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<section id="payroll-compliance-and-regulations">
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<h1><span class="section-number">4. </span>PAYROLL COMPLIANCE AND REGULATIONS<a class="headerlink" href="#payroll-compliance-and-regulations" title="Link to this heading">¶</a></h1>
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<section id="learning-objectives">
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<h2><span class="section-number">4.1. </span>Learning Objectives<a class="headerlink" href="#learning-objectives" title="Link to this heading">¶</a></h2>
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<p>By the end of this chapter, you will have a foundational understanding of payroll compliance and regulations in Canada.
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This includes the various stakeholders involved, the objectives of payroll, and the legal frameworks that govern payroll
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processes. You will also learn how to differentiate between federal and provincial/territorial jurisdictions, and how they
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affect payroll administration. Additionally, you will understand the Canada Revenue Agency’s criteria for determining whether
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an individual is classified as an employee or self-employed.</p>
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<p>This chapter will cover the following topics:</p>
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<blockquote>
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<div><ol class="arabic simple">
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<li><p>Identify four uses of the term payroll</p></li>
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<li><p>Describe payroll’s objectives</p></li>
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<li><p>Describe who payroll’s stakeholders are</p></li>
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<li><p>Differentiate between federal and provincial/territorial jurisdictions</p></li>
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<li><p>Explain how each stakeholder affects payroll processes and procedures</p></li>
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<li><p>Apply the Canada Revenue Agency’s factors for determining whether an individual is an employee or self-employed</p></li>
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</ol>
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</div></blockquote>
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<section id="introduction">
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<h3><span class="section-number">4.1.1. </span>Introduction<a class="headerlink" href="#introduction" title="Link to this heading">¶</a></h3>
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<p>Payroll is a necessary function in every organization that has employees, as each employee
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expects to be paid for the work they perform. While the amount of maximum remuneration
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that an employee receives for their work is not legislated by any government (unless the
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employee is a federal or provincial/territorial civil servant), there is legislation in place at
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both the federal and provincial/territorial levels that governs many aspects of processing
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employees’ pay, their taxable benefits and observing their rights as employees.</p>
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<p>It is important to note that for the scope of this course, the payroll includes the function of paying employees
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for work performed for employers. Self-employed workers or contractors, who submit
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invoices for the work they perform and receive payment through accounts payable and not
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payroll, are not employees. This chapter illustrates how to determine if an employeeemployer relationship exists. Once an employee-employer relationship has been established,
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the correct method of payment for services can be determined.</p>
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<p>Both the federal and the Québec governments provide factors that can be used to determine
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whether an employee-employer relationship exists. It is crucial to know how to determine the
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type of relationship that exists between the worker and the organization and to ensure that
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any payments made comply with legislation.</p>
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</section>
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<section id="what-are-the-payroll-s-objectives">
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<h3><span class="section-number">4.1.2. </span>What are the Payroll’s Objectives?<a class="headerlink" href="#what-are-the-payroll-s-objectives" title="Link to this heading">¶</a></h3>
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<p>The primary objective of the payroll function in every organization is to pay employees
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accurately and on time, in compliance with legislative requirements, for a full annual payroll
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cycle.</p>
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<p>Every employee expects to receive their pay on the day it is due in the manner arranged with
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their employer, either by cheque or direct deposit. In addition to ensuring that employees
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have been paid, payroll practitioners must also be able to communicate payroll information to
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all stakeholders.</p>
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<p><strong>Payroll</strong> is the process of paying employees in exchange for the services they perform. The
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term payroll can refer to:</p>
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<blockquote>
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<div><ul class="simple">
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<li><p>the department that administers the payroll</p></li>
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<li><p>the total number of people employed by an organization</p></li>
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<li><p>the wages and salaries paid out in a year</p></li>
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<li><p>a list of employees to be paid and the amount due to each</p></li>
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</ul>
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</div></blockquote>
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<p><strong>Legislation</strong> refers to laws enacted by a legislative body. In Canada there are many legislative
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sources that payroll practitioners must comply with at two separate levels ─ the federal and
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the provincial/territorial governments. Later in the chapter we will explore the compliance
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requirements for the various pieces of legislation from these sources.</p>
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<p><strong>Compliance</strong> is the observance of official requirements. For payroll practitioners, this means
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performing payroll functions according to federal and provincial/territorial legislative and
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non-governmental stakeholder requirements.</p>
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<p>The legislative requirements are termed statutory. This means they are enacted, created, or
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regulated by statute, a law enacted by the legislative branch of a government. Fines and
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penalties can be imposed if an organization is not in compliance with the legislative
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requirements in each jurisdiction.</p>
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<p>When dealing with federal and provincial/territorial government agencies, payroll
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practitioners must know the many pieces of legislation that regulate their work and the
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compliance requirements associated with each. Payroll practitioners are responsible for
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ensuring their organization is compliant with all payroll related legislation, thus eliminating
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the potential for any fines or penalties.</p>
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<p>In payroll, there are also compliance requirements from other non-government stakeholders,
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for example, union collective agreements or group insurance policies. Payroll practitioners
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must therefore ensure the organization is compliant with all stakeholder requirements.</p>
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</section>
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<section id="what-are-the-responsibilities-of-payroll-function">
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<h3><span class="section-number">4.1.3. </span>What are the Responsibilities of Payroll Function?<a class="headerlink" href="#what-are-the-responsibilities-of-payroll-function" title="Link to this heading">¶</a></h3>
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<p>The responsibilities of the payroll practitioner will differ depending on the size of the
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organization, the number of jurisdictions in which they pay, the reporting structure under
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which they work, and whether there are other related departments, such as human resources,
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finance and administration in the organization.</p>
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<p>Small and medium-sized organizations may have payroll practitioners whose positions
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include other functions that, in a larger organization, would fall under other departments.
