Are tips included in MERC?
Do I include tips when calculating CPP and EI deductions?
There are 2 types of tips.
Controlled tips are mandatory to the client. For example, spa parties may include a mandatory 18% gratuity that is included in the bill. If you include or “control” the tip amount in the final bill, then these tips must be included in the insurable earnings (wages + VAC pay + tips + commission). Anything considered “insurable earnings” must be accounted for when calculating the EI and CPP deductions.
Direct tips are out of your control. A client may or may not tip you or your service providers. Only the client is in control of the amount of tip they choose to leave. You as the employer are simply passing the tip from the hands of the client to the hands of your service provider. Direct tips are NOT considered insurable hours and are therefore not included when calculating EI and CPP deductions.
The declaration of tips is the responsibility of the tip reciever when filing their personal taxes.
Learn more about tips and gratuities.
EXECUTIVE SPA GROUP
Beauty Industry Resource Centre
(780) 604 2772
Tags: beauty industry, CPP, CRA, deductions, ei, gratuities, insurable earnings, tips
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