Pay Equity is based on the value of work provided regardless of gender. The work often refers to of equal duties or comparable value to company.
In 1977 the Canadian Human Rights Act includes a section that makes it a discriminatory practice for an employer to “establish or maintain differences in wages between male and female employees employed in the same establishment who are performing work of equal value”.
A major component to ensure compliance in Pay Equity is to understand how to conduct Job Evaluations. The HR Council of Canada defines job evaluation as “the systematic process for accessing the relative worth of jobs within an organization”.
– Ontario and Quebec employers with 10 of more employees must adhere to the pay equity compliance
– A Pay Equity Plan and report must be filed with the Ontario government each year
– Ontario Pay Equity Act established in 1987, Quebec Charter established in 1978 and Canadian Human Rights established in 1977 can be used as references
How to stay complaint:
– Group your job role/titles into classes that are similar in duties, responsibilities and qualifications
– Determine the job rates using the highest and lowest salaries in the group
– Conduct a job evaluation and analysis based on each employee in each job class
– Make your adjustments and document the changes
The Government of Canada’s project to centralize their payroll and reduce cost was initiated in 2009 and dubbed “Phoenix”.
This was a calibration of several years between the Public Services and Procurement Canada and vendor, IBM, to customize the popular PeopleSoft platform to handle the all the setup and pay rules of all the departments and agencies.
By now you’ve heard the ongoing problems, attention and grief this new pay system has had on the Employees of the Government of Canada.
It is very important to determine this relationship prior to any hiring is done. There are a lot of expense savings in hiring a contractor (self-employed individual), however if its determined down the road this contractor is actually considered an employee by CRA you will have much more expenses, taxes and penalties to remit.
Here is what you need to know:
Is it a Contract of service (employment contract) or a Contract for services?
Who is in control?
Can you clearly identify when and where the work or services have to be done (employee)? Or can there be a negotiation and or compromise on both sides (contractor)?
Can the individual get someone else to perform the work (contractor) or the worker has to perform the work assigned (employee).
Is there a chain of command where the individual reports work and is assigned work by a manager (employee) or the individual has access go straight to the top for any work or issues (contractor)
Are you providing training to the individual (employee)? Or should the individual already be equipped or if needed seek training from another party (contract)
Is there a designated area for the individual (employee)? Or can they work independently as long as the services is completed in the agreed timeframe (contractor).
Is someone overseeing the individuals work? (employee)
Can the individual refuse work? (contractor)
Are you providing the tools and equipment for the work (employee)? Who owns the equipment?
Who is liable for any damages that may result in financial loss? The contracted individual should have his or her owns insurance for these situations.
CRA reporting and remittances
Are you deducting and submitting the employee and employer portions to CRA (employee)? Are you providing a T4 (employee)? Or the individual is responsible for submitting these on their own under their own business name. (contractor)
It was just announced by the CRA that measures starting now are in place to help of filing taxes easier for two groups of tax filers. For these groups of individuals not only is it now more helpful but also saves them money by not needed to purchase a tax filing service or have a tax expert involved.
Individuals with low or fixed income
950,000 eligible individuals will be sent a simple way to report and submit their 2017 tax filings. Based on the communication sent out by CRA they will be able to answer a few questions over the phone and they are done.
Individuals who still submit paper forms
These individuals will now receive in the mail the complete tax package to help them complete their filings. They will not need to go to the local post office to retrieve this.
Do you have employees that work from home? If so, you must understand if you need to fill out or sign a T2200 form for anyone.
A general understanding is if the employee needs to allocate a work space at home in order for them to carry out their job duties, it is a strong possibility that they require a T2200 to be filled out. This helps the employee at tax time with expense deductions related to work.
Be prepared as you may get requests from employees who have been advised by their tax accountants at year end. Most cases, employees may bring a completed T2200 form and ask the HR team to sign it. You must be aware and review the terms of their employment and ensure the amounts filled out by the employee are reasonable.
Questions to ask yourself:
1. Does the employee generally work from home the majority of the time (more than 50%)?
2. Does the employment agreement indicate they must cover the cost of expenses related to working from home?
3. Does the employee hold meetings where client may visit their home?
4. Would working from home have the employee incur more cost on things like internet charges, phone fill, lighting, heating etc..?
