unit 4: Earnings and Deductions

Question 1

most Canadian’s get their income from what?

Answer 1

from working job where they perform certain tasks in exchange for a wage

Question 2

what are a number fo ways compensation can take from

Answer 2

1. hourly
2. annual salaries
3. non-wage benefits (such as health coverage or pensions)

Question 3

what are the 12 most common types of pay

Answer 3

1. Regular pay (hourly or annual salary)
2. Overtime pay
3. Shift premiums
4. commission
5. Bonus
6. Retroactive
7. Sick Pay
8. Vacation Pay
9. Statutory holiday pay
10. pay in lieu of notice
11. severance payments
12. Death benefits

Question 4

define regular pay

Answer 4

salary an employee is paid (can be hourly wage or annual salary)
ontario - must be at least monthly
calculate salary per pay, - divide the annual salary by the number of pay periods in the year

Question 5

Overtime pay

Answer 5

hours worked beyond the legislative requirements (after 44 hours)

Question 6

shift premimums

Answer 6

additional amounts paid to employees for working extra/odd ours such as midnight shifts

Question 7

commission

Answer 7

typically a percentage of the goods sold by the employee

Question 8

bonus

Answer 8

lump sum amounts paid to employees in addition to their regular pay

Question 9

Retroactive earnings

Answer 9

paid for amounts earned in earlier periods, such as giving a rise with a past date attached to it

Question 10

Sick Pay

Answer 10

not a legislative requirement

amounts paid to employees for time off due to illness

Question 11

what is another option for sick pay

Answer 11

wage loss replacement
where the employer and / or employee pay premiums to fund time off for illness. (usually short term and long term disability)

Question 12

Vacation pay

Answer 12

legislative requirement
- earned on dollar one
- 4% of earnings
not all employees are entitled to coverage for vacation under ESA (ie Public Accountants)

Question 13

Statutory Holiday Pay

Answer 13

9 public holidays

statutory requirement

Question 14

Pay in leiu of notice

Answer 14

upon termination of employee if the proper period of notice is not given as per legislation

Question 15

Death benefits

Answer 15

amounts paid upon the death of an employee to a beneficiary or estate of the employee

Question 16

what are Allowance and Expense Reimbursements

Answer 16

amounts paid to employees for the use of their personal property for business or to cover expenses they may incur while performing the duties of their job

Question 17

What are allowances and are they taxable

Answer 17

they are cash in hand of the employee

• therefore considered earnings
• reported on t4

Question 18

what is a car allowance

Answer 18

payment that employee receives from their employer for using their own vehicle to perform duties of their job

Question 19

what can car allowance be based on?

Answer 19

1. flat amount - usually taxable

2. or a reasonable per km rate - not considered taxable

Question 20

what is the reasonable km rate

Answer 20

$0.54 for the first 5000 km’s and $0.48/ km for additional kms

Question 21

what is clothing allowance

Answer 21

amounts paid to employees if required to purchase uniforms or for upkeep/replacement costs

Question 22

when is a clothing allowance taxable

Answer 22

if the clothing is not protective or if it is deemed to be unreasonable

Question 23

what is a meal allowance/ reimbursement

Answer 23

amounts paid to employees who may incur costs for meals

Question 24

How are meal allowances paid

Answer 24

can be paid based on

1. overtime hours
2. flat amount per day when employee travels
3. reimbursement if the employee buys a meal when on company business

Question 25

when is a meal allowance taxable

Answer 25

depends on the reasonabiliy of the amount, the frequency of the overtime worked and expense claimed

Question 26

what are some other types of allowances and expenses often paid by companies

Answer 26

1. moving 2. parking 3. travel 4. tools 5. tuition

Question 27

what is an expense reimbursement

Answer 27

simply repaying the employee for an expense they incurred | - must have receipts

Question 28

is an expense taxable

Answer 28

no, does not show up on a T4

Question 29

What are benefits

Answer 29

amounts paid on behalf of an employee by an employer

Question 30

what are some most commons benefits paid by an employer

Answer 30

group benefits (health and dental or Life Insurance)

Question 31

When are benefits taxable

Answer 31

typically any form of insurance (life, accidental death or critical illness ) paid by employer on behalf of employee would be considered taxable to the employee - added to T4

Question 32

what is another way to refer to benefits

Answer 32

non-cash beneftis - non cash enters the employees hand

Question 33

What are staturtory deductions

Answer 33

deductions required by legislation (CPP, EI IT)

Question 34

What is the order of deductions

Answer 34

1. CPP 2. EI 3. Federal and Provincial Income tax 4. Legal deductions (ie garnishment) 5. Company compulsory deductions (ie union dues) 6. Voluntary deductions (ie. employee's request canada savings bonds or charitable donations)