Yes Yes Yes
- Advances or loans equal to the workers' compensation award No No No
- Amount paid in addition to an advance or loan before the claim is accepted Yes Yes9 Yes
- Top-up amounts paid after claim is accepted Yes No Yes
- Top-up amounts paid as sick leave after the claim is accepted Yes No Yes

1If you have already deducted the total yearly maximum contributions for the employee's income, do not deduct more contributions. Do not consider amounts deducted by previous employers during the same year.

2Do not deduct CPP contributions when the employment is performed wholly or partly outside Canada.

3Do not deduct income tax if you pay only a director's fee, and you estimate that the total fee will not be more than the claim amount on Form TD1.

4Determination to deduct CPP, EI or both depends on the status of the resident director’s employment. Do not deduct EI on the fees portion.

5To determine if you have to deduct CPP, EI or both, see “Prescribed plans or arrangements”.

6Qualifying retroactive lump-sum payments may be subject to CPP and/or EI in addition to tax.

7Do 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).

8Although wage loss replacement plan payments from insured plans are subject to tax, the trustee or insurance company does not have to deduct any tax.

9An 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.