Final Flashcards
Objective of Payroll
To pay employees accurately, on time,
and in compliance with legislative
requirements.
Compliance
is the observance of official requirements (the rules)
Legislation
refers to laws enacted by a legislative body.
In Canada there are many legislative sources that payroll administrators must comply with at two separate levels: the federal and provincial governments.
Contract of Service
an arrangement whereby an individual (the employee) agrees to work on a full-time or part-time basis for an employer for a specified or indeterminate period of time.
Contract for Service
is a business relationship whereby one party agrees to perform certain specific work stipulated in the contract for another party.
A person who carries out a contact for service may be considered a contract worker, a self-employed person or an independent contractor.
If you compensate a worker for services performed you may be an employer based on SEVEN tests:
- Amount of control over a worker’s actions.
- Who provides the necessary tools.
- Option to hire assistants or to sub-contract work
- Degree of personal financial risk
- If the worker has responsibility for investment
- If there is a chance of profit or risk of loss to worker.
- The amount of integration of the worker into the organization.
Employment Standards typically cover:
Hours of regular work. Overtime rules. Minimum wages. Pregnancy, maternal, paternal and other Leaves. Statement earnings and deductions. Minimum age. Statutory Holidays Successor employers. Vacation pay or entitlement. Termination.
Overtime
Under the Canada Labour Code:
hours worked over a “standard” eight hours per day or forty hours per week should be paid at a rate of 1.5 times the normal per hour rate of pay.
Overtime
Under the Ontario Employment Standards Act:
hours worked exceeding forty-four hours in any week. The amount of pay is the same as under federal legislation at 1.5 times the regular rate of pay.
Vacation Pay
An employment entitlement in Canada is the earning of vacation pay.
It can be paid each pay cycle in addition to regular earnings, or
Accrued to be paid when the employee takes vacation/time off from the job.
Canada Labour Code the rate is:
4% of the wages for the first five years of employment
6% for six or more consecutive years
Ontario Employment Standards
4% of wages only
Employment Leaves – Examples:
Pregnancy/Maternity Leave Parental Leave Compassionate Leave Bereavement Leave Sick Leave Family Medical Leave Organ Donor Personal Emergency Reservist Leave (See pages 23 & 24 for details)
5 Types of Deductions from Pay
Statutory deductions
Deductions authorized by a court order
Amounts defined under a collective bargaining agreement
A recovery
Specific amounts authorized by an employee in writing
Statutory deductions
required by law such as Canada Pension Plan contributions, Employment Insurance premiums, and income taxes.
Statutory deductions
Deductions authorized by a court order
such as for family support garnishment of wages.
Amounts defined under a collective bargaining agreement
union dues or assessments.
A recovery
from previously overpaid wages or salary
Specific amounts authorized by an employee in writing
These may be for amounts as for group insurance premiums, charitable contributions or savings bonds.
Labour Standards – Employment Standards
The common information that must appear on a paystub is:
employee name / employee number
pay period dates
rate of pay and hours of work at each rate
gross earnings
itemized deductions – with enough detail so they can be identified
net pay / amount received
Types of Earnings
Salary Hourly - Regular rate - Shift premium Overtime Vacation pay Gratuities and Tips Statutory holiday Piece rate Bonuses Commissions Severance Pay, Pay in Lieu Retiring Allowances
Allowances
Amounts paid to an employee to compensate them for the use of their assets.
Reimbursements
Where the employee personally pays on behalf of the employer and then is paid back by the employer at a later date
Benefits
Benefits are payments made by the employer that is for the personal benefit of the employee.
Canada Pension Plan
Contributions from payroll withholdings for employees:
Over the age of 18
Under the age of 70
Not receiving disability benefits under the Canada Pension Plan or Quebec Pension Plan
Employers match employee contributions 1:1
Canada Pension Plan contribution
Gross Earnings Less: non-taxable allowances Less: amounts paid on termination Plus: taxable benefits = Pensionable Earnings Less: pay cycle exemption = Contributory Earnings X 4.95% = Canada Pension Plan contribution
Employment Insurance Premiums
Contributions are based on Insurable Earnings calculated as:
Gross Earnings
Less:
Non-taxable allowances
Non-cash benefits
Earnings related to termination of employments
= Insurable Earnings
Premium is Insurable Earnings x 1.88% to an annual maximum of $930.60
Employers pay 1.4 times the premium the employee pays
Taxable Income
Gross taxable income is calculated as:
Gross earnings
Less non-taxable allowances
Plus taxable benefits
Net taxable income is:
Gross taxable income less:
Employee deductions for Registered Pension Plan
Employee deductions for RRSP contributions
Union dues withheld
Other CRA approved deductions
Health Taxes - Ontario
Combination of Employer and Employee Tax:
Ontario funds its health care using two methods
there is an employer tax, the Employer Health Tax (EHT) and there is also an employee tax, the Ontario Health Premium (OHIP)
Ontario Employer Health Tax (EHT)
Most employers are exempt for the first $450,000 of payroll
The tax rate of 1.95% of payroll.
