A new provincial tax credit may make it worth hiring new employees before 2020 ends.
Memo to BC Employers: As part of its continuing response to the COVID-19 situation, the provincial government is creating a new refundable tax credit called the BC Increased Employment Incentive (BCIEI) for employers that hire new employees or expand their payroll before the end of the year. Here are the 8 things you need to know to help your company cash in on the BCIEI.
Is Your Company Eligible for the BCIEI?
All private sector employers in BC are eligible for the BCIEI, including charities and non-profits. As with the CEWS, the credit isn’t available to public institutions such as school authorities, public colleges and universities, hospitals, municipalities and other governmental entities.
How Big Is the BCIEI Tax Credit?
The tax credit is a refundable 15% of the amount by which an employer’s “qualifying BC remuneration” exceeds its “base BC remuneration.”
What Is Qualifying BC Remuneration?
Qualifying BC remuneration is the total BC remuneration paid to eligible employees in the fourth quarter of 2020, up to $1,129.33 per employee, per week. Partial weeks are pro-rated.
What Is Base BC Remuneration?
Base BC remuneration is the total BC remuneration paid to eligible employees in the third quarter of 2020, up to $1,129.33 per employee, per week. You can calculate both qualifying and base BC remuneration based on the employee’s average salary over the relevant quarter.
Who Counts as Eligible Employees?
To be considered an eligible employee for purposes of BCIEI eligibility, the employee must:
- Report for work at, or be paid from, a permanent establishment of the employer in BC; and
- Principally perform his/her work in BC.
Employees that work remotely due to COVID-19 count as “eligible employees” if they’re reasonably regarded as attached to the BC permanent establishment. But associated employers can’t claim the BCIEI for the same employee.
The government provided a sample calculation showing how the rules would work when an employer hires a new employee (Employee 6) in the fourth quarter of 2020:
|Employee||Base BC Remuneration||Qualifying BC Remuneration||Difference|
The employer could then claim a BCIEI of $1,920, or 15% of the $12,800 difference between base and qualifying BC remuneration.
Can Employers Receive Both the BCIEI and CEWS?
Yes. And CEWS amounts received do not reduce the BCIEI credit.
What’s the Interplay between the BCIEI and EHT?
The BCIEI credit will first be applied against any BC Employer Health Tax amounts outstanding (assuming the employer is required to pay the EHT), with the remaining amounts refunded to the employer.
What Should Employers Do Next?
First, be aware that the BCIEI is just a proposal at this point. The wildcard is the outcome of the October 24 election. So, BC employers need to keep track of events and, if the BCIEI remains intact, factor it into their fourth quarter payroll and hiring plans. Meanwhile, employers required to be registered for the EHT should ensure they file their EHT return in a timely manner to avoid possible delays in receiving their BCIEI credits.