Category Archives for "Payroll"

Are you Planning to Give Gifts to Your Employees this Holiday Season? Do You Know What is Taxable?

By Randall Orser | Business Income Taxes , holiday season , Payroll , Personal Income Tax , Small Business

At this time of year many employers give a Christmas or annual bonus – did you know that this is a taxable benefit if paid in cash or a cash equivalent such as gift cards?

You might think about giving your employees gifts instead of cash bonuses so that both of you will benefit on your Canadian income tax.  Employers can use the total cost of the gift as a tax deduction and employees do not need to declare the cost of the gift as part of their taxable income.

Under CRA rules all gifts to employees are considered to be taxable income except for the following exemptions:

1.   It is non-cash and less than $500 in fair market value per year and only given for the following reasons:

  • A Religious or other special event
  • Birth of a child
  • Wedding
  • Birthday

2.   It is a non-cash long standing service award valued at less than $500, this can be given once every five years.

3.   An Award for an employment related accomplishment.  These are allowed when:

  • It has clearly defined criteria
  • A nomination and evaluation process
  • Limited number of recipients

4.   Employer provided parties or social events where the cost is $100 per person or less.

5.   Meals or other hospitality services at work-related functions such as meetings or training sessions.

6.   Valueless items such as tea/coffee, snacks, t-shirts, hats etc.

There is no limit to the number of gifts an employee can receive in a given year as long as the total value is not more than $500.  Small gifts such as mugs or chocolates etc. are not included in the $500 limit.

If you want to give your employees gifts that are tax deductible for your company, you need to be careful what you give.  Items that can easily be converted into cash such as gift cards or stocks will be considered to be taxable employee benefits as will some performance related awards and bonuses.  Included under this rule are:

  • Gift Cards
  • Rewards that include employer-provided meals or accommodations such as trips
  • Cash or non-cash awards from manufacturers that are given to employers then passed onto employees
  • Points for travel, accommodations or other rewards
  • Gifts given by manufacturers to employees of dealerships

If you want to give Cash Bonuses or near-cash bonuses such as gift cards to your employees, it must be through payroll and must have taxes deducted.

For full list of taxable or non-taxable benefits and allowances visit the link below:
CRA's Benefits and allowances chart

How and When to File a Record of Employment

By Randall Orser | Payroll , Small Business

A Record of Employment (ROE) must be completed by an employer when a worker suffers a break in insurable earnings (from which EI payments are deducted) for seven consecutive days.  Reasons for the break in earnings can include being laid off, dismissal, illness or when the worker resigns.  The ROE must be submitted to Service Canada for the Employment Insurance (EI) program whether or not the worker intends to apply for EI.

There are also special situations when ROEs must be issued.  These can include a change in pay period, (even though the employees are not experiencing an interruption of earnings) or a change in ownership, unless there has been no actual break in employees’ earnings during the change-over, and the new employer agrees to issue a single ROE that covers both periods of employment should it be required in the future. A more comprehensive list of situations when a ROE must be issued can be found on ROE Guide on the Service Canada website.

There are two ways in which an employer can submit a ROE to Service Canada, each of which has it's own filing deadline.

  1. ROE in Paper Form - Part 1 of this must be given to the employee. Part 2 must be sent to Service Canada within 5 calendar days of the first day of the interruption of earnings.  The employer must retain Part 3 as well as the employee's payroll records for six years after the ROE is issued.
  2. ROE Submitted Electronically - the information is transmitted directly to the Service Canada database where it is used to process EI claims.  In this case the ROE must be issued five calendar days after the biweekly period, five calendar days after the end of a monthly pay period, or fifteen days after the first day of the interruption of earnings.

Should the ROE be incorrect, or it needs to be updated the employer can submit the amended ROE either in a paper copy or electronically.

Employers should refer to Service Canada’s website for more information. 

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Are Your Employee CPP/EI Deductions Correct?

By Randall Orser | Payroll

As we’re coming to the end of the year, it’s a good time to check if you’re correctly calculating and deducting for Canada Pension Plan and Employment Insurance. You may think the software, or even Canada Revenue Agency’s Payroll Deductions Online Calculator (PDOC) are doing the correct job, however, that’s not always the case. In most cases, there’s not much of a different, but in some cases, it can be substantial.

Pensionable and insurable earnings review (PIER)

Each year, CRA checks the calculations you made on the T4 slips that you filed with your T4 Summary. CRA does this to make sure the pensionable and insurable earnings you reported agree with the deductions you withheld and remitted.This should be something you’re doing before you do your final remittance for the year in January of the following year. If you have someone preparing your T4s using software, they can do this for you before you file your December remittance in January. The software checks the CPP & EI and then adjusts the amounts and puts them to TAX. The reason to do this before the final remittance before the year is so you don’t end up with a credit balance on your payroll deductions account (this tends to trigger CRA into asking questions).

If you’re doing the T4s yourself then there is a way of checking the CPP & EI amounts.

Checking the amount of CPP you deducted

Step 1 – Prorate the maximum CPP contribution for the year by following these steps:

Stage 1: Deduct the year's basic exemption ($3,500 for 2016) from the year's maximum pensionable earnings ($54,900 for 2016).

Stage 2: Multiply the result of Stage 1 by the number of pensionable months.

Stage 3: Divide the result of Stage 2 by 12 (months).

Stage 4: Multiply the result of Stage 3 by the CPP rate that applies for the year (4.95% for 2016).

To find out about the previous and current exemptions, maximums, and rates, see the CPP contribution rates, maximums and exemptions chart.

