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Like most payroll topics, there is no one easy answer.
Generally, you are lost in a world of ‘choose your own adventure’ stories.
On a good day, you can call some legislative agencies several times and get a different answer from each representative with whom you speak. To say this is frustrating is an understatement.
So, I decided to take some time to think about the most asked payroll questions I have encountered in my many years as a Payroll Specialist.
Here are the top five Canadian payroll questions.
Question 1: Are all employees entitled to vacation pay?
In Canada, employees can benefit from paid time off work. This can be in the form of vacation pay or vacation time. The minimum requirement is 4% or 2 weeks, which will increase based on consecutive years of service.
Vacation pay and vacation leave entitlement generally apply to full time, part time, casual and seasonal workers.
- Meant to provide an employee with a minimum of 2 weeks time off work
- Earned over a 12 month period (i.e.: calendar year, year as set out by employer or the anniversary of the employee’s hire date)
- Must be taken within 4 – 12 months of being earned depending on the jurisdiction
- Must be monitored for compliance by an employer
- Can be taken as a 2-week period, two 1-week periods or individual days (in some jurisdictions) with written consent by both the employee and employer
- Meant to ensure an employee’s pay continues during the vacation period
- Accrues as a percentage of vacationable earnings as dictated by the jurisdictions
- Should be reconciled at year end or upon termination to determine if there are any amounts outstanding or overpaid
For further details on vacation, contact your Provincial Employment Standards.
📝 Or if you want to keep reading, we have a detailed post on the 4 Ways to Handle Vacation Pay in Canada.
Question 2: Can I pay my employees if I don’t have their Social Insurance Number (SIN)?
The short answer is YES; however, there are some legislative requirements regarding obtaining an employee’s SIN. An employer must request an employee’s SIN within 3 days of their hire date.
If an employee does not give you their SIN, you (as the employer) need to show you made a reasonable effort to get it. Failure to do so could result in a penalty assessed to the employer.
The SIN is also required on an employee tax form. If the tax form is filed without a SIN, there may be a penalty assessed to the employer as well.
Question 3: How do I know what my employees’ Federal and Provincial tax exemption amounts are?
At the beginning of each year, employers should request completed Federal and Provincial TD1 forms from their employees.
The TD1 form is a Personal Tax Credit Form. It is used to determine the amount of tax to be deducted from an employee’s income. If the amounts have not changed from the prior year, a new form is not required.
The tax exemption amount to be entered for payroll purposes is the total claim amount from Line 13 of the forms. Here is a link to the CRA site for TD1 forms.
Question 4: How do I prorate an employee’s salary if they only work part of a pay period?
First, you must determine the daily rate. To do this, take the yearly salary and divide by 260.
260 is the average number of working days per year according to the National Payroll Institute (formerly the Canadian Payroll Association).
Then, take the daily rate and multiply by the actual number of days worked in the pay period. The total is the prorated salary for that period.
Example: If an employee’s salary is $70,000 a year and the employee only worked 4 days during the period,
$70,000 divided by 260 = daily rate of $269.23.
Multiplied by 4 days = $1076.92.
Question 5: When do I need to issue a Record of Employment (ROE) for an employee?
Regardless of whether they plan on applying for Employment Insurance (EI), A ROE must be issued for an employee if one of the following occurs:
- Service Canada requests one
- Each time there is an interruption of earnings
- An employee continues working for the same employer but is transferred to another CRA business number
- A change in payroll frequency (i.e. weekly to bi-weekly, etc.)
- During self-funded leave
- An employer declares bankruptcy and a receiver takes over the business
- When there is a change in business ownership
For more information on Records of Employment from the Government of Canada, click here.
📝 Learn more about what happens after an employee leaves in this post on Employee Terminations and Subsequent Payments or this post on What You Need to Include in an Employee’s Final Payroll.
Well, there you have it.
Some of your burning Canadian payroll questions have been answered.
There are many additional resources for your other payroll questions too. Here are just a few – National Payroll Institute, Provincial Employment Standards, Canada Revenue Agency, Revenu Quebec, and the Provincial Workers’ Compensation Boards.
Disclaimer: The advice we share on our blog is intended to be informational. It does not replace the expertise of accredited business professionals.