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30 January 20245 minute read

New CRA policy provides clarity for remote work arrangements‎

At a glance

  • Employees who physically report for work at an establishment of their employer are subject to the payroll deduction rates of the province in which such establishment is located.

  • Based on CRA’s new policy, employees working remotely on a full-time basis will now be subject to the payroll deduction rates of the province in which their employer has an establishment that the remote employee could reasonably be considered attached to.

  • Employers should examine their fully remote work arrangements to ensure that the payroll deductions align with the province or territory of employment of the establishment in which the remote employee is reasonably attached to.


Employers in Canada are obligated to make deductions from their employees’ payroll for income tax, CPP/QPP, EI, and QPIP. The required amount of such payroll deductions depends on the employee’s province or territory of employment (POE). 

An employee’s POE is generally determined based on (1) the residency of the employee, (2) the nature of income earned by the employee, and (3) the location of an establishment of the employer where the employee reports for work. In recent years however, the determination of an employee’s POE (in particular the determination of where the employee reports for work) has become more unclear, as employers and employees have increasingly adopted remote work arrangements.

Effective January 1, 2024, the Canada Revenue Agency’s (CRA) new administrative policy for remote work arrangements (Policy) provides some welcome clarity on the relevant POE of employees. Under the Policy, an employee that is in a “full-time remote work arrangement” is considered to be reporting for work at an establishment of the employer if the employee is reasonably “attached to an establishment of the employer.” The two-step analysis is summarized below:

Step 1: Determine if a full-time remote work agreement was made

A full-time remote work agreement exists where:

  • The employer and employee have a temporary or permanent agreement;
  • Under which the employer permits or directs the employee to work remotely full-time; and‎
  • The employment duties and functions are to be performed at locations that are not establishments of the employer (eg an employee’s home office is generally not considered to be an establishment of the employer).

Step 2: Determine if employee is reasonably attached to an establishment of the employer

After a full-time remote work agreement is established at step 1, an analysis is required to determine whether the employee can reasonably be considered to be attached to an establishment of the employer. The Policy sets out primary and secondary indicators to consider in step 2:

  • Primary indicator:‎ whether the employee would physically attend at that establishment to carry out employment duties and functions, were it not for the full-time remote work agreement. If an employee used to physically report to an establishment of the employer for work immediately before entering into a full-time remote work agreement, that establishment is generally the one that the employee is considered to be attached to, unless the employee's circumstances or the nature of their duties have changed.

  • Secondary indicators include:
    • the establishment where the employee receives work-related materials or instructions;
    • the establishment where the employee obtains instructions regarding their duties;
    • the establishment responsible for supervising the employee; and
    • the establishment aligned with the nature of the employee’s duties‎.

If an employee may be attached to more than one establishment of the employer after applying the two-step test above, the establishment that the employee is more closely attached to based on the primary and secondary indicators is the relevant establishment.

Takeaways for employers

The new Policy offers better guidance to employers on the applicable payroll deduction rates for their remote employees, particularly where it was initially unclear which provincial deductions should apply. The analysis under the new Policy may result in a change in the POE of some remote employees, which prior to the Policy may have been the establishment of the employer from where the employee’s wages were paid. Employers should review the POE of their employees in accordance with the new Policy to ensure that they are compliant.

Note that this Policy applies only for the purposes of determining the POE for payroll deductions, and not for other purposes (such as determining employer health tax obligations).

For further information please contact any of the members of the DLA Piper Canadian Employment and Labour Law Service Group listed here.