Canada Payroll Basics - Heart of Oregon Payroll Chapter

The Heart of Oregon
Payroll Conference
Oct 2010
Canadian Payroll . . .not
as “alien” as you may
think.
Presented by
Natasha Smyth BSc (Agr), CPM
The Heart of Oregon
Payroll Conference
Oct 2010
CANADA
10 PROVINCES
3 TERRITORIES
(over 185 tax jurisdictions)
The Heart of Oregon
Payroll Conference
Oct 2010
BRITISH COLUMBIA
ALBERTA
SASKATCHEWAN
MANITOBA
ONTARIO
QUÉBEC
NEW BRUNSWICK
NOVA SCOTIA
P.E.I.
NEWFOUNDLAND and
LABRADOR
YUKON
N.W.T.
NUNAVUT
The Heart of Oregon
Payroll Conference
Oct 2010
Canadian Government Agencies
 Canada Revenue Agency (CRA)
 The Ministere du Revenu du Québec (MRQ)
 Service Canada
 Statistics Canada
 Canada Labour Code
 Provincial and territorial employment standards
 Workers’ Compensation Boards
The Heart of Oregon
Payroll Conference
Oct 2010
Additional Taxing Considerations
 Employer Education taxes - MB,NL,QC
 Employer Health Taxes - MB,NL,ON,QC
 Employer Training Tax – QC
 Employer Taxes - NT/Nunavut
 Employee Medical Premiums - BC
The Heart of Oregon
Payroll Conference
Oct 2010
Employment Standards
 Minimum age
 Minimum wage
 Hours of work
 Leave information
 Overtime
 Records retention
The Heart of Oregon
Payroll Conference
Oct 2010
Employment Standards Cont.
 Statutory holidays
 Vacation time and pay
 Terminations
 Statement of wages
 Timing of payments
 Pay advice format and content
The Heart of Oregon
Payroll Conference
Oct 2010
Setting Up An Employee
Required Information
Name and address
Social insurance number
Regular hours of work
Birth date
Date of hire/start date
Wage rate or salary
Federal TD1 Form
Provincial TD1 Form
Work location
Benefits information
The Heart of Oregon
Payroll Conference
Oct 2010
3 Types of Deductions
 Statutory
 Mandatory
 Voluntary
The Heart of Oregon
Payroll Conference
Oct 2010
Statutory Deductions

Canada Pension Plan (CPP)

Employment Insurance (EI + Quebec Parental
Insurance Plan in QC)

Federal and Provincial Income Taxes
The Heart of Oregon
Payroll Conference
Oct 2010
Mandatory Deductions
 Legal (Garnishees, Family Support, Income Taxes)
 Company compulsory – ie Benefit Plan Contributions
 Union contract
The Heart of Oregon
Payroll Conference
Oct 2010
Voluntary Deductions
 Canada Savings Bonds
 Charitable Donations
 Registered Retirement Savings Plans
 Employee Loan Repayments
 Voluntary Group Life
 Employee Share Purchase Plans
 Computer Purchase Plans
The Heart of Oregon
Payroll Conference
Oct 2010
Calculating Canada Pension Plan Contributions
(CPP/QPP)
FOR
2010
Year’s Maximum Pensionable Earnings
$ 47,200.00
Year’s Basic Exemption (same for everyone)
$ 3,500.00
Contributory Earnings
$ 43,700.00
C/QPP Rate
4.95%
C/QPP Year’s Maximum EmployEE Contribution
$
2,163.15
C/QPP Year’s Maximum EmployER Contribution
$
2,163.15
(EmployER portion the same at 4.95%)
The Heart of Oregon
Payroll Conference
Oct 2010
C/QPP Basic Exemption
Pay Period Type
Exemption
Monthly
$ 291.66
Semi-monthly
$ 145.83
Biweekly (26)
$ 134.61
Biweekly (27)
$ 129.62
Weekly (52)
$
67.30
Weekly (53)
$
66.03
(annual exemption/ # pay periods)
The Heart of Oregon
Payroll Conference
Oct 2010
CPP Contributions
(applies to everyone outside QC)
Contributions must be deducted if an employee:
 Has pensionable earnings
 Has reached age 18 and is under age 70.
