CRA indicates that s. 56(1)(r)(i) rather than s. 5(1) applies to inducement payments made by the government directly to a prospective hospital employee

CRA indicated that where a provincial government sponsors a program that is designed to deliver incentive payments or earnings supplements directly to eligible nurses, such amounts are included in their income under s. 56(1)(r)(i) (“earnings supplements provided under a [government-sponsored] project … to encourage individuals to obtain or keep employment”) whereas if it sponsors a program designed to have employers deliver the payments directly to them, such amounts are included in their employment income under s. 5(1). This distinction is significant, in part, because in the first case, no source deductions are required for Canada pension plan or employment insurance premiums.

CRA noted that the Ontario Community Commitment Program for Nurses (CCPN) (which paid $25,000 to nurses to induce them back into practice) fell into the second (s. 5(1)) category.

Incentive amounts to someone who already is an employee paid by someone other than the employer generally still constitute employment income to the employee (see, e.g., Philp). However, s. 6(3)(b) apparently assimilates to employment income only inducement payments made by the employer to a prospective employee rather than by a third party. The above interpretation may be more aligned with s. 6(3)(b) having a limited scope rather than being an application of the interpretive principle that the more specific provision, if it applies, supplants the more general provision (see, e.g., Onenergy).

Neal Armstrong. Summary of 23 March 2023 External T.I. 2023-0967391E5 under s. 56(1)(r)(i).