Quebec 1% Training Law: meeting your workforce training obligation

Who is subject to the Quebec 1% Training Law

The Act to promote workforce skills development and recognition (CQLR, chapter D-8.3), commonly known as the “Workforce Skills Act” or Quebec’s “1% Training Law”, requires qualifying employers to invest in developing the skills of their personnel.

Under Section 1 of the Regulation respecting the determination of total payroll (CQLR, chapter D-8.3, r. 4), any employer whose annual Quebec payroll exceeds $2,000,000 in a calendar year is subject to the law. If your total annual Quebec payroll remains at or below $2,000,000, your business has no investment obligation and no reporting requirement.

Total payroll includes all gross remuneration paid to employees who report for work at a Quebec establishment or who are paid from a Quebec establishment. It mirrors the remuneration subject to the employer contribution to the Health Services Fund (HSF/FSS) declared to Revenu Québec. This encompasses base wages, overtime, commissions, bonuses, and paid vacation. Excluded from payroll are director attendance fees and taxable shareholder benefits.

Growing businesses approaching the $2,000,000 mark should begin tracking training activities before crossing the threshold. Under Section 11 of the Act, eligible training expenses incurred in the calendar year immediately preceding the first year of subject status can be carried forward to meet the initial 1% obligation.

Eligible training expenses under the regulations

Employers subject to the law must allocate at least 1% of their annual payroll to qualifying training activities for their employees, co-op interns, or student apprentices. The Regulation respecting eligible training expenditures (CQLR, chapter D-8.3, r. 3) establishes ten recognized expenditure categories.

To qualify, training must develop skills directly related to employment, follow a structured progression, and pursue measurable learning objectives.

Ineligible and excluded training activities

Purely informational events, such as annual shareholder meetings or industry trade show walk-throughs, and recreational gatherings are strictly excluded. Furthermore, occupational health and safety (SST) training is eligible only if it is “indissociable from the skills required for the performance of a job” (s. 7(3.2°)). Generic compliance sessions, such as standard workplace first aid or introductory ergonomics, are systematically rejected upon audit.

How to report and remit on Revenu Québec RL-1 Summary

Compliance is declared to Revenu Québec on the RL-1 Summary (RLZ-1.S) by the last day of February following the calendar year.

The annual Déclaration des activités de formation (DAF) to the CPMT was formally abolished on January 1, 2024 (Bill 24 / L.Q. 2023, c. 24, s. 133). Employers no longer file with the CPMT; reporting is consolidated entirely on Revenu Québec’s RL-1 Summary. Competitor advice directing employers to file a DAF is outdated.

When completing the RL-1 Summary, three scenarios occur:

1. Eligible expenses meet or exceed 1%: no contribution is owed, and any excess rolls over to next year.
2. Eligible expenses fall below 1%: the employer must remit the exact difference to the Workforce Skills Development and Recognition Fund (WSDRF/FDRCMO).
3. Valid CQIF holder: exempt from remittance by entering the certificate number.

Statutory calculation formulas and practical scenarios

Payroll departments must apply statutory calculation formulas:

• Hourly employees: regular hourly base rate plus authorized statutory employer contributions (CNESST, QPP, QPIP, EI under s. 7(4.1°)), adding roughly 12% to 18% (typically ~15%) to recognized costs.
• Salaried personnel and managers: annual gross salary divided strictly by 1,950 hours (s. 7(6°)). For a manager earning $117,000, the deemed hourly rate is $60.00/hour.
• Production replacements: only the wage rate difference ([Replacement Rate - Absent Worker Rate] × Hours, s. 1(8°)). Replacing a $20/hour operator with a $30/hour worker for 45 hours yields $450 in eligible costs.

Two practical scenarios demonstrate application:

• Manufacturing SME ($4,000,000 payroll, $40,000 obligation): $24,000 in participant wages (including 15% employer payroll burden), $11,000 in internal trainer wages, and $5,000 in replacement wage premiums satisfy the $40,000 target with zero payment to the fund.
• Technology firm ($6,000,000 payroll, $60,000 obligation): 10 engineers ($60/hour using the 1,950-hour divisor) completing 80 hours of internal technical workshops represent $48,000 in wages, complemented by $15,000 in specialized third-party cloud architecture courses, generating $63,000 in eligible expenses and a $3,000 carry-forward surplus.