Step 2 – Calculate the CPP contribution per pay period using the Manual calculation for CPP, and withhold the amount calculated until one of the following happens:

* the maximum prorated contribution for the year is reached; or

* the last pay period for which deductions are required is completed.

Step 3 – The correct amount of CPP contributions will be the result of Step 1 or Step 2, whichever is the lowest.


Brent turns 18 on June 15, 2016. He receives $1,000 every two weeks ($26,000 a year). This amount is less than the maximum pensionable earnings ($54,900 for 2016) that require CPP contributions.

Prorated maximum contribution for 2016:

($54,900 – 3,500) × 6/12 × 4.95% = $1,272.15
(6/12 represents the number of pensionable months divided by 12).

Brent’s maximum CPP contribution for 2016 is $1,272.15.

Pay period calculation:

January to June 2016

No CPP contributions

July to December 2016

* Pay period: biweekly* Earnings: $1,000

* Brent’s first pay in July is July 3, for the period June 20 to July 3.

Using the calculation in the basic exemption chart, Brent’s CPP contributions for each pay are calculated as follows:

Step 1: Brent’s pensionable earnings = $1,000.00

Step 2: Basic exemption for the period from the basic exemption chart = $134.61

Step 3: Pensionable earnings minus basic exemption = $865.39

Step 4: CPP contribution rate for 2016 = 4.95%

Step 5: CPP contribution per pay period = $42.84

You will have to start deducting $42.84 from each of Brent’s pays, beginning with the one dated July 3 (the month after Brent turns 18). His actual contributions for the year will be $42.84 × 13 (biweekly pay periods) = $556.92.

This does not exceed the prorated maximum contribution of $1,272.15; therefore, the correct amount of CPP has been deducted.

When you fill out Brent’s T4 slip at the end of the year, report $26,000 in box 14, $556.92 in box 16, and $13,000 in box 26. Fill in the rest of his T4 slip in the usual way.

Checking the Amount of EI You Deducted

Checking EI is much easier than CPP as there is no yearly exemptions, though there is a yearly maximum income amount (2017 = $51,300 and $836.19 in total EI). Basically, you take the employee’s income for the year times it by the current EI rate (1.63% to maximum of $836.19) and that’s what should’ve been deducted from the employee.


Bob earned $47,000 in the year, so his total EI contributions should be $766.10. If that matches what you have in your records then you’re good to go, if it’s under you’ll have to take more off of Bob’s next cheque. If it’s more, then just adjust his EI to match that amount and add the difference to his TAX amount. If it’s just a couple of pennies, don’t worry about it.

The annual maximum insurable earnings ($51,300 for 2017) apply to each job the employee holds with different employers (different business numbers). If an employee leaves one employer during the year to start work with another employer, the new employer also has to deduct EI premiums without taking into account what the previous employer paid. This is the case even if the employee has paid the maximum premium amount during the previous employment.

Do You Have an Employee Turning Sixty-five? 

By Randall Orser | Payroll

As more and more people are not retiring early like they used to, you, as an employer, need to think about those employees that are currently turning 65. If the employee is going to continue to work for you then there are a couple of things you and they need to discuss. The first is Canada Pension Plan (CPP) and the other is their taxes.

Canada Pension Plan (CPP)

You must also deduct CPP contributions for all employees who are 65 to 70 years of age, unless they choose not to contribute to the CPP by giving you a signed and completed copy of Form CPT30, Election to Stop Contributing to the Canada Pension Plan, or Revocation of a Prior Election. They also have to send the original Form CPT30 to the Canada Revenue Agency (CRA).

Workers who were at least 65 years of age, receiving a CPP or QPP retirement pension, and who had chosen to stop contributing to the CPP can start contributing again if they want to, but they have to wait until the next calendar year. They will be able to do so by giving their employer another signed CPT30 and sending the original to the CRA.

Continue to deduct CPP from the employee until you get confirmation that the CPT-30 was received and processed. CRA has a tendency to lose these forms, so follow up with them after about four weeks.

If you, as the employer, do not deduct or remit CPP contributions to the CRA, you may have to pay your employee’s share and your share of the CPP contributions. If you do not remit the contributions to the CRA by the due date, you may also be charged penalties and interest.

After the month in which they turn 70 years of age, employees can no longer contribute to the CPP.


You should talk to your employee about having more tax taken off his employment income to cover the additional taxes he may incur due to his pension and employment income. Have the employee look at the sources of their income, and the total income they’ll receive for the tax year. The employee can also get the other sources to take off more income tax, so as to alleviate a large tax bill at tax time.

Is the employee taking their Old Age Pension (OAS)? Do they have another pension their withdrawing? Maybe RRSPs? These can all add up to a good sum. If the employee is 65, perhaps taking their OAS is not such a good thing depending on their employment and other income. Currently (2017), the claw back starts at $74,788 and ends at $121,279. If they find their income in this range before the OAS, then it may be wise not to take the OAS until they actually retire.

If the employee is under 70, then they may consider doing RRSPs, or upping their contributions, as this will reduce their taxable income, and give them some retirement funds when they do retire. They should ensure what their contribution limit is before putting any monies into RRSPs.

The employee may want to fill out a new TD1Personal Tax Credits Return plus the Provincial counterpart. As the employee is now 65, they are entitled to some additional credits, such as the Age Amount.

When an employee turns 65, there are a few things that the employee and the employer need to consider. Talk to your employee or have them talk to your human resources, and see what changes are happening.