Understanding Employee Eligibility Criteria for CDAE Tax Credit

The CDAE tax credit is an incentive offered by the Quebec government to encourage companies to create jobs and retain employees. To benefit from this incentive, companies must maintain a minimum number of eligible employees. But what exactly is an eligible employee? How many hours must they work per week? Let’s examine the criteria that must be met to qualify an employee as eligible.

Definition of Eligible Employee

An eligible employee must work a minimum of 26 hours/week for at least 40 weeks to be considered eligible for the CDAE tax credit. This means that employers are encouraged to hire full-time employees and provide them with a stable source of income over a period of several months. In addition, the functions performed by these employees must also be eligible according to the terms provided by this program.

Maintaining the Required Minimum Number of Eligible Jobs

In addition to hiring full-time employees, companies must also maintain a minimum number of 6 jobs throughout the fiscal year to remain eligible for this incentive. While it is important to hire new employees, it is equally important for employers to ensure that their current employees also meet all the criteria required by this program.

For example, any employee (and/or their replacement) must have worked a minimum of 26 hours/week throughout the fiscal year to be counted in meeting this requirement.

Example 1: An Employee Leaves After 45 Weeks and You Have 5 Eligible Employees Left

If one of your employees leaves after 45 weeks and they are part of your 6 eligible jobs, unless you replace them, you will only have 5 eligible employees left and you would lose all your CDAE tax credits.

Example 2: An Employee Leaves After 45 Weeks, But You Already Have 8 Eligible Employees

In this case, you will be entitled to the CDAE credit for all your eligible employees including the employee who left, because they count more than 40 weeks of 26 hours. This means that even if an employee leaves before reaching the required threshold of 46 weeks, they still count to meet the minimum retention requirement as long as they worked more than 40 weeks with at least 26 hours per week.

Conclusion

The CDAE tax credit offers companies the opportunity to save money while encouraging them to create jobs and retain their current employees.

By understanding how these requirements work, companies can ensure they fully benefit from this program.

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