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<li class="nav-item nav-item-this"><a href=""><span class="section-number">2. </span>PAYROLL COMPLIANCE</a></li>
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<section id="payroll-compliance">
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<h1><span class="section-number">2. </span>PAYROLL COMPLIANCE<a class="headerlink" href="#payroll-compliance" title="Link to this heading">¶</a></h1>
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<section id="the-canada-revenue-agency">
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<h2><span class="section-number">2.1. </span>The Canada Revenue Agency<a class="headerlink" href="#the-canada-revenue-agency" title="Link to this heading">¶</a></h2>
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<p>Under the Canada Pension Plan Act and the Employment Insurance Act, the CRA is
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responsible for determining:</p>
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<blockquote>
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<div><ul class="simple">
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<li><p>whether or not an individual’s employment is pensionable under the Canada Pension</p></li>
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</ul>
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</div></blockquote>
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<p>Plan Act or insurable under the Employment Insurance Act</p>
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<blockquote>
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<div><ul class="simple">
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<li><p>the types of earnings that are considered pensionable or insurable</p></li>
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<li><p>how many hours an insured person has in insurable employment</p></li>
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<li><p>the recovery of any debts owed as a result of an overpayment of Canada Pension</p></li>
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</ul>
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</div></blockquote>
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<p>Plan, Employment Insurance, or Old Age Security benefits</p>
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<p>The CRA is also responsible for ensuring that CPP contributions and EI premiums are
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deducted, remitted and reported as required by legislation.</p>
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<p>The Canada Revenue Agency (CRA) is a federal government agency that manages the
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following business lines for the federal government: Tax Services and Benefit Programs.
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The Tax Services business line assists over 25 million individuals, businesses, trusts, and
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organizations to meet their obligations under the tax system. Each year, the CRA collects
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approximately $324 billion in gross taxes and excise duties on behalf of the federal and
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provincial governments - the equivalent of about $1.2 billion every working day. The CRA’s
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mission is to promote compliance with Canada’s tax legislation and regulations through
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communication, quality service, and responsible enforcement, thereby contributing to the
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economic and social well-being of Canadians.</p>
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<p>From this mission comes the CRA’s mandate to:</p>
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<blockquote>
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<div><ul class="simple">
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<li><p>collect revenues and administer tax laws for the federal government and for most provinces and territories</p></li>
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<li><p>deliver various social and economic benefit incentive programs to Canadians</p></li>
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</ul>
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</div></blockquote>
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<p>The CRA tracks the success of the first part of its mandate by measuring compliance in the following areas:</p>
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<blockquote>
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<div><ul class="simple">
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<li><p><strong>Filing:</strong> the CRA’s goal is to have over 90% of individual and corporate income tax and registered business’ goods and services tax/harmonized sales tax (GST/HST) returns filed on time.</p></li>
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<li><p><strong>Registration:</strong> the CRA measures its success in this area by ensuring that the majority of all known businesses are registered for various programs including corporate income tax, GST/HST, payroll deductions, and import/export accounts.</p></li>
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<li><p><strong>Remittance:</strong> the CRA’s goal is to have over 90% of individual and corporate tax filers pay their taxes on time.</p></li>
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<li><p><strong>Reporting:</strong> the CRA measures reporting compliance through the information it receives on tax documents, for example, the T4 and T4A information slips.</p></li>
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</ul>
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</div></blockquote>
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<p>The CRA’s program responsibilities that are specifically related to payroll include the administration of:</p>
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<blockquote>
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<div><ul class="simple">
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<li><p>the Canada Pension Plan (CPP) (shared responsibility with Employment and Social Development Canada and Service Canada)</p></li>
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<li><p>Employment Insurance (EI) (shared responsibility with Employment and Social Development Canada and Service Canada)</p></li>
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<li><p>Income Tax</p></li>
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</ul>
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</div></blockquote>
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<p>Each of these programs requires compliance by employers to withhold deductions from their
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employees’ pay for CPP contributions, EI premiums and income tax deductions. These
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withholdings are termed statutory deductions as the deductions are required under legislative
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statute. Statutory deductions are the first deductions to be withheld from an employee’s gross
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pay.</p>
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<section id="canada-pension-plan-cpp">
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<h3><span class="section-number">2.1.1. </span>Canada Pension Plan (CPP)<a class="headerlink" href="#canada-pension-plan-cpp" title="Link to this heading">¶</a></h3>
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<p>The Canada Pension Plan became operational on January 1, 1966. The plan was fully
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effective in 1976 after a ten year transitional period.
