Federal Tax deductions
Provincial Tax deductions
The bonus that you should pay is:
Frequently Asked Questions
As experts in Canadian payroll legislation, we’re often asked about bonuses. Here’s a list of our most frequently asked questions.
Are bonuses taxable?
Yes, any bonuses you pay your staff are taxable. In Canada, employers are required to deduct Canada Pension Plan (CPP) contributions, employment insurance (EI) premiums and income tax (federal and provincial) from bonuses. Along with other any additional amounts paid to employees.
How much tax do you pay on a bonus?
The bonus tax rate is the same as the individual tax rate.
Federal tax rates for 2022:
- 15% on the first $50,197 of taxable income, plus
- 20.5% on the next $50,195 of taxable income (on the portion of taxable income over 50,197 up to $100,392), plus
- 26% on the next $55,233 of taxable income (on the portion of taxable income over $100,392 up to $155,625), plus
- 29% on the next $66,083 of taxable income (on the portion of taxable income over 155,625 up to $221,708), plus
- 33% of taxable income over $221,708
To calculate your combined rate, see the CRA’s Canadian income tax rates for individuals for provincial and territorial tax rates.
Are bonuses included in vacationable earnings?
Yes! There are two types of bonuses, discretionary and non-discretionary. Only non-discretionary bonuses are included in vacationable earnings. All provinces and territories in Canada consider discretionary bonuses a vacationable earning.
What is a discretionary bonus?
A discretionary bonus is one a company pays an employee in unexpected situations. These payments aren't a part of an employment contract or any verbal agreement with an employer. They're entirely based on the discretion of an employer rather than any predetermined or agreed to conditions.
What is a non-discretionary bonus?
Sometimes referred to as a work-related bonus, a non-discretionary bonus is any bonus outlined in their employment contracts. Employees receive these rewards if they meet a predetermined goal. Some examples of non-discretionary bonuses include signing, hiring, and annual bonuses.
What are vacationable earnings?
Vacationable earnings are those on which vacation pay is calculated, according to federal and/or provincial employment standards. An employee’s vacation entitlement is accrued throughout the year, but not all of their earnings within that same period are consider vacationable. Vacationable earnings typically include regular earnings, overtime, shift premium pay, public holiday pay, commissions and bonuses related to hours of work, production, or efficiency, but it’s important to know that this varied by province or territory.
For a printable version, see the NPI’s Detailed Vacationable Earnings Chart.
Disclaimer: The information provided in this guide is for informational purposes only. It is not professional financial or legal advice nor is it intended to be a substitute therefore. Where there are discrepancies between the guide and information provided by the federal government, provincial government, or the Canadian Revenue Agency (CRA) or Revenu Québec, defer to the guidelines provided by the governing agencies.