-
-8. DETERMINING ANNUAL AND PAY PERIOD EARNINGS
+
+6. CALCULATING NET EARNINGS
-8.1. Employment Income
+6.1. Employment Income
-8.2. Allowances
+6.2. Allowances
-8.3. Expenses
+6.3. Expenses
-8.4. Benefits
+6.4. Benefits
@@ -66,11 +66,11 @@
-- 8. DETERMINING ANNUAL AND PAY PERIOD EARNINGS
@@ -79,12 +79,12 @@
-
4.4. Payroll Stakeholders
+2.4. Payroll Stakeholders
Stakeholders refer to the individuals, groups, and organizations—both within and outside the company—that have a vested
interest in the operations and outcomes of the payroll department. These stakeholders can be viewed as internal customers,
and payroll practitioners are encouraged to adopt a proactive, service-oriented approach in meeting their needs and
@@ -205,7 +205,7 @@ employers and other departments within the organization. External stakeholders i
benefit carriers, courts, unions, pension providers, charities, third party administrators and
outsource/software vendors.
-4.4.1. Government Stakeholders
+2.4.1. Government Stakeholders
Government legislation establishes the rules and regulations that govern payroll practices, particularly in relation to
employee compensation. It is therefore essential for payroll practitioners to understand both the scope and the origin of all
payroll-related laws.
@@ -244,7 +244,7 @@ provincial/territorial requirements. Québec collects its provincial income tax
-4.4.2. Federal Government
+2.4.2. Federal Government
The Constitution Act of 1867 outlined the division of legislative power and authority between
federal and provincial/territorial jurisdictional governments. The exclusive legislative
authority of the Parliament of Canada extends to all matters regarding:
@@ -274,7 +274,7 @@ employees under federal jurisdiction in the following industries and organizatio
4.4.3. Provincial/Territorial Governments
+2.4.3. Provincial/Territorial Governments
Under the Constitution Act of 1867, the exclusive legislative authority of the provinces and
territories exists over:
@@ -309,7 +309,7 @@ Organizations may have some employees who fall under federal jurisdiction and an
group of employees who fall under provincial/territorial legislation.
-4.4.4. Internal Stakeholders
+2.4.4. Internal Stakeholders
Internal stakeholders are the people and departments within the organization that rely on the payroll function to operate
effectively. They form the core audience served by payroll and include employees who depend on accurate and timely
compensation, employers who oversee workforce management, and other internal teams—such as human resources, finance,
@@ -331,7 +331,7 @@ needed for their various requirements.
information for budgeting, analytical and quality purposes.
-4.4.5. External Stakeholders
+2.4.5. External Stakeholders
External stakeholders are entities outside of both the organization and government that maintain a collaborative or
service-based relationship with the payroll function. These may include benefit providers, insurance carriers, pension
plan administrators, unions, and third-party service vendors. Although not formally part of the company or regulatory bodies,
@@ -369,7 +369,7 @@ efficiently.
-4.5. Legislations and Regulations
+2.5. Legislations and Regulations
Federal and provincial/territorial legislation, and amendments to existing legislation and
regulations, can affect the operations of a payroll department, as the requirement to comply
with the new or amended legislation must be satisfied.
@@ -410,7 +410,7 @@ associations, and online portals—can support this ongoing effort to stay infor
-4.5.1. Legislative Compliance
+2.5.1. Legislative Compliance
Payroll plays a critical role not only in ensuring that employees are paid accurately and on time, but also in
supporting and maintaining compliance with numerous government regulations. This includes legislative obligations related to
payroll source deductions, Canada Pension Plan contributions, Employment Insurance premiums, and both federal and
@@ -434,14 +434,14 @@ information slips issued at year-end to validate the amounts of CPP contribution
-4.5.2. Self-Assessment
+2.5.2. Self-Assessment
Both the federal and provincial/territorial tax systems in Canada operate on the principle of self-assessment. Under this system, taxpayers and their representatives—including employers—are responsible for accurately calculating, reporting, and remitting taxes and other required contributions by the prescribed deadlines.
The Canada Revenue Agency (CRA) and Revenu Québec (RQ) serve as administrators of these systems, ensuring that individuals and organizations remain compliant and that all amounts owed are properly paid.
Importantly, both agencies acknowledge the right of taxpayers to organize their financial affairs in a way that minimizes their tax liability, provided it remains within legal boundaries. While tax planning is permitted, tax evasion—such as failing to report income, neglecting to remit amounts due, or submitting false information—is strictly prohibited and subject to enforcement actions.
-4.6. The Employee-Employer Relationship
+2.6. The Employee-Employer Relationship
Determining the nature of the working relationship between an individual and an organization is essential in all employment situations. Whether the individual is classified as an employee or self-employed directly affects the statutory withholding requirements and the organization’s compliance with applicable legislation. To support this assessment, the Canada Revenue Agency (CRA) provides a set of guidelines designed to help distinguish between the two classifications. Importantly, the decision is not made by the worker but must be based on objective criteria and legal standards.
Payroll practitioners play an important role in promoting awareness of this distinction throughout the organization. By proactively communicating the significance of establishing a valid employee-employer relationship, payroll professionals help ensure that employment classifications are accurate and compliant.
Once an employee-employer relationship is confirmed, the payroll department becomes responsible for meeting compliance obligations related to statutory withholdings. This includes deducting the appropriate amounts—such as income tax, Canada Pension Plan contributions, and Employment Insurance premiums—from employee pay and remitting them to the government within the required timelines. Proper classification and adherence to these rules are key to maintaining legal and financial accountability.
@@ -459,7 +459,7 @@ information slips issued at year-end to validate the amounts of CPP contribution
Canada Revenue Agency guide, Employee or Self-Employed? - RC4110. The guide is available on the CRA’s website,
https://www.canada.ca/en/revenue-agency.html.
-4.6.1. Contract of Service (Employment)
+2.6.1. Contract of Service (Employment)
A contract of service is an arrangement whereby an individual (the employee) agrees to
work on a full-time or part-time basis for an employer for a specified or indeterminate period
of time.
@@ -467,7 +467,7 @@ of time.
of remuneration.
-4.6.2. Contract for Service (Subcontracting)
+2.6.2. Contract for Service (Subcontracting)
A contract for service is a business relationship whereby one party agrees to perform certain
specific work stipulated in the contract for another party. It usually calls for the
accomplishment of a clearly defined task but does not normally require that the contracting
@@ -505,7 +505,7 @@ invoice alone is not sufficient to confirm self-employment status. Proper assess
sto ensure accurate classification and compliance with tax and labor regulations.
-4.6.3. Factors Determining the Type of Contract
+2.6.3. Factors Determining the Type of Contract
The CRA uses a two-step approach to examine the relationship between the worker and the
payer for relationships outside the province of Québec. The approach used for relationships
in the province of Québec will be discussed in a later chapter.
@@ -689,7 +689,7 @@ relationship.
-4.7. Review Summary
+2.7. Review Summary
The core purpose of the payroll function within any organization is to ensure employees are compensated accurately and
punctually, in accordance with all applicable legislation throughout the full annual payroll cycle. This essential function
supports employee satisfaction, regulatory compliance, and overall operational efficiency.
@@ -730,7 +730,7 @@ considerations include:
Collectively, these factors guide proper categorization for legal and tax purposes, helping organizations ensure compliance and mitigate potential risk.
