Frequently Asked Questions About Remuneration
Is retiring allowance / severance pay taxable?
No, retiring allowance/severance pay is not considered to be income from an office or employment and is not taxable.
Note: Employers often refer to the total amount paid to an employee upon termination as severance pay; however, this amount could include taxable items. For instance, pay 'in lieu of notice' is considered employment income and is subject to EHT.
Please refer to Information Bulletin 2-96 Remuneration.
What is considered remuneration?
In general, remuneration means employment income (box 14 of Canada Revenue Agency's T4 slip) that is taxable under sections 5, 6 or 7 of the Income Tax Act (Canada).
Examples of remuneration include:
- salaries and wages
- gratuities paid through an employer
- bonuses, commission and other similar payments
- vacation pay, taxable allowances and benefits
- directors' fees
- payments for casual labour
- amounts paid by an employer to 'top up' benefits, and
- advances of salaries and wages.
Please refer to Information Bulletin 2-96 Remuneration.
