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Difference between revisions of "Strategies and Tips for Employment Law (9:VII)"
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Strategies and Tips for Employment Law (9:VII) (view source)
Revision as of 14:45, 18 August 2021
, 14:45, 18 August 2021→Consider the Tax Consequences when Negotiating a Settlement
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== Consider the Tax Consequences when Negotiating a Settlement == | == Consider the Tax Consequences when Negotiating a Settlement == | ||
An employee must pay tax on the portion of an award that is given in place of the wages they would have received during their reasonable notice period. | An employee must pay tax on the portion of an award that is given in place of the wages they would have received during their reasonable notice period. | ||
However, if part of the damages is instead awarded as aggravated or punitive damages (in Small Claims Court or BC Supreme Court), or as damages for injury to dignity, feelings, and self-respect (at the BC Human Rights Tribunal), this portion of the award may not be taxable. Consider structuring a written settlement agreement to allocate a reasonable portion of the award to these potentially non-taxable categories of damages. | |||
Employers will often also allow an employee to allocate an amount of a severance settlement to be paid directly to an RRSP account on a pre-tax basis, up to the employee’s eligible RRSP room. | |||
Note that this chapter, and LSLAP, cannot provide tax advice, and an employee may wish to consult an accountant or tax lawyer or the Canada Revenue Agency to determine exactly which amounts of a final settlement are taxable, and what the best strategy for payment structuring would be for a particular employee. It is helpful to obtain this recommended strategy from the employee’s financial advisor at an early stage, so that the settlement structuring request can form part of the severance negotiations. | |||
== Consider splitting the claim into different forums == | == Consider splitting the claim into different forums == | ||