 Is not receiving disability benefits from the
CPP/QPP plan
The Heart of Oregon
Payroll Conference
Oct 2010
QPP Contributions
(applies to everyone in QC)
Contributions must be deducted if an employee:
 Has pensionable earnings
 Has reached age 18 (no age cap)
 Is not receiving disability benefits or pension from
the CPP/QPP plan
The Heart of Oregon
Payroll Conference
Oct 2010
Calculating C/QPP Contributions
C/QPP contributions are pro-rated:
 In the year an employee turns 18
 In the year an employee turns 70 (CPP only)
 In the year an employee dies
The Heart of Oregon
Payroll Conference
Oct 2010
Pro-Ration Example – C/QPP
Employee dies in February 2010
2010 contribution
$2,163.15
Number of eligible months
2/12ths of $2,163.15 =
$ 360.53
2
The Heart of Oregon
Payroll Conference
Oct 2010
Employment Insurance(EI)
Quebec EI & QPIP
FOR 2010
Year’s Max Insurable Earnings
Year’s Max EmployEE
Contributions
EI/QPIP Rate
Employer rate EI 1.4 x
Employee Rate
Employer rate – QPIP
Year’s Max EmployER
Contributions
FEDERAL EI
QUEBEC EI
QPIP
$ 43,200.00
$43,200.00
$62,500.00
747.36
587.52
316.25
1.73%
1.36%
0.506%
2.422%
1.904%
-
-
-
0.708%
$ 1,046.30**
$822.53 **
$442.50
$
Note: Employees and Self-employed subject to QPIP
** unless a reduced premium rate applies
The Heart of Oregon
Payroll Conference
Oct 2010
Employment Insurance Premium Reduction
 Employer premium rate of 1.4 x employee contribution can
be reduced if there is a short term disability program in
place that meets certain criteria – including sharing
benefit reduction savings with employee.
 Will require a second business number to report those
employees on premium reduction plan.
 Plan no longer needs to be approved annually by HRSDC
The Heart of Oregon
Payroll Conference
Oct 2010
Quebec Parental Insurance Plan (QPIP)
• provides temporary financial maternity, paternity, parental,
and adoption benefits to eligible Québec residents who
take time off work and have an interruption of earnings.
• For Québec residents only, QPIP coverage only applies to
the above benefits rather that EI. EI continues to cover
other benefits such as regular, sickness and compassionate
care.
The Heart of Oregon
Payroll Conference
Oct 2010
Calculating Employment Insurance for Record
of Employment Purposes
 Québec has assumed weekly numbers can be obtained
from ROE for QPIP program
 Earnings that are not subject to EI and therefore not
reported on the ROE are reported on a separate form
The Heart of Oregon
Payroll Conference
Oct 2010
Calculating Employment Insurance for Record
of Employment Purposes
INSURABLE EARNINGS
 Non Cash taxable benefits are not Insurable
 Retirement Allowances are not Insurable
 Self employment – and related parties are not insurable
The Heart of Oregon
Payroll Conference
Oct 2010
Calculating Employment Insurance for
Record of Employment Purposes
INSURABLE HOURS
 Hours worked and paid
 Deemed hours
 Paid leave hours
The Heart of Oregon
Payroll Conference
Oct 2010
Income Tax Calculations
 Table method
 Manual method
 Formula method
 Tables on Diskette (TOD) –except QC
 Payroll Deductions Online Calculator (PDOC)
 WinRAS –
QC only
-except QC
The Heart of Oregon
Payroll Conference
Oct 2010
Special Taxing Considerations

Bonus method






Bonus pay
Pay in lieu of notice
Vacation pay (no time taken)
Retroactive pay method