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The Canada Pension Plan is a social insurance program, legislated under the federal Canada
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Pension Plan Act, designed to provide protection in the form of benefits to contributors and
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their families against loss of income due to retirement.</p>
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<p>In addition to retirement pension benefits, the plan provides supplementary benefits in the form of:</p>
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<blockquote>
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<div><ul class="simple">
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<li><p>surviving spouse pensions</p></li>
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<li><p>disability benefits</p></li>
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<li><p>benefits for orphans and children of disabled contributors</p></li>
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<li><p>death benefits payable upon the death of a contributor</p></li>
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</ul>
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</div></blockquote>
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<p>All employers are required by law to deduct CPP contributions from pensionable earnings
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paid to their employees, and to remit these deductions, along with the employer’s portion, to
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the CRA. The employer matches the employee’s contributions dollar for dollar.</p>
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<div class="admonition note">
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<p class="admonition-title">Note</p>
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<p><em>Example:</em></p>
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<p>Janet Frank has $45.00 in CPP contributions deducted from her gross pay. Her employer,
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Northern Skies, must match her contribution of $45.00. A total of $90.00 in CPP contributions must be remitted to the CRA.</p>
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</div>
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<p>CPP contributions take priority over all other deductions and are therefore the first statutory
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deduction to be withheld from an employee’s gross pay.</p>
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</section>
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<section id="employment-insurance-ei">
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<h3><span class="section-number">2.1.2. </span>Employment Insurance (EI)<a class="headerlink" href="#employment-insurance-ei" title="Link to this heading">¶</a></h3>
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<p>The CRA’s responsibility for the Employment Insurance program is associated with the
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collection of employee and employer premiums. It also makes decisions about which types of
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remuneration are considered insurable and, therefore, subject to EI premiums.
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All employers are required by law to deduct EI premiums from the insurable earnings paid to
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their employees, and remit these deductions, along with the employer’s portion, to the CRA.
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The employer’s portion is 1.4 times the employee’s portion.</p>
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<p><em>Example:</em></p>
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<p>Janet Frank has $20.00 in EI premiums deducted from her gross pay. Her employer, Northern
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Skies must contribute $28.00 ($20.00 x 1.4). A total of $48.00 in EI premiums must be
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remitted to the CRA.</p>
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<p>EI premiums are the second statutory deduction to be withheld from an employee’s pay.