If an employer has payroll less than $600,000 than an annual return and payment is required by March 15th of the year following.
If the employer’s payroll is in excess of $600,000 then monthly instalments need to be made
Calculation of Commissions
The method an organization uses to calculate commission payments is usually specified in either an employment contract or a collective agreement
There are 3 general methods of calculating Commissions:
Straight Percentage of Sales
Fixed Amount per Sale
Multiple Rates per Target Level
Straight Percentage of Sales
Commission = sales x percentage rate
Fixed Amount per Sale
Commission = Fixed dollar amount x number of products sold
Multiple Rates per Target Level
Commission = Zero to first target x first percentage rate + amount in excess of first target to secondtargetx second percentage rate + amount in excess of second target x third percentage rate
Payroll Remittances
Quarterly
Monthly
Accelerated 1
Accelerated 2
Quarterly
Pay Cycle January 1 to March 31 April 1 to June 30 July 31 to September 30 October 1 to December 31
Due Date April 15 July 15 October 15 January 15
Monthly
Pay Cycle
1st to end of month
Due Date
15th of month following
Accelerated 1
Pay Cycle
1st to 15th of month
16th to end of month
Due Date
25th of the month
10th of the month following
Accelerated 2
Pay Cycle 1st to 7th of month 8th to 14th of month 15th to 21st of month 22nd to end of month
Due Date
3rd business day following end of period date
Interruption of Earnings
When an employee is expected to have 7 consecutive calendar days without either work or insurable earnings.
Note: vacation time taken is insurable and cannot be used during this time
Temporary Layoff vs Termination
A layoff is considered temporary if the employee is expected to be recalled within 13 weeks of the date last worked.
There does not need to be a period of notice or pay in lieu
If the employee who is laid off and is expected not to recalled within 13 weeks is deemed to be terminated.
Termination Checklist
A temporary layoff requires only a few steps but a checklist is suggested when there is a termination to ensure nothing is missed.
Record of Employment
Used by Service Canada for Employment Insurance claims to determine:
Whether or not a claimant is entitled to receive benefits.
The number of weeks that the claimant is entitled for benefits.
The dollar value of benefits per week that the claimant is entitled to receive.
Manually completed paper Records of Employment
must be completed in triplicate with the original mailed or delivered to the employee, the second copy mailed to Service Canada and one copy kept on file by the employer. They must be completed within five calendar days of:
The first day of the interruption of earnings, or
The first day the employer is aware of the interruption of earnings.
Records of Employment may also be filed electronically
and in this situation the employer must file within five calendar days of the end of the normal pay cycle in which the interruption of earnings takes place. The employee does not need to receive a copy of the Record of Employment
Record of Employment (2)
Be sure you can complete an ROE
Special attention needs to be paid to the following fields:
Block 15A – Total insurable hours worked in the last year plus one pay cycle, or since the last Record of Employment was issued.
Block 15B – Total insurable earnings in the last six months plus one pay cycle, or since the last Record of Employment was issued.
Canada Revenue Agency
A T4 information slip for each person employed in a calendar year must be completed and submitted to the Canada Revenue Agency by the last day of February following.
A copy of the T4 slip must be given to or mailed to the employee.
A copy of the T4 slip must be kept on file by the employer.
*Be able to fill out a T4 slip from information given
Year End Checklist
Give examples for:
What needs to be done in the current year,
What needs to be done before the end of year,
What needs to be done in the new year.
YEAR-END CHECKLIST
TO BE COMPLETED AT END OF OLD YEAR
- Ensure taxable company car benefits are updated prior to final pay processing
- Ensure all expenses and reimbursements are paid by final pay processing
- Ensure all manual cheques are recorded
YEAR-END CHECKLIST
TO BE COMPLETED AT BEGINNING OF NEW YEAR
- Have all required forms on hand
- Ensure all remittances have been reconciled to online account information/statements from each agency and government department
- Complete T4 slips and summary
- Check due date for all remittances – ensure you have enough preparation time
- YOU CANNOT BE LATE ON REMITTANCES – CHECK AGAIN
YEAR-END CHECKLIST
PREPARE FOR NEW YEAR
- Make sure all programs and tables are updated with new rates
- Check carry forward and any outstanding amount owed to employees
- Communicate to employees – impact of changes to tax rates, exemptions or other information
