Employers must provide detailed pay stubs itemizing pay and deduction amounts. Accounting software does this automatically with each pay. If you use manual cheques, every time net pay changes you should issue a report to each employee.
Posts Tagged ‘Payroll’
Itemize pay and deduction amounts for employees
Tuesday, March 27th, 2012
Don’t get stuck paying both the employer’s and employee’s share of EI and CPP
Thursday, March 22nd, 2012If the CRA determines that a staff member has been improperly treated as a self-employed person, you can be charged both the employer’s and the employee’s share of EI premiums and CPP contributions for the period in question.
Payroll source deductions usually remitted on the 15th of the month
Friday, March 16th, 2012For most small and mid-sized organizations, payroll source deductions must be remitted to the Canada Revenue Agency on the 15th of the month, for the preceding month’s activity. (Larger organizations may need to remit more frequently.)
Employee and employer contributions to the CPP
Tuesday, March 13th, 2012Employees and employers contribute equally to the Canada Pension Plan. In 2011, the rate is 4.95% of earnings over $3,500. Self-employed individuals pay the entire amount – that is, 9.9% of earnings over $3,500.
I got a bonus, and I had to pay a huge chunk of it as tax. What happened?
Wednesday, February 22nd, 2012The bonus becomes part of your total compensation for the year. Let’s say your salary is $36,000 and your employer gives you a $500 bonus. You now need to be taxed as though you’re making $36,500. The bonus calculations need to adjust for the boost in your annual earnings.
Employment Insurance (EI) is a straight percentage of earnings up to an annual maximum. It’s not the culprit, here.
Canada Pension Plan (CPP) is a straight percentage of earnings over $3,500, to an annual maximum. The first $3,500 of earnings is not pensionable. This exempt amount is spread over all of the pays in the year. So, on a salary of $36,000, your weekly gross would be $36,000 ÷ 52 = $692.31. Your weekly non-pensionable earnings would be $3,500 ÷ 52 = $67.31. You pay CPP on only $692.31 – $67.31 = $625.00.
However, if you receive the $500 bonus on a separate cheque, you need to pay CPP on the whole bonus, because you’ve already had the exempt amount on your paycheque. That may make the CPP feel extra expensive.
Tax works in a similar way. In Canada, the first chunk of our income is tax-free: the basic personal exemption (for 2012, $10,822 federally). Thereafter, increasing tax rates apply to different slices of our income. Here are the rates for 2012.
The tax amount on your weekly paycheque is a blended rate: 0% on the first slice, 15% on the next slice, and so on. However, a lump sum such as a bonus must be taxed at the marginal rate: the tax rate that applies to the next dollar of earnings. This can feel very costly, but in fact it’s fair.
To work this out for yourself, you can use the CRA Payroll Deductions Online Calculator, or your can try the manual method, explained in more detail here.
Do I have to pay tax on a bonus?
Wednesday, February 22nd, 2012Emphatically, yes!
Bonuses are compensation and, as such, are taxable. Here’s a link to the Canada Revenue Agency’s Special Payments Chart. It lays out the requirements for source deductions on an array of payments, including bonuses.
Only Staff on Payroll Can Apply for Benefits
Wednesday, February 8th, 2012Only staff on payroll, who contribute to the Employment Insurance plan, are eligible to apply for benefits. Freelancers are not covered.
Employee or Self-Employed? HR story highlights hazards
Monday, February 6th, 2012Staff Post
By Heather Young
From time to time I will share stories from the field – names and details obscured!
One company went through a nerve-wracking time when a former worker – who had been hired on a fee-for-service contract as a freelance consultant – tried to claim EI and insisted to the folks at HRSDC that s/he had been an employee.
The government responded by notifying the company that they were responsible for remitting both the employer and the employee portions of EI and CPP for the duration of the contract. It was up to the company to appeal this decision, and prove that the worker had been properly treated as a freelancer.
To help the organization prepare its appeal, the government provided a lengthy questionnaire, much of it based on concepts you can read about in the CRA publication Employee or Self-employed?, published online.
The company also did some research, including checking the former worker’s social networking activities, where the individual clearly self-identified as a consultant for hire. It’s unclear whether that influenced the happy ending – but I can tell you that in at least one comparable case the defendant’s Facebook page did him in.
After many hours of work and months of waiting, the company finally received the happy news that their appeal was successful.
The CRA ruling made a strong effort to be balanced, stating that “the parties did not share a common intention as to the worker’s employment status” – although the company feels the status was always clear. It outlined all the terms of employment in some detail, noting that the level of “control”, or supervision, of the employee and ownership of tools and equipment were neutral factors – they could have been interpreted to either party’s benefit. The fact that the worker was providing services personally and was not able to subcontract assigned work was deemed consistent with the worker’s contention that s/he was an employee, but the fact that the worker was free to take on other projects for personal profit, and promoted him/herself as a freelance communication consultant suggested to the CRA that s/he was “embarking on a business enterprise on his/her own account.” Weighing all factors, the CRA ruled in the company’s favour: but in reading the written ruling, it looks like it was a close call.
Arts organizations and charities secure all sorts of services on part-time, part-year contracts. It’s worth the effort to research how a particular position should be treated (employee or self-employed?), and to be crystal-clear with the worker both verbally and in a written contract.
T4 & T4A Deadline
Monday, February 6th, 2012It’s a leap year! Your deadline for filing 2011 T4 and T4A slips is Wednesday, February 29, 2012.
53 Week and 27 Bi-Week Pay Years and CPP
Thursday, January 12th, 2012Every few years, employers who pay weekly will have a 53-pay year (instead of 52), and bi-weekly employers will have a 27-pay year (instead of 26). This affects CPP calculations.
Employers Decide Payroll Frequency
Thursday, January 5th, 2012Employers can decide on payroll frequency. Common pay periods are weekly, bi-weekly (26 in a year), semi-monthly (24 in a year) and monthly.
Updated Payroll Tax Tables from CRA
Thursday, December 22nd, 2011The CRA releases updated payroll tax tables on January 1. Updates may be released on July 1, and occasionally on other months.
What is a Taxable Benefit?
Thursday, December 15th, 2011Taxable benefits are items above and beyond payroll that have a value for employees, and that the CRA considers taxable income. Check this page on the CRA website for information about cell phones, parking, transit passes, insurance, gifts and other benefits.