Taxes in Québec are slightly different than in the rest of the provinces and territories. In Québec, there are five main tax deductions and two employer amounts. Employees in Québec, can expect to pay QPP, QPIP, EI, federal and provincial tax. There are also two more employer contributions to CNESST and HSF. If your employees do not pay taxes in QC see this article here
For a summarized breakdown of the Québec-specific taxes for 2021, please see Revenu Québec’s article below:
Québec Pension Plan (QPP)
QPP the first tax taken off an employee's pay. QPP is a deduction off of pensionable earnings which deducts up to a certain maximum amount per year. After the employee has reached the maximum contribution, no additional QPP is deducted. To understand the calculation, we first need to understand the QPP exemption. Each employee gets a certain exemption amount per pay run, which is the annual exemption of $3500 divided by the number of pay periods per year. This per-pay run amount is then subtracted from the employee’s wages + taxable benefits to get the total pensionable earnings. The QPP deduction is then calculated as a percentage of the pensionable earnings. To make it easier, let’s breakdown an example:
Wages + taxable benefits = $1000
QPP Rate (2021) = 5.90%
Pays per year: 26 (bi-weekly)
Annual CPP Exemption = $3500
QPP Exemption per pay run = 3500 / 26 = $134.61
Pensionable Earnings = 1000 – 134.62 = $865.39
Employee QPP Contribution = 5.90% x 865.38 = $51.06
Employer QPP Contribution= $51.06
Total QPP Contribution= $102.12
As an employer, you not only have to remit QPP on behalf of the employee, but you also have to match their contribution dollar for dollar. This is something to keep in mind when estimating the total cost of an employee.
If an employee is below the age of 18, they do not contribute to QPP until the first pay in the month after they turn 18. Example, they turn 18 on June 1, they will pay QPP on their first pay date in July. When adding such an employee to the system, you don’t need to manually exempt them from this tax – the system will handle that automatically. There are other circumstances where an employee may be exempt, so we recommend checking with your accountant or Revenu Québec to confirm if ever an employee notifies you that they are exempt.
Please note: if you are running a Special Run, the QPP exemption will not be calculated. This is because special pay runs are meant to be completed as additional or off-cycle runs. As a result, they will pay slightly more in QPP (as it’s being calculated as a percentage of wages + benefits, rather than wages + benefits – exemption), but this is correct for this kind of pay run. For example, if you were to run two regular pay runs for one employee in the same cycle, then you would over-exempt them for that period. Instead, with a regular and special run for the same period, the employee has now only been exempted once, so they’ve paid the correct amount of QPP.
For more on the maximum contributions, please refer to RQ’s article below:
Employment Insurance (EI)
EI is a deduction off of an employee's insurable earnings, up to a certain maximum contribution per year. As with QPP, once an employee reaches their maximum contribution, they no longer contribute to EI for the remainder of the calendar year. EI in Québec is calculated at a lesser percentage than the rest of Canada due to QPIP, which is a unique tax for Québec employees.
Insurable earnings are any cash-based earning or benefit, such as an employee’s regular earnings or an internet reimbursement benefit. In most cases, non-cash benefits are not considered insurable, but it’s always best to check with an accountant or the CRA when in doubt.
Just like QPP, an employer also has to make their own EI contributions based on the employee's deduction. Rather than dollar for dollar, it is 1.4x the employee’s amount, unless your company has received a reduced rate from CRA. If this is the case, please contact us for how to implement this in your account.
For more information on EI rates and maximums, see the CRA’s page below:
Québec Parental Insurance Plan (QPIP)
QPIP is the second tax that is calculated on insurable earnings up to a certain annual maximum. The employer’s contribution is calculated at 1.4x the employee’s deduction and the amounts are then remitted to RQ rather than the CRA. These amounts are paid regardless of the employee’s age and province of residence.
For more information on the current rates and maximums, please see the article below:
Federal taxes are calculated on an employee’s total taxable income. There is a basic amount that each person can earn before being subject to federal tax (which is annualized based on their current pay). If an employee has an exemption beyond the basic amount, they should have aded this to their completed TD1 form to notify you what that amount is when they were first hired. You can update the TD1 amounts in their employee profile so that they can be taxed accordingly.
If ever an employee earns less than the exemption amount, then federal tax may not be deducted. Payroll tax tables are based on a per pay period amount that is annualized. So, an employee who is working temporarily, who may end up making less than the exemption amount, may still pay tax if their pay during their working period is high enough to taxed when it is annualized. They can apply to receive any overpayments back on their personal income tax return. If an employee is earning beyond the exemption amount, then they will begin to have tax deducted based on their income bracket. Federal tax is calculated as a percentage of their annualized income up to a certain threshold. Once the employee earns beyond that threshold, they are taxed at a higher percentage for the next threshold, and so on.
With federal tax, there is no additional employer contribution – you remit only what is deducted from the employee.
For more information on the current tax tables, please see the page below from the CRA:
In Québec, RQ collects the provincial tax rather than the CRA. It is very similar to federal tax in the sense that there is no additional employer contribution, and that each employee has a certain amount that they can earn before being subject to the tax. If an employee has an amount higher than the basic exemption and has submitted to you their provincial TD1 form, you can modify this amount in the employee profile. As with federal tax, it is calculated by income bracket with varying percentages as the employee earns more.
For more information on the current provincial and territorial tax tables, please see the page below from CRA:
Aside from QPP, QPIP and EI, Québec employers are also required to remit two additional taxes: CNESST (Commission des Normes, de l'Equité, de la Santé et de la Sécurité du Travail) and HSF (Heath Services Fund). There is no maximum contribution for either of these taxes, so it will be added to your payroll all throughout the year.
To get your CNESST rate, you will need to register with CNESST as they can vary. It will ultimately depend on the industry you operate in, and is essentially calculated as a percentage of your employee’s insurable earnings.
HSF is calculated as a percentage of your gross payroll. Your rate is determined by your gross payroll for the year as well as your company’s industry. Throughout the year the amount owed is estimated and not precisely determined until you submit your RL-1s at the end of the year. You are still required to remit these estimated amounts periodically, and only once you file your RL-1 summary will you know if you owe anything further or if you are owed anything back.
For current HSF rates, please see RQ’s page below:
You can set your CNESST and HSF Rates in your account under Company Settings>Pay Rules> Company Rules.