 A variation of the bonus method
Lump sum Tax rates
 Retiring allowance
 Severance
Commission Method
 Depends on commissions paid with or without
expenses incurred
The Heart of Oregon
Payroll Conference
Oct 2010
Net Taxable Income is:
Gross Taxable Income
(gross taxable
earnings + total taxable benefits)
-minus
Registered pension plan contributions
Family Support payments
Employee RRSP contributions
Exemptions allowed by CRA, MRQ (Fed and Prov)
Union dues - except Quebec
The Heart of Oregon
Payroll Conference
Oct 2010
Sample Income Tax Rates
Federal – effective Jan 2010
FROM
TO
RATE
$0
$ 40,970.00
15%
$ 40,970.01
$ 81,941.00
22%
$ 81,941.01
$ 127,021.00
26%
$ 127,021.01
and over
29%
Provincial BC -- effective Jan 2010
FROM
TO
RATE
$0
$ 35,859.00
5.06%
$ 35,859.01
$ 71,719.00
7.7%
$ 71,719.01
$ 82,342.00
10.5%
$ 82,342.01
$ 99,987.00
12.29%
$ 99,987.01
and over
14.7%
The Heart of Oregon
Payroll Conference
Oct 2010
Net Pay Determination
Gross Earnings
minus
Statutory deductions
minus
Non-statutory deductions
equals
NET PAY
The Heart of Oregon
Payroll Conference
Oct 2010
Sample Payroll Calculation
For one employee bi weekly in Ontario working
40 hrs/week at $12.50/hr
Gross pay (80 hours)
CPP @4.95%
EI @1.73%
Federal taxes
Provincial taxes
Net pay
$1000.00
(42.84)*
(17.30)
(75.02)
(41.63)
$823.21
*CPP calc.= ($1000.00-134.61 ) x 4.95%
The Heart of Oregon
Payroll Conference
Oct 2010
Sample Payroll Calculation
For one employee weekly in Ontario working
40 hrs/week at $25/hr
Employer portion CPP $42.84
Employer portion of EI $24.22
Total remittance to the CRA is $176.79
(fed&prov tax, EE & ER EI, EE & ER CPP)
Other employer costs:
Vacation accrual ie 4% =40.00
WCB ie. assume rate of 2% = $20.00
The Heart of Oregon
Payroll Conference
Oct 2010
CRA & MRQ Remittance Requirements
Weekly:
1st to 7th - due three business days after the 7th
8th to 14th - due three business days after the 14th
15th to 22nd - due three business days after the 22nd
22nd to end - due three business days after the last day of the month
Semi-monthly:
1st to 15th
16th to last day
- due on 25th of month
- due on 10th of month following
Monthly
- due on 15th of month following
Quarterly
- due on 15th of month following the end of the
Quarter
Québec CAUTION – if due date falls on a non-working day, due date is
advanced
The Heart of Oregon
Payroll Conference
Oct 2010
Employees vs. Self-Employed Status
Criteria used to define status:
 Subordination in the performance of work
 Financial or economic criteria
 Ownership of tools
 Integration of tasks carried out by worker
 Specific result of the work
 Attitude of the parties wrt the relationship
The Heart of Oregon
Payroll Conference
Oct 2010
Employees vs. Self-Employed Status
MRQ Publications:
IN-301-V-Employee or Self-Employed Person
CRA Publications:
RC4110 - Employee or Self Employed?
CPT1 - Application for ruling
The Heart of Oregon
Payroll Conference
Oct 2010
Year End Processes
 Process any adjustments -Taxable benefits,
pension adjustments, manual cheques
 Update employee records-address, tax
exemptions (if any changes)
 Update benefit rates
 Update WCB rate
 If you have a reduced EI rate – watch for notice
from HRSDC
 Watch for CRA/MRQ remittance frequency
change (late Nov./early Dec.)
The Heart of Oregon
Payroll Conference
Oct 2010
Year End Processes cont.