5. Are they required to use their personal vehicle?
It’s quite common for your payroll service provider to have problems with this tax. We have experience a number of reputable companies that did not have the engine built to calculate Bonus payments properly. It is your responsibility to ensure the bonus calculations are accurate to the best of your abilities.
Result of incorrect taxing on bonuses:
– employee being unhappy when filing taxes. They end of paying more instead of getting a refund.
– employers responsible for paying the CPP and EI company portions
– employers responsible for paying the all the taxes for the bonus because the employee has left and you cannot recoup the amounts.
– CRA PIER audit can be triggered which cases more headaches
– possible further audits going years back if suspected of not handling bonuses properly which amounts to much more time and money spent
A general rule to understand: CRA considers these payments as being an increase to your pay rate. Taxes are calculated on your pay rates.
Calculating CPP on Bonuses:
The difference in calculating CPP on bonuses than a regular payment is the CPP basic exemption. You do not take the basic exemption of $3500/year (as of 2018) in consideration. Therefore take the taxable amount of the bonus (Pensionable amount) by the CPP contribution rate (4.95% as of 2018). Also provide the employer matching amount.
If the employee is exempt or has reached his maximum contribution for the year, you can ignore calculating CPP.
Calculating EI on Bonuses:
Calculating EI is exactly the same. Multiply the EI rate by the taxable amount of the bonus (Insurable Earnings). Also provide the employer contribution amount.
If the employee is exempt of has reach his maximum for the year, you can ignore calculating EI.
Calculating Income Taxes on Bonuses:
Total taxable income is less or equal to $5000
If the total the taxable income and the bonus year to date is $5,000 or less use 15% tax (10% in Quebec) for the bonus payment.
Total taxable income is greater than $5000
There are 2 bonus tax methods listed (one-time bonus or more than one bonus), however understand the concept is the same. Whether is one bonus or 52 bonuses a year, you have to include all bonus amounts year-to-date when calculating the taxes.
The employee regularly gets $1500 salary per cheque. An now you’re paying the employee $1000 bonus.
Let’s say you are bi-weekly pay with 26 pay periods a year. Take the amount of the bonus divided by the number of periods in the year = $38.46 ($1000 / 26) This now is added to the regular salary amount = $1538.46.
Calculate the taxes on $1538.46 = $211.58 (assuming using claim code 1 with no pre-tax deductions, or taxable benefits in Ontario)
Calculate the taxes on the regular salary amount $1500 (you can refer to last pay run) = $204.38 (assuming using claim code 1 with no pre-tax deductions, or taxable benefits in Ontario)
Subtract the difference = $7.20 (211.58 – 204.38)
Annualize the taxes per year: $7.20 multiple by 26 pay period = $187.20
As we are ready to celebrate the year it was and welcome the next chapter, we as payroll people have to ensure our year end is as clean as possible.
Below is an internal checklist to consider for your year-end payroll process:
– Attend training and read up on Year End Processes from your payroll service provider
– Be aware of crucial team member time offs and availability during the holidays
– Adjust for any payroll processing days that fall on Statutory Holidays
– Last payments for 2017. Before the calendar days run out, any payments that need to be included on this year’s T4s need to be completed
– Auditing and Previewing your Year End Reporting before finalizing (T4s, Tax Remittances, Discrepancies Reports etc..)
– Adjustments for any mistakes or accruals
– Reviewing year end deadlines with your payroll service provider
– Completing your year-end process with your payroll service provider
– Communications to employees the delivery of T4s
– Review the 2018 payroll calendar to make sure any pay dates don’t conflict with Banking Holidays
– Update Provincial Health Taxes rates, exemption amounts in your payroll system if applicable
– Update Workers Compensation rates in your payroll system if applicable
– Update any Reduced EI, CSST rates in your payroll system if applicable
– Update any payroll or benefit rates for 2018 in your payroll system if applicable
– Coordinate with your payroll service provider on the 2018 tax updates to the system
– Distribute and/or communicate to employees any updates to Federal and Provincial TD1s for 2018
– Send Reminders to employees about updating their address, emergency contacts, dependent/beneficiary contacts
– Be prepared to review and audit the first pay for 2018 ahead of your normal processing time because of any system issues or updates above that must be correct prior to the first pay completion
As the subject matter expert in your organization you must always keep track with the latest in legislative and compliance updates. In addition, it is important to connect with your HRIS and Canadian payroll service provider about year-end trainings, support hours and availability around the holidays to make sure you are ready for the first payroll of the new year.