Employee RRSP+ contribution or cash bonus?
We explain why it is better to put an amount into your employees RRSP+ as a contribution rather than offering a bonus on their pay.¹
By Fonds de solidarité FTQ
Employee attraction and retention are at the heart of every employer's concerns. As a result, many employers — especially SMEs — want to enhance their benefits to not only meet their employees' needs, but also become more competitive on the market.
Rather than offering raises, some employers prefer to wait until the end of the year to pay employee bonuses based on their company's performance. However, there is a way to give your employees more while reducing your costs. Simply opt for the RRSP+ with Fonds de solidarité FTQ employer contribution program.
A worthwhile alternative to traditional bonuses
Generally speaking, companies that offer bonuses do so by paying their employees a lump sum at the end of the year. Since each employee's bonus must be added to their total salary to calculate applicable payroll taxes, they don't benefit from the full bonus amount. Plus, you end up spending more.
Fortunately, there is a solution that allows your employees to take full advantage of their bonus while also reducing your payroll costs. By setting up an RRSP+ with the Fonds contribution program for your employees, they'll not only benefit from your full employer contribution, but also receive the additional 30 percent tax savings² on this amount.
Planning to give each employee $1,000?
Here's a breakdown of the two scenarios³.
|Traditional payroll bonus||Employer contribution to the employee's RRSP+ with the Fonds1|
|Amount offered to the employee||$1,000||$1,000|
|Employer's payroll taxes4||$125||N/A|
|Actual cost to the employer||$1,125||$1,000|
|Gross amount paid to the employee||$1,000||$1,000|
|Employee contributions (QPP, QPIP, and EI)||$74||N/A|
|Total gross profit for the employee||$926||$1,300|
Contributing to your employees' RRSP+ with the Fonds has three distinct advantages:
You give more to your employees at a lower cost
Setting up an RRSP+ with the Fonds employer contribution program allows you to give an amount that fits your budget and that your employees can fully benefit from while enjoying additional tax savings².
You stand out in the job market
The RRSP+ with the Fonds will enhance your benefits package, helping you to attract and retain the best candidates and improve your employee experience.
You encourage healthy saving habits
By contributing to your employees' RRSP+ with the Fonds, you encourage healthy saving habits and help them reach their goals.
Did you know?
You can contribute to your employees' RRSP+ with the Fonds with every paycheque. Of course, you can vary the amounts for different employees, or choose a contribution amount based on your own pre-established criteria, such as job position or seniority. All this is optional and at your discretion.
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This article deals with a situation where an employer chooses to set up an employer contribution program through to RRSP+ with the Fonds de solidarité FTQ. It does not deal with a situation where employees can individually choose to receive their bonus in cash or in Fonds de solidarité FTQ shares.2
To the extent that the annual maximum eligible for the tax savings has not otherwise been reached.
The Fonds de solidarité FTQ's shareholders will receive 15% in tax credits from the Québec government and 15% from the federal government. They are capped at $1,500 per fiscal year, which represents a $5,000 purchase of shares of the Fonds de solidarité FTQ.3Example for the 2022 taxation year, based on a person with a $40.000 taxable annual income with a marginal tax rate of 27.50%, receiving 52 paychecks per year and benefits from a tax refund on each paycheck. These amounts are estimates that could vary depending on your taxation status.4
Employer payroll taxes are calculated on the gross bonus amount, or $1,000 in this example. Payroll taxes charged to the employer include the Québec Pension Plan (QPP), Employment Insurance (EI), the Québec Parental Insurance Plan (QPIP), the Health Services Fund (HSF), and the Commission des normes, de l'équité, de la santé et de la sécurité du travail (CNESST). Certain contribution rates vary according to the employer's specific situation.
Please read the prospectus before buying Fonds de solidarité FTQ shares. Copies of the prospectus may be obtained on the Website fondsftq.com, from a local representative or at the offices of the Fonds de solidarité FTQ. The shares of the Fonds de solidarité FTQ are not guaranteed, their value changes and past performance may not be repeated.