 Reconcile your tax (CRA/MRQ) account
 Reconcile your WCB account
 File WCB annual return – due date varies
 File provincial tax authority filings
 File the following by Feb 28th:
 RL 1 slip for employees
 RLZ-1.S-V Summary for MRQ
 T4 slip for employees
 T4 Summary for CRA
The Heart of Oregon
Payroll Conference
Oct 2010
Privacy Legislation
 the Privacy Act- This Act imposes obligations
on some 150 federal government
departments and agencies to respect privacy
rights by limiting the collection, use and
disclosure of personal information
 the Personal Information Protection and
Electronic Documents Act (PIPEDA)-sets out
ground rules for how private sector
organizations may collect, use or disclose
personal information in the course of
commercial activities.
The Heart of Oregon
Payroll Conference
Oct 2010
Some Taxable Benefits
 Gifts and awards - effective January 2010, the
$500 will be an exemption rather than a threshold.
Any amounts exceeding $500 are to be reported as
a taxable benefit.
 Car allowance – any amounts paid to an
employee is taxable benefit unless it is based on a
reasonable per km allowance.
 Automobile Benefits Online Calculator For employees’ who have personal use of an
automobile owned or leased by the business, the
CRA provides an online tool to calculate the
automobile benefit amount that should be prorated to
the employee's pay periods.
(CRA Guide T4130)
The Heart of Oregon
Payroll Conference
Oct 2010
Some Useful Web Sites
Canada Revenue Agency – www.cra.gc.ca
(Business registration, Rates, GST/HST)
Québec– www.revenu.gouv.qc.ca/eng/ministere/index.asp
HRSDC (EI) – www.hrsdc.gc.ca
Service Canada – www.servicecanada.gc.ca
Privacy Commissioner – www.privcom.gc.ca
WCB – www.awcbc.org/en/linkstoworkerscompensationboardscommissions.asp
(links to all Provinces)
Canadian Payroll Association (CPA) – www.payroll.ca
The Heart of Oregon
Payroll Conference
Oct 2010
Some Terminology
Payroll Account Number – the employer’s “account number” with the CRA.
Used to remit statutory deductions, tax forms and ROE
US equivalent =Federal Employer Identification Number
T4 – Reports to the CRA and the employee all relevant income and deduction
information for the taxation year.
US equivalent = W2 Wage and Tax Statement
RL-1 – Reports to the MRQ and the employee all relevant income and deduction
information for the taxation year.
T4A – Reports to the CRA for other Taxable Income – (including Independent
Contractors)
TD1 and TP-1015.3-V – federal and provincial forms for employees to claim
credit amounts and reduce tax at source
US equivalent = W4
P.I.E.R report – year end variances
The Heart of Oregon
Payroll Conference
Oct 2010
Some Terminology cont.
PD7A / PD7A-RB – remittance forms for CRA submitted with payroll remittances.
PD7A is used by regular remitters, PD&A-RB is used by accelerated remitters.
US equivalent = Form 8109 – Federal Tax Deposit Coupon
ROE – Record of employment: an HRSDC form completed by the employer when an
employee has an interruption of earnings. Used by employee to claim
employment insurance or Quebec Parental Insurance Plan benefits.
US equivalent = none
RRSP – Registered retirement savings plan: a plan that an employee contributes to,
to save money for retirement. Contributions and interest earned are tax exempt
until withdrawn. Some employers provide a match. Contributions are subject to
an annual maximum.
US equivalent = 401(k) plan
PCP – Payroll Compliance Practitioner
CPM – Certified Payroll Manager
The Heart of Oregon
Payroll Conference
Oct 2010
Canadian Payroll
Presented by
Natasha Smyth, CPM
Vice President
OnPayroll.ca Corp
1-800-955-0806 x227
nsmyth@onpayroll.ca
North Vancouver, BC
CANADA
The Heart of Oregon
Payroll Conference
Oct 2010
Canadian Payroll
BONUS MATERIAL
The Heart of Oregon
Payroll Conference
Oct 2010
Quebec Payrolls – some differences
 Pay Equity Act– employers with employees in
Québec may be required to through the exercise to prove
pay equity.
 QPP
 when an employee turns 70 or starts to receive QPP,
QPP contributions will continue to be made.
 allows for employees to continue making
contributions on what they would have earned rather
than what they normally earn through progressive
retirement plans.
