Today is the start of September, 2022 and a bit of planning needs to happen as minimum wage is increasing on one month in Ontario.
October 1, 2022 At $15.50
On April 5, 2022, Ontario announced that, in an effort to help workers with rising costs and inflation, it will be raising its general minimum wage by 3.33% from $15 per hour to $15.50 per hour, commencing October 1, 2022. The general minimum wage applies to most employees in the province.
January 1 to September 30, 2022
Since January 1, 2022, the Ontario minimum wage was $15.00/hr which had increased from $14.65 an hour in 2021. In addition, the special minimum wage rate that previously applied to “liquor servers” was eliminated, and their minimum wage also increased to $15.00/hr as servers and bartenders previous earned $12.55 plus tips in 2021.
Student Minimum Wage
Student minimum wage is a rate that applies to students under the age of 18, who work 28 hours a week or less when school is in session. This rate also applies to students who work during school breaks or over the summer holidays. Currently, the student minimum wage in Ontario is $14.10 per hour. This will increase to $14.60 per hour on October 1, 2022.
Three Hour Rule
Employers are required to pay employees for at least three hours when they call an employee in to work, even if they do not work the full three hours. This applies to the students as well as full time employees.
Holiday and Vacation Pay
Student minimum wage workers are entitled to the same vacation and public holiday pay as regular minimum wage workers. Full-time and part-time student workers are entitled to take the nine public stat holidays in Ontario off with public holiday pay. Student minimum wage workers also are entitled to vacation pay and vacation time.
Tip Income - Reminders
Tip income is taxable to the person receiving them in Canada.
The Tips are to be declared in your personal income tax return.
Direct tips to the server are to be self declared at tax filing time.
However, the controlled tips go through the employer known and are part of the T4 issued as CPP and EI are deducted.
Controlled Tips
Controlled tips are part of the employee's total remuneration. Since they are controlled by the employer, the employer is considered to have paid these amounts to the employee. This means that CPP contributions and EI premiums must be deducted at source, if the employee is employed in pensionable or insurable employment or both.
What are controlled Tips
The term controlled tips refers to tips that an employer controls or possesses and then must pay to the employee. The following are some examples of controlled tips:
the employer adds a mandatory service charge to a client's bill to cover tips
the employer adds a percentage to a client's bill to cover tips
tips that are allocated to employees using a tip-sharing formula determined by the employer
tips that an employer includes in his business income, then expenses and redistributes to employees in the form of pay
tips that the employees turn over to their employer who then distributes them to the employees
cash tips that are deposited into the employer's bank account and become, or are even commingled with, the property of the employer and then paid out to the employees
Quick Stats
Various sources have workers residing in Toronto needing to earn at least $22.08 an hour to survive at this time. Other locations in Ontario are lower. In all regions of Ontario the liveable wage is $16.28 or above. A living wage is defined as how much money an individual would need to cost of living in a given area. These costs include housing, food, clothing, transportation, medical, childcare, recreation, and a modest vacation.
Minimum Wage % of Workers
Between 1997 and 2014, the proportion of employees receiving minimum wage rose from 5.0% to 7.2% in Canada (stats Canada archives). Most of this increase occurred between 2003 and 2010. The proportion was lowest in Alberta, at 1.7%, followed by Saskatchewan at 3.5%. Ontario had the highest proportion at 10.9% working for minimum wage in 2014.
In 2021, 8.8% of all workers earn the minimum wage in Canada (source Fraser Institute).
Also, 53 percent of all minimum wage workers are between the ages of 15 and 24 and that 46.4 percent of minimum wage workers had been in their job for less than a year. The vast majority of minimum wage earners live with their parents in Ontario (source Fraser Institute).
So time to plan for the payroll increase for October 1, 2022 and improved decisions versus tip recording.
If any questions or comments arise, please contact Peter at 905-898-3355 or send an email to peter@taxhome.net
Date: September 1, 2022
Copyright © 2022 by Peter Wiesner CPA
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