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Proposed B.C. Increased Employment Incentive: What You Need to Know

Proposed B.C. Increased Employment Incentive: What You Need to Know
October 5, 2020

OVERVIEW

On September 17, 2020, the British Columbia provincial government proposed the B.C. Increased Employment Incentive (BCIEI) as part of B.C.’s Economic Recovery Plan. The BCIEI creates a refundable tax credit for employers that hire new employees or increase payroll from Q3 of 2020 to Q4 of 2020. Employers eligible for the Canada Emergency Wage Subsidy (CEWS) are also eligible for the BCIEI, and the BCIEI credit is not reduced by the CEWS. Employers should be able to apply for this credit online starting March 2021.
 
For B.C. employers required to pay the Employer Health Tax (EHT), the BCIEI will first be applied against any EHT outstanding, and any balance of the BCIEI remaining thereafter with be refunded to such employer.
 
As of yet, the provincial government has not released draft legislation, and any such release will likely be dependent on the outcome of the B.C. provincial election, scheduled for October 24, 2020.

EMPLOYER ELIGIBILITY

All B.C. private sector employers — including charities and non-profit employers, but excluding public institutions — can claim the credit. Public institutions include school authorities, public colleges and universities, hospital authorities, municipalities and other governmental entities.

QUALIFYING REMUNERATION

The BCIEI tax credit is a refundable 15 per cent of the amount by which the employer’s “qualifying B.C. remuneration” exceeds its “base B.C. remuneration.” Qualifying B.C. remuneration is the total B.C. remuneration paid to eligible employees in Q4 of 2020, up to a limit of C$1,129.33 per employee, per week. Partial weeks are pro-rated. Base B.C. remuneration is the total B.C. remuneration paid to eligible employees in Q3 of 2020 up to a limit of C$1,129.33 per employee, per week. The amounts are calculated separately for each employee.
 
While qualifying and base B.C. remuneration, respectively, have a weekly maximum, these figures are calculated as an average of the employee’s remuneration over the quarter and are not tied to the amount earned in each week. Therefore, employers can calculate both qualifying and base B.C. remuneration based on the employee’s average salary over the relevant quarter.

ELIGIBLE EMPLOYEES

Eligible employees must report for work at, or be paid from, a permanent establishment of the employer in B.C., and principally perform their work in B.C. As many employees work remotely due to COVID-19, such employees will still be “eligible employees” if they are reasonably regarded as attached to the permanent establishment.
 
Associated employers cannot claim the BCIEI in respect of the same employee. Employers are to calculate qualifying and base B.C. remuneration, respectively, based on the total of all B.C. remuneration paid to the employee by all associated employers.

LEGISLATIVE CONCERNS

At the time of announcement, the BCIEI was not accompanied by any draft legislation. Shortly thereafter, on September 21, 2020, a B.C. provincial election was called and set for October 24, 2020. As a result, the fate of the BCIEI and tabling of draft legislation, including its form, may well depend on the outcome of the B.C. provincial election. 

SAMPLE CALCULATION

For reference, below is a sample calculation published by the provincial government, outlining a situation where an employer hires a new employee (Employee 6) in Q4 of 2020.

Employee

Base B.C. Remuneration

Qualifying B.C. Remuneration

Difference

Employee 1

C$13,200

C$13,200

 

Employee 2

C$13,200

C$13,200

 

Employee 3

C$13,200

C$13,200

 

Employee 4

C$13,200

C$13,200

 

Employee 5

C$13,200

C$13,200

 

Employee 6

 

C$12,800

C$12,800

TOTAL

C$66,000

C$78,800

C$12,800

B.C. Increased Employment Incentive Rate

15%

B.C. Increased Employment Incentive Tax Credit

C$1,920

WHAT EMPLOYERS SHOULD DO NEXT

Employers having recently hired new employees and/or intending on increasing payroll in the coming quarter should assess the amount of the credit for which they may be eligible. Employers that are required to be registered for the EHT should ensure that they have filed in a timely manner their EHT return as delays in receiving the BCIEI may otherwise result.
 
For further information, please reach out to any member of our Tax group or your usual Blakes contact.