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Tips and gratuities

10-04-2017

If one comes to know of someone else’s shortcomings it is a matter of great merit that one conceal them from others provided this shortcoming is not harmful or dangerous to others. According to Abu Huraira, our Holy Prophet (Allah bless him with peace) has said that, “Allah shall conceal, on the Day of Judgement, the shortcomings of one who conceals the shortcomings of others.” (Sahih Muslim: Kitab al Birr wa Silah)

And ‘Uqbah ibn Amir relates that Our eternally blessed Prophet (Allah bless him with peace) has said that, “The act concealing the shortcomings of another is like saving a girl from being buried alive.” (Mustadrik Hakim, p. 334, vol 4)

Concealing the shortcomings means no

 

All employers are required by law to deduct CPP contributions and employment insurance (EI) premiums from most amounts they pay to their employees. Employers must remit these amounts to the Canada Revenue Agency (CRA) along with their share of CPP contributions and EI premiums.

 

Does Income From Tips and Gratuities Form Part of an Employee's Pensionable and/or Insurable earnings?

Gratuities or tips received by employees are income earned in respect of employment for purposes of the Income Tax Act.

However, it must be determined whether tips received in the course of employment are considered pensionable earnings under the CPP and/or are insurable earnings under the EIA.

This answer depends on whether the tips are considered to have been paid by the employer (controlled tips), whether they are considered to have been paid by the client (direct tips).

Controlled Tips

Controlled tips are gratuities that are controlled by the employer. Since they are controlled by the employer, the employer is considered to have paid these amounts to the employee. The following are some examples of controlled tips:

  • The employer adds a mandatory service charge to a client's bill to cover tips;
  • The employer adds a percentage to a client's bill to cover tips;
  • Tips allocated to employees using a tip sharing formula determined by the employer;
  • Tips that an employer includes in his business income, later expenses and redistributes to employees in the form of pay;
  • Tips that the employees are required to turn over to their employer and are later distributed to the employees;
  • Cash tips that are deposited in the employer's bank account and become the property of (or even commingled with the property of) the employer and subsequently paid out to the employees.

 

CRA use the  term 'controlled tips' within this article to denote the principles of employer control/employer possession over the tips and the employer's obligation to pay the tip to the employee as expressed by the courts.

Controlled tips form part of the employee's total remuneration and are subject to CPP contributions and EI premiums being deducted at source, provided that this person is employed in pensionable and/or insurable employment.

Direct Tips

Direct tips are gratuities that are paid directly by the client to the employee and that are not subject to any of the forms of control by the employer as mentioned above under the heading controlled tips. The following are some examples of direct tips:

  • A client leaves money on the table at the end of the meal and the server keeps the whole amount;
  • A client gives a tip directly to a bellhop, door person, car attendant, porter; etc.
  • Tips pooled and/or shared among employees in a manner determined by the employees (as opposed to the employer);
  • When paying the bill by credit card, a client includes an amount for a tip on the credit card and the employer returns the tip amount in cash to the employee;
  • When paying the bill by debit card, a client includes an amount for a tip and the employer returns the tip amount in cash to the employee;

CRA use the term 'direct tips' to denote the principle of when the employer has no control over the tip amount and no control over the tip distribution. Direct tips are considered to have been paid by the client and not the employer. In these situations, the employer is merely a conduit for the tip from the client to the worker.

Direct tips are not subject to CPP contributions and/or EI premiums. However, an employee can elect to make CPP contributions on tip amounts earned in the course of pensionable employment where the tip income is found not to be subject to CPP contributions at source. The individual will complete a form CPT20 to elect to pay the CPP contributions.

It is possible for an employee to receive both controlled and direct tips. In such a situation, only the controlled tips will form part of the employee's pensionable and/or insurable earnings.

Declared Tips

Declared tips are the amount of tips that provincial law requires an employee to declare to his or her employer along with their controlled tips. In the province of Quebec, the Taxation Act provides specific guidance for employers in the hospitality sector whose employees carry out their duties in a regulated establishment. Employees working in a regulated establishment in the province of Quebec must declare their direct tips to their employer. For the purposes of the EIA, employees in the province of Quebec working in a regulated establishment will have the amount of their declared tips included in their insurable earnings along with their controlled tips. Currently, Quebec is the only province that has tax legislation requiring employees to declare their tips to their employer.

t mentioning it to others and not broadcasting or announcing it before all. But certain points should be borne in mind in this regard.

