Honoraria & Stipends
Honoraria and stipends are frequently misunderstood terms that, when applied incorrectly, can lead to payment methods that breach government regulations and TMU policies.
It is important to correctly assess the employee/employer relationship in order to apply the correct payment method. A number of resources are available to help you do so:
- Establishing Employee/Employer Relationships Policy: This TMU policy outlines standards for determining the employee/employer relationship as well as the corresponding procedures and methods for payment.
- (PDF file) Independent Contractor (ICON) Form: This form is designed to assist departments in determining employment status and is required for all independent contracts. It also allows you to generate a Purchase Requisition number with Financial Services in the event that independent contractor status is confirmed.
- Determining Independent Contractor Status: This HR webpage breaks down the topic and provides a decision tree to help you determine the employee relationship and related methods of pay.
TMU defines honoraria as a thank you payment of nominal value for voluntary services. The definition is outlined in the policy:
“Token payments of nominal sums (usually no more than $500.00) not reflective of value of work done – usually as a thank you.”
The policy also indicates that token payments to faculty and staff are processed as employment income and added to pay.
No. Honorarium payments are often mistakenly made to self-employed individuals, e.g. consultants, freelance writers, and others providing specialized services to the university on a short-term or project basis. These self-employed individuals actually have an independent contractor relationship with the university, and method of payment is made accordingly.
If an individual is paid an honorarium when they are really an independent contractor, Financial Services Purchasing and Payment rules and processes are being circumvented.
I asked an employee to do additional work beyond their job requirements. Should I pay them an honorarium?
No. Employees are not eligible for honorarium payments but can be compensated by token payments for additional work outside their role.
If an individual is paid an honorarium when they are really an employee, the university is violating federal and provincial tax regulations that require mandatory deductions from employment income to be made at source.
Honorarium is not a term that has any meaning from a tax perspective. Payments for services are either business or employment income. There is some unofficial information from the CRA to support the notion of “nominal” payments that are not subject to the usual tax rules. They must be nominal amounts and are not provided as an incentive or as compensation.
One example of a tax-exempt nominal payment provided by CRA is where a research subject volunteers to participate in a research study, is not promised any payment and, after their participation is over, receives $100.00 as a thank you.
If an individual is paid an honorarium when they are really an employee, the university is violating federal and provincial tax regulations. The university may also be violating TMU’s collective agreements and Employment Standards Act regulations regarding paying employees.
If an individual is paid an honorarium when they are really an independent contractor, Purchasing and Payment rules and processes are being circumvented. In addition, provincial government rules are potentially being circumvented, including those that restrict dealings with contractors, particularly consultants. For more information, see Hiring independent contractors and the Purchasing and Payment section of the Financial Services website.
Familiarizing yourself with the information included here and in the policy are a great start.
When working with an independent contractor, it’s helpful to establish the nature of the relationship upfront – preferably in writing. If terms and conditions are appropriate and agreed upon, it makes it easier to process payments afterwards. Completing the (PDF file) ICON form is a crucial step in this process.
In universities the term is most often used for regular payments, over an academic year or longer, made to faculty or students. It is not used in relation to payments for employment.
When used in relation to faculty payments, stipends normally refer to employment income for a temporary assignment, e.g. chair/director stipend, overload teaching stipend, or stipends paid for work on academic administrative projects carried out for the faculty or department. This is consistent with TMU’s use of the term for its faculty members. Payments in such situations are added to employment earnings and taxed at source.
At TMU, stipend is used to refer to student payments that are made to provide support while they fulfill their academic requirements. This may include payments provided to further the education and training of graduate students and postdoctoral fellows.
The term stipend is not used in relation to payment for student employment. If an employee/employer relationship exists, the student must be paid as an employee or the university will be in violation of tax and employment laws, and may also be in violation of collective agreement provisions and/or university policy.
From a tax perspective, there is no such type of payment as a stipend. There must be an assessment of the nature of the relationship to determine the category of payment and any tax requirements, along with other terms and conditions.
If an employee/employer relationship exists, payment must be taxed at source or the university will be in violation of tax and employment laws, and may also be in violation of collective agreement provisions and/or university policy.
If you have any questions or concerns, contact your human resources partner.