Indemnity in Lieu of Notice

Under the Act respecting labour standards, you must give written notice to an employee before terminating his or her contract of employment, taking into account the period of notice determined on the basis of the employee's number of years of uninterrupted service. If you do not give the employee notice in writing, or if you do not give notice within the time limit prescribed by the Act, you must pay the employee an indemnity in lieu of notice (This link will open a new window).

Salary or wages, or retiring allowance

If the employee works during the period of notice, the amount paid for this period constitutes salary or wages (This link will open a new window). The amount is subject to:

You must also include this amount 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).

The indemnity in lieu of notice you pay an employee is considered a retiring allowance under the Taxation Act. The amount is subject to source deductions of income tax, employee and employer QPIP premiums and the contribution related to labour standards only.

Note
An indemnity in lieu of notice does not constitute a retiring allowance under the Employment Insurance plan.
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