2021-0892941I7 Ontario paid sick days

Principal Issues: The tax treatment and reporting requirements for paid infectious disease emergency leave under the Ontario COVID-19 Worker Income Protection Program.

Position: Payments made under the Program are required to be included in income under subsection 5(1), are subject to income tax withholdings in accordance with paragraph 153(1)(a), and are reported on a T4 slip.

Reasons: See below.

Author: Trop, Shiri
Section: 5(1), 56(1)(v)

                                                                                          July 21, 2021

Collections and Verification Branch                             HEADQUARTERS
Business Compliance Directorate                                Income Tax Rulings
Policy & Legislative Research Section                         Directorate

                                                                                          S.Trop

Attention: XXXXXXXXXX                                             2021-089294

Re: Tax treatment and reporting requirements for paid infectious disease emergency leave under the Ontario COVID-19 Worker Income Protection Benefit program

We are writing in reply to your correspondence of May 6, 2021, where you asked about the tax treatment and reporting and withholding requirements for paid infectious disease emergency leave (“PIDEL”) made by an employer to an employee under the Ontario COVID-19 Worker Income Protection Benefit program. Specifically, you asked whether the PIDEL should be reported on box 77 of the employee’s T4 slip.

Our comments

On April 29, 2021, the Ontario Government amended subsection 50.1.1(1.2) of the Employment Standards Act, 2000 (“ESA”) to require employers to provide employees with up to three days of PIDEL because of certain reasons related to COVID-19. Employers are generally required to pay employees the wages they would have earned had they not taken PIDEL, up to $200 a day for up to three days. Eligible employers are entitled to be reimbursed the amount of PIDEL that they provided to their employees. Employers must submit their claims to the Workplace Safety and Insurance Board (“WSIB”) to get reimbursed for providing PIDEL to their employees.

The PIDEL is similar to paid sick days that would be provided to an employee under their employment contract for one or more of the same reasons that PIDEL can now be provided under the ESA. Employer-provided paid sick days as stipulated by an employment contract would generally be included in employment income under subsection 5(1) of the Income Tax Act (the “Act”). Where a provincial government sponsors a program that is designed to have employers provide PIDEL directly to employees, it is our view that the amount of the PIDEL received by the employee would be included in their employment income under subsection 5(1) of Act.

The PIDEL does not appear to be a workers compensation benefit because it is not received as a result of the employee having suffered illness, injury or death in the performance of his or her duties of employment pursuant to an entitlement provided by an employees’ or workers’ compensation law of Canada, and should not be reported on box 77 as proposed in your email from May 6, 2021. The Government of Ontario is reimbursing Ontario employers for the PIDEL they provided to their employees as stipulated by the ESA. The fact that WSIB is the administrator of the program, does not make the reimbursement to the employer a workers compensation benefit. The employer would be required to withhold income tax, Canada Pension Plan contributions, and Employment Insurance premiums when they provide PIDEL to their employees and report the gross amount of the PIDEL and the withholdings on the employee’s T4 slip as part of salary or wages.

Unless exempted, a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the Canada Revenue Agency’s electronic library. After a 90-day waiting period, a severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. You may request an extension of this 90-day period. The severing process removes all content that is not subject to disclosure.

We trust these comments will be of assistance to you.

Yours truly,

Nerill Thomas-Wilkinson, CPA, CA
Manager
Business and Employment Income Section
Business and Employment Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

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