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Payroll that understands Section 87
Built-in support for treaty status tax exemptions – record a qualifying employee’s exemption once, and the correct tax treatment applies automatically on every pay run. No more manual adjustments.
What’s included
Treaty Status setting on the employee payroll profile
Flexible exemption percentages (1–100%) for employees working partially on and off reserve
Automatic income tax treatment on every pay run
CPP exemption settings configurable per employee
EI handled as required. Section 87 does not exempt Employment Insurance
S87 badge and visible exempt earnings for a clear audit trail
Code 71 T4 reporting for exempt income included — ready well before year-end
✦ The Reality
Section 87 payroll shouldn’t mean manual workarounds
We heard from Indigenous employers that most payroll software doesn’t account for Section 87, leaving admins to override tax withholding by hand for each qualifying employee, every pay run, with no clear record of why. That’s why we built it directly into Employment Hero payroll.
✦ How it works
Set it once. Every pay run after that is automatic.
1. Record treaty status
Enable the Treaty Status setting on the employee’s payroll profile and enter their exemption percentage — 100%, or partial (1–100%) where work is split on and off reserve.
2. Payroll applies it, every cycle
Each pay run splits pay into exempt and taxable income and withholds tax only on the taxable portion. An employee earning $3,200 at 25% exempt has $800 treated as exempt — calculated for you, every time.
3. See it clearly
An S87 badge marks each qualifying employee, with exempt earnings visible on payroll detail — a clear record of what was applied and why.
✦ Support that comes with it
Hands-on from day one
Our team works with you directly to enable the capability and configure exemptions for each qualifying employee verified against your current process before your first pay run relies on it. And determining eligibility stays where it belongs, with you as the employer, supported by CRA guidance and the TD1-IN.
See it running on your own pay cycle
Walk through Section 87 support with someone who has set it up before, and see exactly what it looks like for your employees.