Eligible salary for SR&ED and CDAE-IA: maximize your credits

One question comes up again and again in conversations with technology company leaders: what counts as eligible salary for SR&ED and CDAE-IA, and how should it be calculated properly? It is a fair question because the rules are not always intuitive. Include too little and you leave money on the table. Include ineligible expenses and you expose yourself to a denial or a review.

This article clarifies the rules that apply to eligible salary expenses for the two flagship programs managed by Quebec tech companies: SR&ED and CDAE-IA.

Why eligible salary for SR&ED and CDAE-IA matters so much

For most technology service companies, salaries account for the vast majority of operating costs. That is where the largest claim potential usually sits.

Under SR&ED, salaries are typically the largest expense category in claims filed by technology SMEs. Under CDAE-IA, the program is based entirely on salaries: they are the only basis used to calculate the credit.

Understanding the salary eligibility rules for each program is therefore essential to maximizing your tax return in practice.

Eligible salaries under SR&ED: CRA rules

Which employees can be included

The Canada Revenue Agency (CRA) allows you to include salaries paid to employees who perform activities directly related to SR&ED, but also employees who directly support that work. That distinction matters.

Researchers, engineers, developers, and scientists performing R&D work are the first group concerned. This can also include technicians involved in testing and experimentation, as well as project managers whose time is directly spent supervising eligible work. Employees whose work directly supports SR&ED activities, such as a technician preparing test materials, may also be included in part.

Time spent on non-eligible tasks must be excluded. If a developer splits time between an SR&ED project and routine maintenance work, only the SR&ED portion is eligible.

How the eligible salary expense is calculated

The CRA uses either the prescribed proxy amount method or the direct cost method to determine the eligible salary expense.

Under the proxy method, overhead tied to eligible salaries can be calculated at a fixed rate of 55% of direct SR&ED salaries. This is a simplified way to include payroll burdens and part of indirect costs without documenting every item in detail.

Hours and time tracking records

The CRA requires contemporaneous evidence of the time spent on SR&ED. A structured time tracking record maintained throughout the year, rather than reconstructed afterward, is essential to defend the claim in the event of a review.

According to the CRA’s SR&ED filing guidance, documentation must be detailed enough to show that the activities meet program criteria and that the claimed expenses relate directly to them.

Eligible salaries for CDAE-IA: Revenu Quebec rules

The central 26-hour-per-week threshold

This is the CDAE-IA rule that is most often misunderstood. For an employee to qualify, they must spend at least 26 hours per week on eligible activities during the reference period.

This threshold corresponds to roughly 75% of a standard 35-hour workweek. It applies weekly, not as a monthly or annual average.

An employee who spends 30 hours on an eligible CDAE-IA project one week, then 10 hours on that same project the following week, does not meet the criterion for that second week. That is why rigorous time tracking is essential.

Which roles are eligible under CDAE-IA

Eligible roles are those that fall within activities recognized by Revenu Quebec:

• Developers and programmers working on e-business solutions that integrate AI
• Information systems analysts
• IT consultants involved in systems integration and development
• Cybersecurity professionals tied to eligible infrastructure
• Solution architects and software engineers

General management, sales, marketing, and administrative roles are not eligible, even if the company operates entirely in IT.

CDAE-IA credit calculation base

Unlike SR&ED, which includes multiple expense categories, CDAE-IA is based only on the eligible gross salaries of eligible employees. The credit is calculated as follows: eligible gross salary x eligible time proportion x credit rate (up to 30%).

The absence of a salary cap per employee, unlike the former CDAE program that capped salaries at $83,333, is a major advantage, especially for companies employing experienced developers or engineers with higher compensation.

Comparison table: SR&ED vs CDAE-IA on salaries

Criteria	SR&ED	CDAE-IA
Responsible authority	CRA (federal)	Revenu Quebec (provincial)
Calculation base	Salaries, materials, subcontracting, overhead	Eligible salaries only
Minimum hours threshold	No fixed threshold (eligible time proportion)	26 h/week on eligible activities
Salary cap per employee	None	None (removed with CDAE-IA)
CCPC rate	35% refundable (up to $3M of expenditures)	N/A
CDAE-IA rate	N/A	Up to 30% (24% refundable + 6% non-refundable)
Stackable	Yes	Yes (with SR&ED)
Required documentation	Time tracking, proof of work performed	Time tracking, employee records

Concrete calculation examples

Example 1: senior developer under SR&ED

A Quebec CCPC employs a senior developer with an annual salary of $120,000. That employee spends 60% of their time on an eligible SR&ED project.

The eligible SR&ED salary is $72,000 ($120,000 x 60%). The refundable federal SR&ED credit (35%) equals $25,200. Using the proxy method, overhead calculated at 55% of direct salaries adds $39,600 to the eligible base, which further increases the return. The federal benefit tied to this single employee can therefore exceed $25,000, in addition to the provincial credit.

Example 2: team of 8 developers under CDAE-IA

A Quebec SaaS company has 8 developers, 6 of whom spend more than 26 hours per week on eligible AI integration projects. The salaries of those 6 employees total $480,000.

The refundable CDAE-IA credit (24%) amounts to $115,200, and the non-refundable portion (6%) adds $28,800, for a total potential return of $144,000. These examples show why correctly identifying eligible employees and documenting time worked are so important.

Most common mistakes to avoid

Many companies unintentionally reduce their returns because of avoidable mistakes in how eligible salaries are managed:

• Excluding employees who could have been included because roles and actual activities were not reviewed fully
• Failing to maintain contemporaneous time tracking, which weakens the file in case of review
• Confusing SR&ED and CDAE-IA rules, even though the two programs operate under distinct logics
• Overlooking taxable benefits in the SR&ED calculation base

Companies also sometimes forget that part-time employees can be partially eligible under SR&ED.

Want to validate your approach or identify roles that may have been missed in your last claim? Get a free assessment and find out what you may still be able to recover.

Conclusion

Clearly defining eligible salary for SR&ED and CDAE-IA is the foundation of any strong claim. Each program has its own rules, but they converge toward the same objective: helping you recover a meaningful portion of salary costs tied to innovation and technology development activities.

Understanding the CDAE-IA 26-hour threshold, the SR&ED proxy method, and the categories of eligible roles in each program is the basis of a well-structured claim.

To deepen your understanding of these programs, explore our complete guides on SR&ED and CDAE-IA. Ready to maximize your claim? Speak with an expert today for a free, no-obligation consultation.

FAQ

How do you determine whether eligible salary for SR&ED and CDAE-IA can be claimed for the same employee?

The same employee can appear in both claims if their work meets each program’s criteria. However, eligible salary for SR&ED and CDAE-IA must be documented separately: SR&ED hours based on time proportion, and CDAE-IA hours based on the 26-hour-per-week threshold. The same expense base cannot be counted twice.

How do you calculate an employee’s eligible time proportion for SR&ED?

The eligible proportion is calculated by dividing the number of hours spent on SR&ED activities by the total number of hours worked during the period. For example, a developer who spends 800 hours out of 1,400 annual hours on SR&ED projects has an eligible proportion of about 57%. This figure must be supported by contemporaneous time records to stand up in a CRA review.

Can an employee who is eligible for CDAE-IA also appear in an SR&ED claim?

Yes. The two programs are separate and are generally stackable. A developer whose work touches both SR&ED and AI-enabled e-business activities can appear in both claims, provided that each program’s rules are respected and the same expense base is not counted twice.