Apprentice Job Creation Tax Credit

TAXATION

Receive an investment tax credit by hiring apprentices
to replace your retiring workers.

The potential retirement of the Baby Boomers is
creating a gap in many trades that will have to be filled
by inexperienced trainees. Companies whose success
depends on the employment of highly skilled workers
should be looking at their growth strategy and the possibility
of their more experienced employees retiring, to
make sure they are not left with unfilled key jobs. New
employees need to be brought in as soon as possible
and trained alongside the more experienced workers to
ensure a continuous flow of qualified workers.

The first step toward preparing for the future is to
examine your long-term strategy. What should your
business look like five or 10 years from now? How are
your markets changing and what skills will you need
to meet demand? What is the demographic of your
workforce? Who and how many of your workers are
planning to retire in the next five years? What skills
will they be taking with them? A careful job analysis
should give you a good idea of the skills you will need
to continue growing your business.

Red Seal Program

Once you have defined the problem, how do you go
about planning to make new hires? A good place to
start is the Red Seal Program. The Red Seal Program
is managed by the Canadian Council of Directors
of Apprenticeship, a voluntary partnership between
the federal, provincial and territorial governments to
develop a “certified, highly skilled and mobile trades
workforce in Canada.” The Red Seal Program’s mission
is to standardize skills teaching, testing and certification
across Canada so that workers can move around
and employers will know the standard of skill of job
applicants from other parts of Canada. The Red Seal
Program currently certifies in 57 trades.

Red Seal Website

An alphabetical list of trades is provided on the Red
Seal website. (The website URL is listed at the end of
this article.) The site also provides information about
education and entrance requirements the apprentice
may need to be accepted into the program. In addition,
details regarding the total number of apprenticeship
hours required is divided into learning components
of theory and shop (i.e., hands-on) experience. The
website also lists by province whether practical and/or
written examinations are required.

This site is an invaluable source of information because
it provides a realistic guideline concerning the commitment
both employer and employee must make to the
program. Employers can, before hiring someone, not
only determine the cost associated with the process,
but also explain to the potential apprentice employee
the criteria required to enter into the program, the
timelines from start to finish, skills that will be learned
from the experience, the dedication and time that
should be considered and the certificate they will earn
at the end of the process.

Red Seal helps both individuals
and businesses.

Since many individuals are often not fully aware of the
requirements for the career path they wish to follow,
such information should assist the potential employee
to determine whether the Red Seal Program would
be right for them. This process enables employers to
eliminate potential employees who are not sufficiently
motivated to pursue the career path that you, as an
employer, have determined is necessary not only for
the success of your business, but also for the career
satisfaction of potential employees.

Job Creation Tax Credit

If your business is considering hiring an apprentice to
learn one of the trades whose skills play an important
part in your operations, ask your CPA about the
Apprenticeship Job Creation Tax Credit (AJCTC). This
non-refundable tax credit offers a tax credit of 10% of
all salaries and wages paid to eligible apprentices. There
is, however, a “cap” of $2,000 for each apprentice. To
prevent “double dipping”, rules are in place to ensure
that if the same apprentice works for a related person
(as defined under subsection 251(2) of the Income Tax
Act), the $2,000 cap is allocated to only one employer.

To qualify for the tax credit, your tax advisor will need
to complete either Schedule 31 “Investment Tax Credit-
Corporations” or Form T2038 (IND) “Investment
Tax Credit-Individuals”. The information includes:

• apprentice contract number registered with CRA
  or the province or territory. (It is beneficial to provide
  the Social Insurance Number (SIN) and the
  individual’s name in the event a contract number
  is not available.)
• name of the eligible trade as specified under the
  Red Seal Program.
• salary and wages paid to each apprentice.
• eligible salary and wage multiplied by 10% to
  determine the amount of the credit.

An “eligible apprentice” is someone who is working in
a prescribed trade in the first two years of their apprenticeship
contract. This contract must be registered with
a federal, provincial or territorial government under an
apprenticeship program designed to certify or license
individuals in the trade. For the provinces, the trade
must be a Red Seal trade.

It should be noted that British Columbia, Manitoba
and Ontario also offer their own (provincial) apprenticeship
tax credits.

Benefits of Red Seal

Employers should be encouraged by the prospect
of hiring apprentices under the Red Seal Program
because it not only provides a career path outline but
also affords current tax savings for businesses that will
require a fresh work force in the not so distant future.

Red Seal Program website:

www.red-seal.ca