Any amounts an employee would have received during the year had the employee not died are subject to the following:
- source deductions of income tax;
- employee and employer Québec Pension Plan (QPP) contributions;
- the employer contribution to the health services fund; and
- the contribution related to labour standards.
Similarly, you must also include such amounts in your total payroll used to calculate your health services fund contribution rate, your participation in workforce skills development and, if applicable, your contribution to the Workforce Skills Development and Recognition Fund (WSDRF).
Such amounts could be, for example, an amount for accumulated vacation at the time of death or retroactive payments under a collective agreement signed before the employee's death.
However, if the payment of such an amount was unforeseeable at the time of the employee's death, it will not be subject to source deductions and employer contributions. This applies, for example, to a lump sum paid under a collective agreement signed after the employee's death.
An amount paid for accumulated sick leave is considered a death benefit and is therefore subject only to source deductions of income tax. Income tax is withheld at a rate of 16% or 20%, as applicable.
Québec parental insurance plan (QPIP) premiums
Any amounts an employee would have received during the year had the employee not died are not subject to employee or employer Québec parental insurance plan (QPIP) premiums.
The eligible salary or wages of an employee who dies or ceases to be resident in Canada in the year are subject to QPIP premiums for the period of the year prior to death or to the cessation of residence in Canada, since the moment that immediately precedes death or the cessation of residence is deemed to be the end of the year.