Bonuses, retroactive pay increases or irregular amounts

You may pay bonuses, retroactive pay increases, or any other additional or unusual payments to your employee.

On this page

• Steps
• References

Steps

1. Determine if you need to report the payment on a slip

   You must report the payment as employment income on your employee’s T4 slip in the year the bonuses, retroactive pay increases, or any other additional or unusual payments are received.

   Example: Bonuses

   Can be paid at any time but are usually paid at the end of a fiscal or calendar year

   Example: Retroactive pay increases

   Are normally paid when a new contract has been finalized and there is a backdated increase in pay

2. Withhold payroll deductions

   You must withhold the following deductions:

   • Income tax - Calculate using the bonus or irregular payments method

     Learn more on how to calculate, including examples: Calculate income tax deductions

   • EI premiums

     Learn more on how to calculate, including examples: Calculate EI premiums deductions

   • CPP contributions - Calculate using the bonus or irregular payments method

     Learn more on how to calculate, including examples: Calculate CPP contributions deductions

3. Report the payment on a T4 slip

   You must report the following on the T4 slip:

   • Box 14 - Employment income
   • Box 24 - EI insurable earnings
   • Box 26 - CPP/QPP pensionable earnings
   Special situation: Qualifying retroactive lump-sum payments (QRLP)

   If the retroactive payment is related to previous years that are paid in the current year, it may be considered a QRLP. Your employee may be eligible for a special tax calculation when they file their personal income tax and benefit return.

   Learn more: Lump-sum payments

    Learn how to report the payment: T4 slip - Information for employers

References

Legislation