3.1 Concepts and definitions
Wages and salaries
3.6 Broadly defined, wages and salaries1 comprise the gross pay before tax that is paid to employees in cash or in kind, for work performed under the general direction of an employer. Fundamental to this definition is an inherent employer-employee relationship or contract of service, where the employer defines the time and place of work, the nature of the work, and the compensation provided for work done. Also implied in this employer-employee relationship is a certain level of direct or indirect control2 where the employer is ultimately responsible for the hiring of employees and the termination of their employment. The compensation given to employees can be as varied as the jobs themselves. Wages and salaries represent the many types of payments given to all employees regardless of their occupation, method of payment, or duration of employment. Employees can be full-time, part-time, casual, or seasonal workers. In addition, employees can be paid on either an hourly, weekly, monthly or annual basis, as well as receive special or irregular payments. Included in the compensation package can be a variety of base salary plus commission arrangements, special payments,3 and performance bonuses, as well as taxable allowances and benefits.4
3.7 The wages and salaries of all persons working for resident Canadian or foreign-owned companies are included in the estimate of total wages and salaries, whether they are Canadian citizens, landed immigrants, or non-permanent residents.5 Military personnel and federal government employees working outside the country are also included in labour income, as military bases, external affairs embassies and consulates are deemed Canadian territory.6 On the other hand, Canadian residents working for Canadian or foreign-owned companies located outside the country are not included in labour income.7
Supplementary labour income
3.8 Supplementary labour income8 includes employers' contributions to private and public sector pension plans, Canada and Quebec pension plans, employment insurance, workers' compensation, health and life insurance plans, and retirement allowances.
3.9 Supplementary labour income is defined as payments or contributions made by employers, out of their own revenue funds, and are therefore considered to be an employers' labour cost. These payments or contributions can be placed into private or government managed funds for the future benefit of employees and their families. Payments, such as retirement allowances, may also be made directly to employees upon termination of work. Many of these payments or contributions are required by law, such as the employers' contributions to Canada and Quebec pension plans, the Employment Insurance Fund, and provincial and territorial workers compensation funds. Some employers' payments or contributions are unique to certain provinces, such as payments to specific provincial medical plans in Alberta and British Columbia, while others are determined by provincial and territorial labour legislation, such as retirement allowance payments. Employers' payments or contributions can also be made obligatory through union contracts or agreements between employers and employees, such as employers' contributions to private and public sector pension plans, and contributions to group health, life and dental insurance plans.
2. Certain athletes and artists may be considered employees depending on the nature of their contract. Certain construction workers may also be considered employees rather than sub-contractors. Employee or Self-employed? (RC 4110), published by the Canada Revenue Agency, provides a checklist of questions to determine the existence of an employer-employee relationship.
3. Bonuses and retroactive pay increases, overtime pay, and directors' fees are examples of special payments. A full list can be found in the Special Payments Chart in Chapter 7 of the Canada Revenue Agency's Employers' Guide, Payroll Deductions and Remittances (T4001). This chart lists special payments for which employers must withhold Canada Pension Plan, Employment Insurance, or income tax.
4. Automobile allowances, board and lodging, and gifts are examples of taxable allowances and benefits. See the Benefits Chart, at the end of the Canada Revenue Agency's Employers' Guide, Taxable Benefits (T4130). This chart lists the taxable allowances and benefits for which employers must withhold Canada Pension Plan, Employment Insurance, or income tax. The chart also indicates whether the taxable benefit is included as Goods and Services Tax (GST) or Harmonized Sales Tax (HST).
5. Any individual working in Canada requires a Social Insurance Number. Temporary social insurance numbers are given to non- permanent residents and these are referred to as TTNs (Temporary Taxation Numbers).
- Date modified: