Payroll in Quebec can feel like navigating a complex financial maze, especially since employers must adhere to the province's unique set of labour laws and tax systems. Things can get complicated, and we get it – which is why we wrote this guide.
Consider this blog your one-stop shop for navigating payroll in la belle province. We'll break down everything you need to know and help you understand what federal labour and tax laws apply to employees working in Quebec, so you can pay your Quebecois employees accurately and on time.
Let’s dive in!
Understanding Quebec's payroll requirements
To begin, let’s understand how running payroll in Quebec differs from running payroll in other Canadian provinces.
Employers in all provinces except Quebec are required to calculate and withhold the same types of payroll source deductions. These are Federal Income Tax, Provincial Income Tax, Canada Pension Plan contributions (CPP), and Employment Insurance premiums (EI). These employers are required to remit those employee payroll taxes, as well as the applicable employer contributions, to the Canada Revenue Agency (CRA).
Employers who have an employee reporting to an office in Quebec and Quebec considered their Province of Employment, are required to calculate Federal Income Tax and Employment Insurance and remit these taxes to the CRA. In addition to these taxes, the Province of Quebec requires employers to calculate and withhold: Provincial Income Tax, Quebec Pension Plan contributions (QPP), and Quebec Parental Insurance Plan premiums (QPIP). These employers are required to remit those employee payroll taxes, as well as the employer contributions, to Revenu Quebec (RQ).
Here’s a table to help clarify the differences, and below we’ll dive a little deeper into each tax type, and how it differs between non-Quebec and Quebec employees.
1 For employees who report to a location in Quebec, the following taxes are required to be remitted to Revenu Quebec, instead of the CRA: Income Tax - Provincial, QPP, Second Additional QPP, and Quebec Parental Insurance Plan.
Income Taxes
The major difference with Income Tax is that for employees reporting to a Quebec location, their Provincial Income tax gets remitted to Revenu Quebec instead of the CRA. Other than that, income tax requirements are very similar to employees reporting to non-Quebec locations. Quebec employees are still required to pay Federal Income Tax, and the employer is still required to remit the Federal Income Tax portion to the CRA. The Quebec provincial income tax calculations are progressive in nature, similar to other provinces in Canada.
Pension Plan Contributions
For employees in Quebec, the Quebec Pension Plan effectively replaces the Canada Pension Plan – but thankfully for payroll practitioners across the country, both plans have a similar structure, as required by federal legislation. That means that both CPP and QPP have the same:
- Maximum annual pensionable earnings
- Basic exemption amount
- Maximum contributory earnings
- Applicable to Second Additional CPP/QPP: Additional maximum annual pensionable earnings
- Applicable to Second Additional CPP/QPP: Employee and employer contribution rate (%)
There are three main differences between the plans. First, QPP has a slightly higher employee and employer contribution rate on the Maximum Contributory Earnings. Second, the QPP contribution gets remitted to Revenu Quebec instead of the CRA. Lastly, the maximum pensionable age for QPP is 72 rather than 70 for CPP.
Employment Insurance
For employees in Quebec, the Province of Quebec is responsible for providing maternity, paternity, parental and adoption benefits to residents of Quebec through the Quebec Parental Insurance Plan (QPIP). For employees in the rest of Canada, similar benefits are provided through the Employment Insurance program.
Since the Province of Quebec provides these benefits through QPIP, employees and employers in Quebec pay QPIP premiums and pay a lower rate of EI. Overall, employees in Quebec pay a slightly higher rate for the benefits.
Other taxes and fees related to Quebec Payroll
Like other provinces in Canada, running payroll in Quebec means the employer is subject to health taxes and workers’ compensation premiums. In addition to these, Quebec has two other taxes that are required if running a payroll for employers reporting to work in Quebec: the Contribution related to labour standards through CNESST, and the Contribution to the Workforce Skills Development and Recognition Fund (WSDRF).
Here’s a table that provides a high-level understanding of these taxes. Below we’ll dive a little deeper into each tax type, and how it’s calculated and administered.
Quebec Health Services Fund
The Quebec Health Services Fund (QHSF) is a provincial fund established to finance health services provided by the government of Quebec. It is designed to support the operation and improvement of healthcare services throughout the province.
QHSF is a rate-based, employer tax. The rate is determined by the employers' (1) industry, and (2) gross payroll.
QHSF rate varies from 1.25% - 4.26% and is specific to the employer. It’s important to understand that the exact rate is not known until all payroll has been run for the year. The employer is expected to estimate their total annual payroll at the beginning of the tax year, and use this value to calculate an estimated QHSF rate. At the end of the tax year the employer will prepare the RL-1 Summary of Source Deductions and Employer Contributions and use the realized annual payroll to determine the actual QHSF rate, and reconcile any over or under payments in the section titled “Contribution to the health services fund”.
Unlike other provincial health taxes applied to payroll, there is no exemption in Quebec, and as a result, employers are required to calculate and pay into the QHSF from the first dollar of payroll paid to an employee.
QHSF gets remitted to Revenue Quebec as part of the source deductions, made on regular payroll runs, and follows the same remittance frequency.
Workers’ Compensation
In Quebec, workers' compensation benefits are administered by the Commission des normes, de l'équité, de la santé et de la sécurité du travail (CNESST). The calculation of the workers' compensation premium in Quebec is similar to the calculation in other Canadian provinces. Namely, the premium rate is determined by the industry the employer operates in and the level of risk associated with the work. The premium rate is then multiplied by the assessable earnings the employer has paid to employees, and the premium is remitted.
Workers' compensation premiums are remitted to Revenu Quebec as part of the source deductions and follow the same remittance frequency. The total workers' compensation premiums are calculated and payments are reconciled for the year on the Statement of Wages filing which employers must submit to CNESST by March 15th each year.
Contribution Related to Labour Standards
In Quebec, employers must pay a contribution that goes to fund the enforcement of labour standards in the province. The contribution rate is 0.06%. The rate is multiplied by the remuneration paid to employees in a calendar year. However, remuneration that exceeds a threshold is not subject to the contribution related to labour standards. This threshold is set by the province and changes every year. In 2025, the threshold is $98,000. Some industries may be exempt from the tax or have a reduced contribution rate. For more information, consult the Revenu Quebec Guide for Employers: Source Deductions and Contributions.
The Contribution related to labour standards is calculated on the RL-1 Summary at the end of the year and must be remitted to Revenu Quebec by the last day of February each year.
Workforce Skills Development and Recognition Fund
In Quebec, if your total payroll for the year is over $2 million, you are required to participate in workforce skills development for the year. The purpose of the fund is to ensure that businesses are investing in worker training and development. Businesses are required to participate in workforce skills development for the year by allotting an amount representing at least 1% of their total payroll to eligible training expenditures. If the business has no eligible training expenditures or the eligible training expenditures are less than 1% of the total payroll, then it will be required to pay into the Workforce Skills Development and Recognition Fund (WSDRF) a contribution equal to the difference between 1% of your total payroll and the amount of your eligible training expenditures.
In general, employment income is subject to the contribution to the WSDRF. To see whether the remuneration you are paying is subject to the contribution, see the Table of Remuneration Subject to Source Deductions and Employer Contributions. You must include the remuneration subject to the contribution in the calculation of your total payroll used to determine your participation in workforce skills development.
The contribution to the WSDRF is calculated on the RL-1 Summary at the end of the year and must be remitted to Revenu Quebec by the last day of February each year.
Setting Up a Payroll Account in Quebec
Now, how do we go about actually running payroll in Quebec? First, new employers have to register with Revenu Quebec for source deductions.
We’ll assume that “new employer” means entering the Quebec jurisdiction for the first time. (If the business is already operating in Quebec, then the first steps may already be completed.)
- Register the business with the government of Quebec. Once the business is registered, the government will assign a Québec enterprise number (NEQ), which is required for the next steps.
- Register the business with Revenu Quebec. You can do this online, or by filling Form LM-1-V, Application for Registration. Once the business is registered, the agency will assign a tax identification number.
