Question

CHAPTER 6 DISCUSSION DISCUSSION ACTIVITY In your own words, explain how legislated wages in lieu of notice are treated for statutory deduction purposes in all jurisdictions in Canada.

Answer 1

Legislated wages in lieu of notice are treated as employment income and hence are subjected to all applicable statutory deductions. This is because the wages in lieu of notice is in the form of payments made to employees for termination and this takes place of a notice of termination. In other words when instead of notice of termination wages in lieu of notice is provided then it will be considered an employment income in the hands of the employees. Thus income will be subjected to all statutory deductions like Canada Pension Plan contributions, Employment Insurance etc.

The bonus method will have to be used to determine the amount of tax that the employer has to deduct from the wages in lieu of notice.