Employee Relocation Package

According to the Government of Canada, in most cases, “employment has to take place in Canada to be pensionable or insurable under the Canada Pension Plan or the Employment Insurance Act. However, employment outside Canada may be pensionable or insurable in certain situations. This is the case if a person works outside Canada for a Canadian company or the Canadian government.”

Not surprisingly, one of the most common questions the National Payroll Institute receives in the Payroll InfoLineTM is what are the employer's obligations when a Canadian employee permanently relocates physically and works abroad while maintaining their Canadian residency status.

“The employee would generally be required to have CPP, EI and income tax deductions withheld as if the employment had taken place in Canada. The withholding is required if the employee had previously been employed by a Canadian employer and retained their Canadian residency while moving to work remotely outside of Canada for the same company. In the case of CPP, as long as there is a social security agreement between the country in which they are working and Canada, the agreement must be consulted to confirm if the employment is pensionable. Where there is no social security agreement between that country and Canada, CPP Regulation 16(1) will generally result in the employment being pensionable based on the facts you have provided,” according to Dialogue Magazine.

“For EI, however, it is important to note that earnings outside of Canada would not be insurable should the employment be insurable under the laws of the country in which it takes place. For income tax purposes, the province of employment in this situation is understood to be the province from which the remuneration was paid as they no longer report to an establishment of the employer,” continues the publication.

Moving Expenses and Relocation Benefits

“When you transfer an employee from one of your places of business to another, the amount you pay or reimburse the employee for certain moving expenses is usually not a taxable benefit. This includes any amounts you incurred to move the employee, their family, and their household effects. This also applies when the employee accepts employment at a different location from their former residence. The move does not have to be within Canada,” according to the Canada Revenue Agency.

Dialogue Magazine gathered the list of expenses, which, when reimbursed by the employer, are not considered a taxable benefit to the employee:

  1. The cost of house-hunting trips to the new location, including child care and pet care expenses while the employee is away;

  2. Traveling costs (including a reasonable amount spent for meals and lodging) while the employee and members of the employee’s household were moving from the old residence to the new;

  3. The cost to the employee of transporting or storing household effects while moving from the old residence to the new;

  4. Costs to move personal items such as automobiles, boats, or trailers;

  5. Charges and fees to disconnect telephones, television or aerials, water, space heaters, air conditioners, gas barbecues, automatic garage doors, and water heaters;

  6. Fees for canceling leases;

  7. The cost to the employee of selling the old residence (including advertising, notarial or legal fees, real estate commission, and mortgage discharge penalties);

  8. Charges to connect and install utilities, appliances, and fixtures that existed at the old residence;

  9. Adjustments and alterations to existing furniture and fixtures to arrange them in the new residence, including plumbing and electrical changes in the new home;

  10. Automobile licenses, inspections, and drivers’ permit fees, if the employee-owned these items at the former location;

  11. Legal fees and land transfer tax to buy the new residence;

  12. The cost to revise legal documents to reflect the new address;

  13. Reasonable temporary living expenses while waiting to occupy the new, permanent accommodation;

  14. Long-distance telephone charges that relate to selling the old residence;

  15. Amounts paid or reimbursed for property taxes, heat, hydro, insurance, and grounds maintenance costs to keep up the old home after the move when all reasonable efforts to sell it have been unsuccessful.

Would you consider using “relocation packages” to attract and retain talent? Tell us what you think in the comments below.  

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