The Heart of Oregon
Payroll Conference
Oct 2010
Quebec Payrolls – some differences cont.
 Relocation Allowance
 CRA allows a tax free non-accountable allowance up to
$650.
 MRQ allows a tax free non-accountable allowance up to 2
weeks salary.
 Bonuses and Retroactive payments.
 CRA says that where an employee receives no more than
$5,000 for the entire year, an employer may calculate tax at
the rate of 15% on the amount outside of Québec and 10%
inside of Québec.
 MRQ says that if the amount does not exceed $11,950,
then the Provincial rate would be 8%.
The Heart of Oregon
Payroll Conference
Oct 2010
Quebec Payrolls – some differences cont.
 Lump Sum Payments – withholding rates
 5% on amounts up to $5,000 (vs. 10%)
 10% on amounts from $5,000 to $15,000 (vs. 20%)
 15% on amounts over $15,000 (vs.30% )
The Heart of Oregon
Payroll Conference
Oct 2010
Quebec Payrolls – some differences cont.
Wages in lieu of notice are subject to
CPP (CRA)
YES
X
QPP (MRQ)
X
EI (CRA)
X
QPIP (MRQ)
X
FEDERAL TAX (BONUS METHOD) (CRA)
X
PROVINCIAL TAX (LUMP SUM TAX RATE) (MRQ)
X
QHSF
CNT
X
X
WSDRF
X
VACATION PAY CALCULATION
X
Wages in lieu of notice are reported on a
Record of Employment
X
T4
RL-1
NO
Box 14
Box 0/code RJ
The Heart of Oregon
Payroll Conference
Oct 2010
QPIP – Some Rules
 Applies to salaried worker living in Québec when benefit
period begins
 Applies to self employed – must be living in Québec when
benefit period begins AND living there on December 31st of
previous year.
 Wages or regular time worked or spent on business
activities (self-employed) must have been reduced by at
least 40%
 Insurable earnings must be at least $2,000 regardless of the
number of hours worked.
The Heart of Oregon
Payroll Conference
Oct 2010
QPIP – Some Rules Cont.
 EI requires a minimum number of hours worked, QPIP
doesn’t
 Both Ministѐre de l’Emploi et de la Solidarité Sociale
(MESS) and Revenu Québec are responsible for
administration
 Generally the status of a worker for QPIP purposes the
same as those for QPP (Québec Pension Plan) purposes.
 QPIP paid on insurable employment, broadly defined as all
employment in Québec including those employees not
required to report to work at the employer’s place of
business, but whose salary or wages are paid from the
employer’s business located in Québec.
The Heart of Oregon
Payroll Conference
Oct 2010
QPIP – Some Rules Cont.
 Employees are exempt from paying premiums where their
earnings are less than $2,000 but employers MUST deduct
from first dollar earned.
 Employers have to start from zero even if new employee
maxed out at a previous employer that year.
 Shareholders regardless of percentage of ownership.
 Directors fees subject to QPIP regardless of residency and
whether or not in receipt of a salary.
The Heart of Oregon
Payroll Conference
Oct 2010
Some additional provincial taxes
that apply to payrolls in Quebec
Quebec Health Services Fund (QHSF)
 Employer contribution rate is from 2.7% to 4.26%
based on the employer’s TOTAL WORLDWIDE
PAYROLL. Flat 4.26% with total annual worldwide
payroll exceeds $5,000,000.
The Heart of Oregon
Payroll Conference
Oct 2010
Quebec Labour Standards
Contribution (CNT Levy)
 80 cents per $1,000 on total wages
paid for all employees subject to a
maximum of $62,000 per
employee. Remitted by last day of
February in following year.
The Heart of Oregon
Payroll Conference
Oct 2010
Workforce Skills Development
and Recognition Fund
(WSDRF)
 Employers whose total Québec
Payroll exceeds $1,000,000 are
subject to a special training tax 1% of their total Québec payroll for
the year. Contribution amount is
reduced by eligible training
expenses as defined by regulation.
Remitted by last day of February in
following year.