Indemnity in Lieu of Notice

Under the Act respecting labour standards, you must give written notice to an employee before terminating the employee's 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.

Salary or wages

If the employee works during the period of notice, the amount paid for this period constitutes salary or wages. 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).

Retiring allowance

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, 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.
End of note

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