Yesterday’s federal budget changed the rules under which employers may provide electronic, instead of paper copies of T4 slips to employees.
Currently the Income Tax Regulations say electronic access can be provided to year-end slips only if employees have expressly consented to receiving this information in an electronic format.
As of January 1, 2018, instead of requiring employees to opt in to electronic access, employees may opt out, by requesting a paper copy of their T4 slip.
The January 1, 2018, effective date of these changes mean these new rules apply to T4s for the 2017 tax year. However, they would also apply to any prior year T4 slips issued or amended after the end of 2017.
While this change is a positive move and may make it easier for employers to issue slips electronically, employers should be aware of the following limitations.
First, these changes only apply to T4 slips, not to the T4A or any other slip an employer may have to provide, such as an NR4. This means electronic access to slips, other than the T4, still requires prior employee consent.
Second, employers who wish to provide T4 slips in an electronic format will face new criteria to safeguard the privacy of the related information. These new criteria, and the measures employers will need to take to meet them, were not disclosed in the budget documents themselves. Judging from the wording used, it seems employers may only learn the details of these new requirements when the CRA T4 guide, the RC4120, is released in late fall. If that’s the case, compliance with these new criteria may become an issue, because of the timelines involved, for some employers and for some software vendors or service providers.
Three, there’s an exception for the right to provide employees with electronic T4s, if there’s no reasonable expectation that employees will be able to access these slips in an electronic format. The examples used include employees on an extended leave, i.e. maternity or parental leaves, or where the employment relationship has ended.
It seems there are two parts to this exception. One, does the employer have the ability to provide electronic access to T4 slips to person’s who aren’t in active employment? Two, do employees on leave and terminated employees have the means to access T4s provided in an electronic format?
I know many HCM vendors have the ability to provide electronic slips to employees who aren’t in active employment. And why should it be assumed that employees in active service always have such access, and that inactive or terminated employees don’t? There are many employees who don’t use computers, tablets or smartphones as part of their daily work. Why is it assumed that active service employees have such access and inactive or terminated employees don’t?
Why don’t the rules around electronic access just contain two simple provisions? One, that employers may always able provide secure electronic access to the relevant year-end slips. Two, where, in addition to this, employees expressly ask for a paper copy, employers are required to provide the slip in that format.
As the rules exist today, and as they will remain in 2018, employers may not provide an electronic copy of a slip, even if they are also willing to provide a paper copy. Surely, that makes no sense.
Alan McEwen is a Vancouver Island-based HRIS/Payroll consultant and freelance writer with over 25 years’ experience in all aspects of payroll. He can be reached at email@example.com or (250) 228-5280. If you like these articles, please sign up to my email list to be notified of future postings. Please also share them with your friends and colleagues.