unit 4: Earnings and Deductions Flashcards
most Canadian’s get their income from what?
from working job where they perform certain tasks in exchange for a wage
what are a number fo ways compensation can take from
- hourly
- annual salaries
- non-wage benefits (such as health coverage or pensions)
what are the 12 most common types of pay
- Regular pay (hourly or annual salary)
- Overtime pay
- Shift premiums
- commission
- Bonus
- Retroactive
- Sick Pay
- Vacation Pay
- Statutory holiday pay
- pay in lieu of notice
- severance payments
- Death benefits
define regular pay
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
Overtime pay
hours worked beyond the legislative requirements (after 44 hours)
shift premimums
additional amounts paid to employees for working extra/odd ours such as midnight shifts
commission
typically a percentage of the goods sold by the employee
bonus
lump sum amounts paid to employees in addition to their regular pay
Retroactive earnings
paid for amounts earned in earlier periods, such as giving a rise with a past date attached to it
Sick Pay
not a legislative requirement
amounts paid to employees for time off due to illness
what is another option for sick pay
wage loss replacement
where the employer and / or employee pay premiums to fund time off for illness. (usually short term and long term disability)
Vacation pay
legislative requirement
- earned on dollar one
- 4% of earnings
not all employees are entitled to coverage for vacation under ESA (ie Public Accountants)
Statutory Holiday Pay
9 public holidays
statutory requirement
Pay in leiu of notice
upon termination of employee if the proper period of notice is not given as per legislation
Death benefits
amounts paid upon the death of an employee to a beneficiary or estate of the employee
what are Allowance and Expense Reimbursements
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
What are allowances and are they taxable
they are cash in hand of the employee
- therefore considered earnings
- reported on t4
what is a car allowance
payment that employee receives from their employer for using their own vehicle to perform duties of their job
what can car allowance be based on?
- flat amount - usually taxable
2. or a reasonable per km rate - not considered taxable
what is the reasonable km rate
$0.54 for the first 5000 km’s and $0.48/ km for additional kms
what is clothing allowance
amounts paid to employees if required to purchase uniforms or for upkeep/replacement costs
when is a clothing allowance taxable
if the clothing is not protective or if it is deemed to be unreasonable
what is a meal allowance/ reimbursement
amounts paid to employees who may incur costs for meals
How are meal allowances paid
can be paid based on
- overtime hours
- flat amount per day when employee travels
- reimbursement if the employee buys a meal when on company business
when is a meal allowance taxable
depends on the reasonabiliy of the amount, the frequency of the overtime worked and
expense claimed
what are some other types of allowances and expenses often paid by companies
- moving
- parking
- travel
- tools
- tuition
what is an expense reimbursement
simply repaying the employee for an expense they incurred
- must have receipts
is an expense taxable
no, does not show up on a T4
What are benefits
amounts paid on behalf of an employee by an employer
what are some most commons benefits paid by an employer
group benefits (health and dental or Life Insurance)
When are benefits taxable
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
what is another way to refer to benefits
non-cash beneftis - non cash enters the employees hand
What are staturtory deductions
deductions required by legislation (CPP, EI IT)
What is the order of deductions
- CPP
- EI
- Federal and Provincial Income tax
- Legal deductions (ie garnishment)
- Company compulsory deductions (ie union dues)
- Voluntary deductions (ie. employee’s request canada savings bonds or charitable donations)
