The Record of Employment and the Final Payroll Run: An Ontario Employer's Guide
When someone leaves, three separate clocks start, and they are governed by three different authorities. Service Canada wants a Record of Employment. The CRA wants the right deductions on the final payments. Ontario’s Employment Standards Act sets the floor for what those payments have to be.
Small employers usually get the third one right, because it is the one the departing employee asks about. The first two are where the errors accumulate, and they surface months later as an EI claim that stalls or a pensionable earnings discrepancy on a T4 summary.
What actually triggers an ROE
The trigger is not a resignation or a dismissal. It is an interruption of earnings. Service Canada’s guidance on completing the ROE requires you to issue one each time an employee experiences an interruption of earnings, or whenever Service Canada asks for one, and this applies regardless of whether the employee intends to claim EI benefits.
That last clause is the one employers most often get wrong. “She is going straight to another job, so she does not need one” is not the test.
Several situations produce an ROE that people do not expect:
- A leave of absence long enough to interrupt earnings, including sick and parental leave, not only a permanent departure. On a parental leave the ROE is what the benefit is calculated from, so an error in the insurable earnings you report follows the employee all the way to their tax bill the following April.
- A request from Service Canada, most commonly when an employee holds two jobs and loses one, in which case the continuing employer is asked for an ROE for a person who is still working there.
- A change in your pay period type, which requires ROEs for everyone.
Filing it, and the deadline that is not a fixed date
There are two ways to file, and the choice changes your deadline.
ROE Web submits electronically and, per Service Canada’s ROE page, the deadline is tied to your pay period type and the day the interruption of earnings occurred, which generally gives you more time than paper. Filing electronically also means you no longer need to hand the employee a paper copy.
Paper ROEs run on their own schedule and require you to store the employer copy.
Because the deadline depends on your pay cycle rather than a single calendar rule, take it from the guide for your own pay period type rather than from memory or from whatever your previous payroll provider did.
Two rules about corrections are worth knowing before you need them. You cannot cancel an ROE once it has been issued, and if you have already distributed copies of a paper ROE you cannot alter it. In both cases the fix is an amended ROE, including in the common scenario where a departure changes from non-final to final and additional money becomes payable.
Has the employee had an interruption of earnings?
│
├── No, and Service Canada has not asked
│ → No ROE required yet. Reassess if a leave extends.
│
└── Yes, or Service Canada requested one
├── Do you file through ROE Web?
│ → Deadline follows your pay period type.
│ No paper copy to the employee required.
│
└── Paper ROE?
→ Follow the paper deadline and retain the
employer copy.
│
└── Already issued and something changed?
→ You cannot cancel it. Issue an amended ROE.
The final payroll run
The final cheque is rarely one thing. It is usually a mix, and the components are not treated alike. The CRA’s special payments chart is the authority, and these are the three that appear in almost every departure.
| Payment | CPP contributions | EI premiums | Income tax |
|---|---|---|---|
| Wages in lieu of termination notice | Yes | Yes | Yes |
| Vacation pay, public holiday pay, and a lump-sum vacation payout | Yes | Yes | Yes |
| Retiring allowance | No | No | Yes |
The retiring allowance row is where the money is. It carries no CPP and no EI, it takes lump-sum withholding rather than regular withholding, and it is reported on a T4A rather than a T4. The CRA sets out the treatment on its retiring allowances page, including the direct transfer to an RPP or RRSP on which income tax is not deducted.
None of that helps if the settlement document does not say which amount is which. A single lump sum described as “separation pay” forces you to characterise it yourself, and characterising it wrongly creates a pensionable and insurable earnings discrepancy that only shows up after year end. What is and is not a retiring allowance, and how the RRSP transfer works, is set out in severance and retiring allowances.
Get the split agreed in writing at the time of payment. It is straightforward then and awkward later.
The Ontario layer
The ESA sets the statutory floor. Ontario’s guidance on termination of employment scales written notice, or termination pay in lieu, by length of service for employees continuously employed for at least three months.
| Period of employment | Notice required |
|---|---|
| Less than 1 year | 1 week |
| 1 year but less than 3 years | 2 weeks |
| 3 years but less than 4 years | 3 weeks |
| 4 years but less than 5 years | 4 weeks |
| 5 years but less than 6 years | 5 weeks |
| 6 years but less than 7 years | 6 weeks |
| 7 years but less than 8 years | 7 weeks |
| 8 years or more | 8 weeks |
Statutory severance pay is a separate entitlement with its own tests, and common law reasonable notice is a third thing again, usually larger than both. The ESA amounts are floors rather than answers. Special rules apply to mass terminations, and the notice and termination pay requirements do not apply where there has been wilful misconduct that is not trivial and has not been condoned.
Closing the file properly
Four things belong on the checklist after the last cheque clears.
Retain the records. Ontario’s record keeping rules set retention periods that run past the departure, and the CRA has its own six-year expectation for payroll records.
Reconcile the year-to-date figures now, while the employee is fresh in the file. The final T4 has to agree with what you remitted, and the CRA’s T4 slip guidance is the reference. Add the departure to the payroll year end checklist rather than trusting it to reappear in February.
Update the Ontario obligations that scale with payroll. A departure changes your insurable earnings for WSIB, covered in workers’ compensation in Ontario, and your total Ontario remuneration for the Employer Health Tax.
Recover company property and access. Not a tax matter, but the one item that is genuinely impossible to fix later.
A departure touches the ROE, the final pay run, WSIB and EHT inside the same week, and missing one is a sequencing failure rather than a knowledge failure. Holding that sequence is what payroll support is for.
If you have a departure coming up and you are unsure how the settlement should be split between salary, vacation pay and a retiring allowance, or whether an ROE is required at all, send me the offer letter, the proposed package and the last pay stub. I will tell you what each component is for payroll purposes and what has to be filed, in what order. Get in touch.
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