Canadian Payroll Reporter

CPR | July 2014 Ask An experT annie Chong 7 Canadian HR Reporter, a Thomson Reuters business 2014 mAnAgER Of CARSWEll'S pAyROll COnSulTIng gROup annie.chong@thomsonsreuters.com | (416) 298-5085 understanding social security agreements QuesTion: We are sending some employees to work over- seas later this year. I have been asked to look into social security agreements for the countries to which they will be assigned. What are these agreements and why are they important? ANSWER: Given the com- plexity of social security leg- islation, employers that want to fully understand an agree- ment with a particular coun- try are advised to read the text of the agreement and consult with a tax and social security planning expert. What fol- lows below is a general over- view of social security agree- ments. Social security agreements al- low countries with similar plans for old age, retirement, disability and survivor benefits to co-or- dinate programs for employees who are temporarily assigned to work in those countries. In Canada, the programs covered under the social security agree- ments are the Canada Pension Plan (CPP) and Old Age Secu- rity (OAS) program. To date, the Canadian govern- ment has signed social security agreements (and social security conventions) with more than 50 countries, although some of the agreements are not yet in force. (Quebec, which administers the Quebec Pension Plan, has also signed social security agree- ments with many countries.) Canada enters into the agree- ments to: • ensure that Canadians who work outside the country temporarily continue to pay into only the CPP and not into both the CPP and the host country's social security plan for the same work • reduce restrictions based on nationality that may stop Ca- nadians from receiving ben- efits under the social security laws of another country • make it easier for Canadians to be eligible for benefits by allowing them to combine all pension credits they earned in Canada and in other countries where they lived or worked • reduce or eliminate barriers on paying pensions abroad. The first point, which enables Canadians temporarily working abroad to avoid "double taxa- tion" is also important for em- ployers since they, too, would only have to make contributions to the CPP rather than having to make employer contributions to both plans for the same work. To ensure that a social secu- rity agreement will apply to an employee going to work in an- other country, the Canadian em- ployer must fill out and file with the Canada Revenue Agency (CRA) a Certificate of Coverage form applicable to the country to which the employee is going to work temporarily. The forms are used to certify the employee is covered under the CPP and is, therefore, ex- empt from the other country's social security laws. The forms are available on the CRA's website and can be filled out online. Once approved, the CRA issues a certificate. It is val- id for the length of time noted in the document, provided that the employee's employment situa- tion remains the same. If an employer is sending an employee to work in a country where there is no social security agreement, there are still steps it can take to ensure the em- ployee remains covered under the CPP, although the employee and the employer may have to pay into both Canada's and the host country's social security plan. If the employee is on a short- term assignment to another country, he can continue to be covered under the CPP, as long as: • the employment qualifies un- der the Canada Pension Plan Regulations as employment that would be pensionable em- ployment if it were in Canada • the employee ordinarily reports for work at the em- ployer's place of business in Canada • the employee is a resident in Canada and paid at or from the employer's workplace in Canada. Employers in Canada that want to cover employees under the CPP while they are working in a country that has not signed a social security agreement with Canada can do so by filing form CPT8, Application and Under- taking for Coverage of Employ- ment in a Country Other Than Canada under the Canada Pen- sion Plan with the CRA. Certain conditions will apply. More information about so- cial security agreements, includ- ing the text of all the agreements, is available at www.servicecan- ada.gc.ca/eng/isp/ibfa/intlben. shtml. The Certificate of Coverage forms are available on the CRA website at www.cra-arc.gc.ca/ menu/AFAF_C-e.html. summer students and vacation pay Question: We have hired students to work for us over the summer. Are they entitled to vacation pay? ANSWER: None of the juris- dictions in Canada specifically exclude summer students from vacation pay standards. Unless the students are excluded from vacation stan- dards for some other reason under the legislation, they are entitled to vacation pay, just like other employees. summer students and statutory holidays Question: Are we required to pay summer students for statutory holidays that occur while they are working for us? ANSWER: Summer stu- dents are entitled to statutory holiday pay if they meet em- ployment standards minimum eligibility requirements and are not excluded under employ- ment standards law for some other reason. Many jurisdictions have mini- mum eligibility requirements that set out the number of days that an employee must work before being eligible for a paid statutory holiday. Students working in summer jobs across Canada are entitled to vacation pay, just like other employees. Credit: Mark Blinch / Reuters

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