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Chapter 5
Payroll Fundamentals 1
| Term | Definition |
|---|---|
| Statutory Deductions | first required deductions: C/QPP, EI, QPIP, Income Taxes, Payroll Taxes |
| Non-Statutory Deductions | in order are deductions following statutory deductions 1. Legal deductions 2. Union deductions 3. Company-compulsory deductions 4. Voluntary deductions |
| Held "in trust" | money held is not used by employer for general operating expenses. |
| 1. Legal deductions (non-statutory deduction) | required by law to be garnished/held from employment income. |
| Types of Garnishments | 1. Requirement to pay 2. Third party demand 3. Family support and maintenance order 4. Garnishment order |
| Requirement to Pay notice | directs the employer to deduct/garnish outstanding amounts for unpaid statutory deductions from any wages or payments owed to the employee. |
| Income Tax Act | CRA may garnish wages from those who failed to pay income taxes or other amounts payable under EI Act or CPP Act. |
| Quebec Taxation Act | RQ may garnish wages from those who failed to pay income taxes or other amounts payable under Act respecting the QPP. |
| Responsibilities to the Requirement to pay | 1. Employer fails to comply, is liable for the amount owed 2. Employer must advise CRA/RQ of no wages owed for a given period 3. Employer must advise CRA/RQ of employment termination |
| Third Party Demand | requires an employer to deduct a percentage of present and future wages to settle any over paid EI benefits. |
| Canada Employment insurance Commission (CEIC) | a branch of Service Canada that may request CRA to garnish wages under a Third Party Demand. |
| Family Support Maintenance order | require deductions and remittance of child support and maintenance payments on a continuing basis. |
| Third party garnishment order | creditor wins a judgment in small claims court, to garnish wages to satisfy the debt to the creditor. |
| Set of established procedures | allows legal orders to be organized and ensure all aspects are dealt with in a consistent and compliant manner. |
| 2. Union Deductions (non-statutory deduction) | for all jurisdictions (except QC) it is not included in income, subject to income taxes (subtract from GPTI to determine net taxable income). QC doesn't deduct from their provincial taxes. |
| Union Collective agreement requires | 1. Union dues deducted 2. Initiation fees deducted on a one-time bases, beginning of employment 3. Special assessment deducted for unique projects (e.g. Hall) |
| 3. Company-Compulsory deductions (non-statutory deduction) | mandatory deductions through an employer's policy and employment conditions. |
| Company-Compulsory deduction types | 1. Provincial health care plan 2. Registered pension plan (RPP) 3. Group Registered Retirement Savings Plan (RRSP) 4. Group benefit plan |
| Provincial health care plan | BC - non-cash taxable benefit. Included in income and subject to deductions (except EI/QPIP). |
| RPP | not included in income, subject to income taxes (Subtract from GPTI to determine net taxable income). |
| Retirement plan types | 1. Defined contribution plan 2. Defined Benefit Pension plan 3. Group Registered Retirement Savings plan (RRSP) 4. Pooled Registered Pension plan (PRPP) 5. Voluntary Retirement Savings plan (VRSP) |
| Defined contribution plan | contributions made are defined by the employee, employer or both. Based on: 1. Flat dollar contribution or 2. Percentage of pensionable earnings. |
| Defined Benefit Pension plan | amount one will receive is defined, but cost to maintain is uncertain. |
| Defined Benefit pension plan (continued) | 3 types to define the benefit plan: 1. Flat benefit (dollar amt. for each mon./yr. of service) 2. Career avg. (avg. earnings over entire period of service) 3. Final or best avg. (avg. final 5 yrs. service or 3-5 yrs. of highest earnings. |
| Group (RRSP) | not included in income, subject to income taxes (Subtract from GPTI to determine net taxable income). |
| Group RRSP Contribution | limit is voluntary; 18% of previous yr.'s earnings to a max amount set by CRA. |
| PRPP | provide retirement income for employees or self-employed individuals. Set up by a Canadian institution and managed by an administrator. |
| PRPP (continued) | contribution max amount in a tax yr. is determined by the current RRSP contribution limit. Subject to income taxes. |
| VRSP (QC) | employers are mandated to offer this plan if: 1. Have the required number of employees 18 y/o and over, with at least one yr. of uninterrupted service 2. No RRSP or TFSA is offered for which deductions can be made |
| VRSP (QC, continued) | employers automatically sign-up eligible employees, but employees can make a request to opt-out. stop or suspend the plan. |
| Group benefit plans | can be paid by employer, employee or both. Types may be: 1. Group life ins. and AD & D = Employer (non-cash tax), Employee (Cash tax), subject to retail sales tax 2. Health, dental, vision care = QC Only (non-cash tax, 9% tax) |
| Group benefit plans (continued) | 3. Short/long term disability = Employer (not tax), Employee (non-cash tax) 4. Employee assistance = Employer to 3rd party (non-cash), employee reimburse (cash), subject to sale tax (GST/QST/HST) |
| 4. Voluntary deductions (non-statutory deduction) | doesn't reduce an employee's taxable income. Only add to deductions total when calculating Net Pay. |
| Voluntary deductions (types) | 1. Charitable donations (united way, cancer society, etc.) 2. Voluntary Ins. Coverage (optional life/death ins.), subject to retail sales tax 3. Social Clubs (fitness club) |
Created by:
Moorebaier
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