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Employers are also required to track the employee’s insurable earnings and insurable hours
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by pay period for reporting purposes, such as completing the Record of Employment for a
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terminated or inactive employee.</p>
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</section>
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<section id="income-tax">
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<h3><span class="section-number">2.1.3. </span>Income Tax<a class="headerlink" href="#income-tax" title="Link to this heading">¶</a></h3>
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</section>
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</section>
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<section id="non-compliance-penalties">
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<h2><span class="section-number">2.2. </span>Non-Compliance Penalties<a class="headerlink" href="#non-compliance-penalties" title="Link to this heading">¶</a></h2>
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</section>
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<section id="employment-and-social-development-canada-esdc">
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<h2><span class="section-number">2.3. </span>Employment and Social Development Canada (ESDC)<a class="headerlink" href="#employment-and-social-development-canada-esdc" title="Link to this heading">¶</a></h2>
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</section>
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<section id="service-canada">
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<h2><span class="section-number">2.4. </span>Service Canada<a class="headerlink" href="#service-canada" title="Link to this heading">¶</a></h2>
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<section id="social-insurance-number-sin">
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<h3><span class="section-number">2.4.1. </span>Social Insurance Number (SIN)<a class="headerlink" href="#social-insurance-number-sin" title="Link to this heading">¶</a></h3>
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</section>
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</section>
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<section id="statistics-canada">
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<h2><span class="section-number">2.5. </span>Statistics Canada<a class="headerlink" href="#statistics-canada" title="Link to this heading">¶</a></h2>
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</section>
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<section id="personal-privacy">
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<h2><span class="section-number">2.6. </span>Personal Privacy<a class="headerlink" href="#personal-privacy" title="Link to this heading">¶</a></h2>
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<section id="the-privacy-principles">
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<h3><span class="section-number">2.6.1. </span>The Privacy Principles<a class="headerlink" href="#the-privacy-principles" title="Link to this heading">¶</a></h3>
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</section>
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<section id="the-personal-information-protection-and-electronic-documents-act-pipeda">
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<h3><span class="section-number">2.6.2. </span>The Personal Information Protection and Electronic Documents Act (PIPEDA)<a class="headerlink" href="#the-personal-information-protection-and-electronic-documents-act-pipeda" title="Link to this heading">¶</a></h3>
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</section>
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</section>
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<section id="pension-benefits-standards-act">
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<h2><span class="section-number">2.7. </span>Pension Benefits Standards Act<a class="headerlink" href="#pension-benefits-standards-act" title="Link to this heading">¶</a></h2>
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</section>
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<section id="canadian-human-rights-act">
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<h2><span class="section-number">2.8. </span>Canadian Human Rights Act<a class="headerlink" href="#canadian-human-rights-act" title="Link to this heading">¶</a></h2>
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</section>
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<section id="employment-equity-act">
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<h2><span class="section-number">2.9. </span>Employment Equity Act<a class="headerlink" href="#employment-equity-act" title="Link to this heading">¶</a></h2>
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</section>
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</section>
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<h3><a href="index.html">Table of Contents</a></h3>
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<ul>
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<li><a class="reference internal" href="#">2. PAYROLL COMPLIANCE</a><ul>
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<li><a class="reference internal" href="#the-canada-revenue-agency">2.1. The Canada Revenue Agency</a><ul>
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<li><a class="reference internal" href="#canada-pension-plan-cpp">2.1.1. Canada Pension Plan (CPP)</a></li>
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<li><a class="reference internal" href="#employment-insurance-ei">2.1.2. Employment Insurance (EI)</a></li>
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<li><a class="reference internal" href="#income-tax">2.1.3. Income Tax</a></li>
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</ul>
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</li>
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<li><a class="reference internal" href="#non-compliance-penalties">2.2. Non-Compliance Penalties</a></li>
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<li><a class="reference internal" href="#employment-and-social-development-canada-esdc">2.3. Employment and Social Development Canada (ESDC)</a></li>
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<li><a class="reference internal" href="#service-canada">2.4. Service Canada</a><ul>
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<li><a class="reference internal" href="#social-insurance-number-sin">2.4.1. Social Insurance Number (SIN)</a></li>
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</ul>
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</li>
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<li><a class="reference internal" href="#statistics-canada">2.5. Statistics Canada</a></li>
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<li><a class="reference internal" href="#personal-privacy">2.6. Personal Privacy</a><ul>
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<li><a class="reference internal" href="#the-privacy-principles">2.6.1. The Privacy Principles</a></li>
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<li><a class="reference internal" href="#the-personal-information-protection-and-electronic-documents-act-pipeda">2.6.2. The Personal Information Protection and Electronic Documents Act (PIPEDA)</a></li>
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</ul>
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</li>
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<li><a class="reference internal" href="#pension-benefits-standards-act">2.7. Pension Benefits Standards Act</a></li>
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<li><a class="reference internal" href="#canadian-human-rights-act">2.8. Canadian Human Rights Act</a></li>
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<li><a class="reference internal" href="#employment-equity-act">2.9. Employment Equity Act</a></li>
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title="previous chapter"><span class="section-number">1. </span>INTRODUCTION TO CANADIAN PAYROLL</a></p>
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