Small business deduction: precision on the concept of paid hours in the construction industry

September 25, 2019
Category :  Articles

In Quebec, companies must reach a threshold of 5,500 paid hours per year in order to be eligible to the “small tax rate”[1] on the first $500,000 in revenue[2].

Calculation of paid hours is limited to 40 hours per week per employee of the company.

In order to adapt to the reality of companies working in the construction industry, Revenu Québec recently announced that an additional amount of 5.2 paid hours per week per employee could be considered in the calculation of the 5,500 hours. The maximum per employee per week is therefore 45.2 paid hours for the companies of this industry[3].

This additional amount allows to take into consideration the particular situation of the construction industry due to the amounts paid by the employers to the Commission de la construction du Québec (CCQ) relatively to the vacation pay[4].

Calculation examples for the amount of paid overtime:

 30 hours /week40 hours /week50 hours /week
Hourly rate (A)$50/h$50/h$50/h
 $1,500 $/week$2,000/week$2,500/week
Compensation rate13%13%13 %
Amount of compensation (B)$195$/week$260/week$325/week
Paid hours (B/A)3.9 h/week5.2 h/week6.5 h/week
Adjusted paid hours3.9 h/week5.2 h/week6.5 h/week

In the first calculation, in which the employee works 30 hours per week, the compensation of $195/week paid to the CCQ allows to consider an additional amount of 3.9 hours per week, totalizing an amount of 33.9 hours per week for this employee.

In the other two calculations, the additional amount is 5.2 hours for an employee working 40 hours and more per week.

To find out more, communicate with your FBL representative.

[1]   A 6% tax rate on the provincial level (11.6% if non-eligible).

[2]   When the company benefits from the small company deduction.

[3]   APFF, Revenu Québec Liaison Committee, June 13, 2019.

[4]   The compensation regarding public holidays, sick leave and vacation leave provided for in collective agreements are paid twice a year to employees by the CCQ.

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