Summer break often brings a shake-up in routines. Travel plans, school holidays, camps, or even just a slower season where you don’t need as much help around the house. If you’re thinking of pausing care for a few weeks (or longer), or your nanny is planning a personal leave, there are a few payroll-related items to keep in mind before everyone heads into vacation mode.
Here’s what you need to know to stay compliant, avoid headaches later, and keep things smooth between you, your nanny, and the CRA and Service Canada.
Leave of Absence or Temporary Layoff: What’s the Difference?
If your nanny is planning time away, or if you’re the one initiating a break in care, it’s important to understand the terminology, especially since it affects how payroll is handled.
Leave of Absence
This is when your nanny is the one taking time off. Maybe they’re going on an extended vacation, taking parental leave, or attending to a personal matter. The key is that the job still exists and your nanny intends to return.
If it’s unpaid leave, there’s no payroll processed during this time, but the employment relationship is still considered active.
Temporary Layoff
This happens when you, the employer, no longer need childcare temporarily. Maybe your kids are off to grandma’s or sleepaway camp for the summer. You’re not ending employment permanently, but you’re hitting pause.
In some provinces, temporary layoffs are legally defined and time-limited, so make sure you check with the labour laws in your region. In Ontario and British Columbia, for example, temporary layoffs are generally up to 13 weeks in a 20-week period (but can possibly be extended for exceptional circumstances).
If you think the break will last longer, or there’s uncertainty about return dates, it may need to be treated as a termination.
What Happens to Payroll?
If your nanny is taking time off or you’re pausing care, here’s what happens on the payroll front:
Final (or Interrupted) Paycheque
If the break is more than just a long weekend, you’ll likely need to issue an official final pay or interim paycheque. This should include:
- Any hours worked up to the leave date
- Vacation pay owing, if not already paid out
- Stat holiday pay or unused entitlements, if applicable
If you’re working with NannyTax, we can help ensure that the pay is calculated correctly and that all deductions and contributions are included.
During the break, if there are any months with $0 payroll, be sure to issue a Nil remittance to the CRA.
Do You Need to Issue a Record of Employment (ROE)?
Most likely, yes.
A Record of Employment (ROE) is required whenever there’s an interruption of earnings, even if the break is temporary. This document is used by Service Canada to determine if your nanny qualifies for Employment Insurance (EI), including maternity leave, sick leave, or periods of no work.
When to issue an ROE:
- Your nanny won’t be paid for 7 consecutive calendar days
- There is an interruption in regular work and pay, even if the job will resume later
The ROE should reflect the last day paid and the reason for the interruption.
For example:
- Code “N” for leave of absence
- Code “A” for shortage of work or temporary layoff
- Code “K” if there’s a special circumstance and you’re including additional notes
Good to Know: Reporting the ROE
If you’re a NannyTax client, we’ll take care of preparing and submitting the ROE electronically through Service Canada. Just let us know about the break, and we’ll handle the paperwork. No stress, no forms for you to figure out.
If you’re managing payroll yourself, you’ll need to log into the ROE Web through Service Canada to issue the Record of Employment. Be sure to include the correct reason code and dates for the interruption in pay. If you’re not sure which code to use, check the ROE guide or give them a call before submitting.
Resuming Payroll After a Break
Once your nanny returns, you won’t need to start payroll from scratch, but there are a few things to review before their first payday:
- Has the schedule or number of hours changed?
- Will they be returning at a new wage?
- Did they accrue vacation pay during the break that now needs to be paid or tracked?
If you’re with NannyTax, just send us any updates and we’ll make the necessary changes. We’ll ensure the next payroll run reflects everything accurately. If it’s been more than six months or you’ve hired a new caregiver, we may also ask for updated TD1 forms.
If you’re handling payroll independently, make sure to:
- Update your records with any changes to hours or rate of pay
- Resume CRA remittances with the correct payroll frequency
- Keep documentation of the return-to-work date and any new agreements in case they’re ever needed
Want to Keep Things Super Smooth?
A quick chat with your nanny before any planned time off goes a long way.
Talk through:
- The return date and whether it’s firm or flexible
- How vacation pay will be handled, if there is any
- Whether benefits (if applicable) continue during the break
- Whether they plan to apply for EI during the leave
It also helps to confirm the arrangement in writing, even if it’s informal. Just a short email to recap what was discussed.
Final Thoughts
Taking a break from care doesn’t have to mean a break in payroll compliance. Whether your nanny is going on leave or you’re pressing pause for summer, understanding the difference between leaves and layoffs, reporting to the CRA properly, and handling final paycheques the right way will save you stress down the road.
Need help with ROEs, vacation pay calculations, or figuring out what to report? That’s what we’re here for. You can reach us toll-free at 1-877-626-6982 or send us a message at taxquestions@nannytax.ca. With three domestic payroll plans to choose from, we’ve got flexible options for families of all shapes and schedules!