Carry-forwards, growth rules, and training mutuals

The legislation provides financial flexibility mechanisms to accommodate varying training cycles: surplus carry-forwards, pre-threshold banking, and training mutuals.

Under Section 11 of the Act, when eligible training expenditures exceed the mandatory 1% payroll threshold, the surplus is automatically carried forward to the following calendar year. That surplus is deemed an eligible training expenditure in the subsequent year. This allows businesses to absorb major one-time training investments, such as enterprise resource planning (ERP) deployments or automated line installations. In corporate restructurings, amalgamations, or business transfers, accumulated surpluses transfer to the successor entity.

High-growth firms benefit from the pre-threshold rule under Section 11: eligible training expenses incurred during the year immediately preceding the year payroll crosses $2,000,000 carry forward into the first year of subject status.

However, employers must avoid the two-year lapse trap: if an employer’s annual payroll drops below $2,000,000 for two consecutive calendar years, all previously accumulated carry-forward balances are permanently forfeited under administrative rules interpreting Section 11. Only expenses incurred in the single year preceding re-qualification can be brought forward under Section 11.

The second key mechanism is the training mutual (mutuelle de formation, Sections 8 and 20 of the Act and Regulation D-8.3, r. 7). Recognized by the Ministère de l’Emploi et de la Solidarité sociale, training mutuals pool resources across industry sectors. 100% of membership contributions and training purchases made through a recognized mutual constitute eligible training expenditures. For businesses lacking internal HR infrastructure, participating in a recognized sectoral mutual (such as a CSMO) secures compliance with minimal audit exposure.

Stacking with Services Québec MFOR and PAMT tax credits

Quebec’s Workforce Training Measure (MFOR), business component, administered by Services Québec, provides non-repayable grants covering 40% to 65% of eligible training costs, and up to 100% for francization and basic literacy.

Activities approved under an MFOR agreement meet the qualification standards of the 1% Training Law. However, Section 7(13°) of Regulation D-8.3, r. 3 enforces a strict netting rule: employers may include in their 1% declaration only their net out-of-pocket expenditure.

This structural difference creates significant financial leverage. Because Services Québec does not subsidize trainee wages for standard commercial training, 100% of those wages (including the ~15% employer statutory payroll tax loading factor under s. 7(4.1°)) can be applied toward satisfying your 1% statutory training target.

Similarly, under the Workplace Apprenticeship Program (PAMT), an employer claiming the 30% refundable apprenticeship stage tax credit can count the remaining un-subsidized 70% of eligible wages toward their 1% obligation. For comprehensive subsidy details, review our guides to MFOR eligible costs and Quebec business grants and tax credits.

Six-year audit documentation and compliance verification

The 1% Training Law is audited rigorously through joint oversight by Revenu Québec and the Commission des partenaires du marché du travail (CPMT).

Shortfalls and assessments are recovered by Revenu Québec under the Tax Administration Act (CQLR, chapter A-6.002). Late remittances, omitted payroll declarations, or disallowed expenses trigger reassessments, prescribed statutory interest, and financial penalties.

Under the regulations, employers must retain all supporting documentation for 6 years following the end of the relevant calendar year.

During an audit, Revenu Québec requires the following documentation:

• Itemized invoices from training providers indicating exact dates, hours, and course outlines;
• Service contracts and signed agreements with accredited instructors or recognized institutions;
• Daily attendance sheets signed by each participating employee and the instructor;
• Structured internal training plans with documented proof of internal committee consultation (meeting minutes or confirmed email exchanges under s. 7(5°));
• Payroll audit reports isolating training earnings codes to prove actual wages paid during training;
• Demonstrated capability to issue individual annual training completion certificates for participants (Schedule 1 format).

Auditors strictly disallow generic occupational health and safety (SST) training that is not indissociable from job competencies (s. 7(3.2°)). Any expense rejected during an audit is retroactively converted into an FDRCMO assessment, subject to interest and late-filing penalties.

What Canadian Funding Partners does

Canadian Funding Partners helps businesses identify funding opportunities and coordinate applications with specialist partner firms. Where a file requires accounting or engineering expertise, the work is handled by appropriately qualified professionals at our partner firms. We assist employers in auditing payroll baselines, calculating recognized internal wage costs including statutory employer payroll taxes under Section 7(4.1°), assembling 6-year documentation binders, and structuring coordinated applications for Services Québec MFOR grants.