- During the Revenu Quebec registration process, you will be asked “For which Revenu Quebec files are you registering the business?” and you must select “Source Deductions” from the list. Once registered, the business will be given a Revene Quebec payroll tax account (denoted RS) and a tax remittance frequency that determines how frequently the business must remit payroll taxes to the agency.
It’s possible that a business might already have an NEQ and a tax ID before hiring an employee in Quebec. This would be true if, for example, the business was selling taxable goods in Quebec and had already registered for a Quebec sales tax (QST) account. If your business already has an NEQ and a tax ID but does not have a payroll account, then you can apply for a payroll account directly through clicSEUR (also called My Business Account).
Issuing Records of Employment (ROEs)
Just like in other provinces, employers in Quebec are required to submit ROEs to Service Canada regardless of whether the employee intends to file a claim for EI benefits, when:
- an employee experiences an interruption of earnings, or
- Service Canada requests one
Service Canada will share ROE information with the Government of Quebec, which administers maternity, paternity, parental, and adoption benefits to residents of that province through a program called the Quebec Parental Insurance Plan (QPIP).
Year-end Reporting and Tax Forms
Employers in Quebec are required to complete an RL-1 slip for each employee who receives employment or other income during the year, and they’re required to provide a copy of this slip to the employee and a copy to Revenu Quebec. These slips must be received by the employee and Revenu Quebec on or before the last day of February each year, or the business could incur a late filing penalty. This form is similar to the T4 that is produced for employees in non-Quebec provinces. Employees in Quebec will receive both a T4 and an RL-1 at year-end.
If an employer produces 1 or more RL-1 forms, then they are also required to complete an RL-1 Summary form. The RL-1 Summary form is similar to the T4 Summary form in that it totals up all Source Deductions made throughout the year, but it also includes the reconciliation/ calculation of three additional tax types:
- Quebec Health Services Fund (QSHF)
- Contribution to labour standards
- Contribution to Workforce Skills Development and Recognition Fund (WSDRF)
The employer must calculate these taxes as per the RL-1 Summary form, and remit any outstanding taxes to Revenue Quebec on or before the last day of February each year.
Conquering Quebec Payroll Using Software
As you can probably tell, payroll in Quebec can be very complex, with unique regulations and calculations that can leave even the most seasoned payroll professional scratching their head. Thankfully, using payroll software can help you streamline the process and ensure everything is done accurately and efficiently.
Payroll software streamlines Quebec payroll processing by offering the following benefits:
- Enhanced accuracy: Payroll software eliminates the need for manual calculations, reducing the risk of errors and ensuring employees are paid correctly according to Quebec regulations
- Increased efficiency: Repetitive tasks such as calculating overtime, vacation pay, and statutory deductions are automated by payroll software, freeing up valuable time to focus on more strategic initiatives
- Ensured compliance: Payroll software stays current with the latest Quebec payroll regulations, helping businesses maintain compliance and avoid potential penalties
Streamline Your Payroll with Humi
Our Canadian-made payroll software is designed to make your life easier, especially when it comes to navigating the intricacies of Quebec payroll. We speak fluent Quebec tax code, automate all the tedious bits, and keep you compliant with the latest regulations in Quebec.
Speak to someone today about how you can use Humi to streamline your Quebec payroll!
Wrap Up
By understanding and adhering to Quebec's unique payroll requirements, you're not just ticking a compliance box – you're setting your business up for long-term success. Employees who are paid accurately and on time are more engaged and productive, contributing to a positive work environment. Additionally, avoiding penalties and fines associated with non-compliance saves you money and reduces stress.
Remember, you don't have to navigate this alone! Consider using payroll software that can specifically handle running Quebec payroll to take some of the load off your shoulders.
With the right tools and knowledge, Quebec payroll can become a streamlined process, allowing you to focus on what truly matters – growing your business and taking good care of your people.
Sources:
https://www.canada.ca/en/services/benefits/ei/ei-quebec-parental.html