1 . It is not justified to lie in order to conceal another’s shortcomings. So if one is asked about the shortcoming he, should first try to avoid answering, but if pressed he should not say anything except the bare fact.

2. Concealing somebody’s shortcoming is justified when the effect of that shortcoming is confined to the man himself, but if it might conceivably cause harm or injury to others, then it is justified to tell the person to be affected about the shortcoming. This latter action is not only justified but also meritorious provided there is no intent of harming anyone or insulting or degrading him. For instance, someone is in the habit of taking money from others by subterfuge and not returning it or someone is habitual borrower and does not redeem his loans. As in both case an unaware person may be taken by surprise and lose his money, he should be informed of this habit of the borrower. Another instance is of a person who proposes to marry girl; if the girl’s parents wish to know about the prospective husband, it is justified to tell the truth. However, in all such cases, the intent should not be of harming anyone in any way. Another case is that of a person who has committed a crime which may harm the society or the community; this information must be made available to proper authorities and it would be a meritorious act, if the intent is social reform and not personal revenge against the culprit.

Tenderness towards others is very pleasing to Allah and is very meritorious. Ayesha (may Allah be pleased with her always) relates that our holy Prophet (Allah bless him with peace) has said, “Allah is kind and likes kindness and gives a reward for tenderness which is nor granted for anything else.” (Sahih Muslim)

In another hadith related by Ayesha (may Allah be pleased with her) our Prophet (Allah bless him with peace) says that, “Tenderness adorns everything and when it is absent things become ugly.” (Sahih Muslim)

Tenderness means that one must avoid using harsh words or displaying harsh attitude in anger, rather one behave and speak with tenderness. If someone has to be checked or if a difference in opinion is to be expressed, one should not be rough or harsh, but speak softly and kindly. If a younger person has to be trained and strictness cannot be avoided, it too should be adopted in moderation or to the extent needed.

Kind behaviour also implies that one must not argue or quarrel with others on every issue and think well of them as far as possible. Even haggling over a price should not be harsh or acrimonious. One should be ready to accept another’s viewpoint if it is acceptable. If the viewpoint is not acceptable one should withdraw from argument. It is not good to compel others to agree with one’s own viewpoint and to try to force them into submission.

Jabir has related that our exalted Prophet (Allah bless him with peace) said that, “Allah is kind to him who is tender and forgiving in selling as well as buying and even when asking others for his due”. (Sahih Bukhari). Hudhifah ibn Yaman has related that our blessed Prophet (Allah bless him with peace) said that, “A bondsman of Allah who was given much wealth would be brought before Allah and would be asked, ‘What did you do in the world?’ He would submit that ‘Oh my Nourisher, Thou hadst given me Thine wealth and I traded with it and I was forgiving, so I made things easy for the rich and allowed time to the poor’. Allah would say, ‘I have more right to behave in this manner.’ He would then turn to His Angels and command them ‘Release this bondsman’.” (Sahih Muslim)

Abu Hurairah has quoted our blessed Prophet (Allah bless him with peace) as saying that, “One who gives time to the poor debtor or gives him some relief, Allah would keep him in the shade of His throne on the Day of Judgement when there would be no shade Save that of His Throne.” (Jami’ Tirmidhi)

Abu Qatadah has quoted our revered and respected Prophet (Allah bless him with peace) as saying that, “One who desires to be relieved of the pains and worries of the Day of Judgment, should ease the troubles of the destitute or ease his debt.” (Sahih Muslim)

Footnotes: Footnotes: This column is presented as a general source of information only and is not intended as a solicitation for business. Mohammed Yasin, CPA,CGA, is the principal of M. Yasin & Co. Inc., Certified General Accountants and has offices in Vancouver & Surrey,B.C.

Article Source: ALAMEENPOST.COM