Top 10 Payroll Questions AnsweredBrian Jang ON June 15, 2021
Payroll administration can be challenging, with several factors to be aware of. It is also an incredibly important part of your business, with your employees relying on you to ensure that it is handled correctly. It is an aspect of business that you don’t want to get wrong.
Here are some of the most commonly asked questions regarding payroll management.
Can Employees be Given Paid Time Off instead of Overtime Pay?
If desired, an employee can take paid time off (PTO) in place of overtime pay. The employer and employee make a written agreement to this effect, with this time referred to as “banked time” or “time off in lieu”. An employer who has agreed to this request will provide the employee with 1.5 hours of PTO for each hour of overtime worked. For example, an employee who worked 4 hours of overtime will receive 6 hours of paid time off in lieu of overtime pay.
When is Vacation Pay Payable, and How is it Calculated?
The Employee Standards Act indicates that the vacation rate will be calculated as a percentage of the employee’s earnings for the year. There is a minimum of two weeks’ vacation with vacation pay of 4% of earnings made during the first year of entitlement, with this amount accruing annually. Once the employee reaches 5 consecutive years of employment with the same employer, the rate becomes 6% with 3 weeks of vacation time.
Vacation pay is payable before, during, or after the vacation time, as determined by the employer’s established policy, though the employer and employee may agree in writing to pay a portion of this amount on each paycheque.
How is an Employee’s Statutory Holiday Pay Determined?
Eligible employees shall be paid an average day’s pay on statutory holidays and days off in honour of statutory holidays if that holiday falls on their regular day off.
To determine an average day’s salary, divide the total wages from the 30 calendar days preceding the holiday by the number of days worked. The total wages include vacation pay and commission, but excludes overtime pay.
What is the Bonus Tax Method?
This is a method for calculating taxes and CPP and EI deductions, as they apply to bonuses, retroactive payments, and other irregular payments.
How is an Employee Overpayment Corrected?
If the overpayment is the result of administrative miscalculations, the error is corrected through deductions. The amount of the overpayment is also to be deducted from the employee’s total income as listed on their T4 form.
Employees who pay back the amount owed within the same year as the error are only required to repay the net total provided the remittances can be adjusted before the year’s end.
If an Employee is Paid in Cryptocurrency, What Are the Tax Implications?
Digital currencies like Bitcoin and Ethereum are not recognized by the CRA as legal currencies. They are, however, taxable. Accordingly, both employers and employees should be recording the equivalent Canadian dollar value of the cryptocurrency at the time of the exchange.
When Are Payroll Remittances Reported to the CRA?
Your payroll software may automatically submit remittances to the CRA. If it does not, you will need to do so yourself, following the CRA’s submission schedule. The average monthly withholding amount determines the deadline. Missing this deadline will result in penalties.
Are Taxable Benefits Subject to EI and CPP Deductions?
Yes, they are. Any taxable benefit provided to an employee requires the employer to calculate the benefit’s value, calculate the proper payroll deductions for said benefit, and file an information return.
Unless stated otherwise, bonuses, awards, and incentives are considered taxable earnings subject to CCP, EI and tax deductions. If paid in kind, the value remains subject to taxes and CPP, but not EI.
Which Expenses Can Small Businesses Claim As Tax Deductions?
Spending that relates to the management, operation, and growth of a small business may qualify as fully or partially deductible. This may include various expenses from license fees, to meals, or entertaining clients.
The CRA’s website provides a detailed list of business expenses.
When Must TR4 Slips Be Distributed to Employees?
Employers must provide T4 slips to all current and former employees who received income during the tax year, mailing them by February 28th. If an employee provides written permission, you may send them electronically.
Do you have any payroll questions? Reach out to BCJ Group today!