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This payroll practitioner may be required to handle multiple tasks, such as employee
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recruitment, human resource policy development, benefits administration, accounts payable,
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accounts receivable, budgets and/or administration. These practitioners must have excellent
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knowledge of all areas for which they are responsible and be aware of the resources available
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to provide advice and information.</p>
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<p>Larger organizations may have a distinct payroll department with specific payroll positions,
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in addition to separate human resources, accounting and administration groups. Even in a
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multi-departmental organization, payroll practitioners must have knowledge of the various
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stages of the life cycle of an employee. From hiring through termination of employment,
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many of these stages will impact how to produce the employee’s pay and prepare required
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reports.</p>
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<p>The payroll department in a large organization may have:</p>
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<blockquote>
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<div><ul class="simple">
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<li><p>payroll administrators who are responsible for entering payroll data into the system</p></li>
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</ul>
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</div></blockquote>
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<dl class="simple">
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<dt>and making required payroll remittances</dt><dd><ul class="simple">
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<li><p>payroll coordinators who are responsible for preparing the payroll journal entries and</p></li>
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</ul>
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</dd>
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<dt>reconciling the payroll related accounts</dt><dd><ul class="simple">
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<li><p>payroll managers who manage the payroll function, the payroll staff and represent</p></li>
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</ul>
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</dd>
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</dl>
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<p>payroll at the management level</p>
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</section>
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</section>
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<section id="content-knowledge">
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<h2><span class="section-number">4.2. </span>Content Knowledge<a class="headerlink" href="#content-knowledge" title="Link to this heading">¶</a></h2>
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<p>Payroll practitioners should know the following to effectively perform their duties:</p>
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<blockquote>
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<div><ul class="simple">
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<li><p>Payroll Compliance Legislation: the Income Tax Act, the Employment Insurance</p></li>
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</ul>
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</div></blockquote>
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<p>Act, the Canada Pension Plan Act, Employment/Labour Standards, privacy
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legislation, Workers’ Compensation and provincial/territorial payroll-specific
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legislation</p>
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<blockquote>
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<div><ul class="simple">
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<li><p>Payroll Processes: the remuneration and deduction components of payroll and how</p></li>
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</ul>
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</div></blockquote>
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<p>to use these components to calculate a net pay in both regular and non-regular
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circumstances</p>
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<blockquote>
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<div><ul class="simple">
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<li><p>Payroll Reporting: how to calculate and remit amounts due to government agencies,</p></li>
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</ul>
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</div></blockquote>
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<p>insurance companies, unions and other third parties. In addition, payroll reporting
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includes accounting for payroll expenses and accruals to internal financial systems
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and federal and provincial/territorial year-end reporting.</p>
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</section>
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<section id="technical-skills">
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<h2><span class="section-number">4.3. </span>Technical Skills<a class="headerlink" href="#technical-skills" title="Link to this heading">¶</a></h2>
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<p>The technical skills required by payroll professionals include proficiency in computer
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programs such as payroll software and financial systems, spreadsheets, databases and word
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processing.</p>
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<p>Organizations often change their payroll and business systems to meet new technology
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requirements and corporate reporting needs. It is important for payroll personnel to have the
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ability to be adaptable to changing systems. As a payroll practitioner, you must be prepared
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and willing to embrace continuous learning.</p>
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</section>
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<section id="personal-and-professional-skills">
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<h2><span class="section-number">4.4. </span>Personal and Professional Skills<a class="headerlink" href="#personal-and-professional-skills" title="Link to this heading">¶</a></h2>
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<p>The following personal and professional skills will assist payroll practitioners in dealing with
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the various stakeholders involved in the payroll process:</p>
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<blockquote>
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<div><ul class="simple">
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<li><p>written communication skills, such as preparing employee emails and memos,</p></li>
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</ul>
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</div></blockquote>
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<p>management reports, policies and procedures and correspondence with various levels
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of government</p>
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<blockquote>
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<div><ul class="simple">
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<li><p>verbal communication skills, to be able to respond to internal and external</p></li>
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</ul>
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</div></blockquote>
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<dl class="simple">
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<dt>stakeholder inquiries</dt><dd><ul class="simple">
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<li><p>the ability to read, understand and interpret legal terminology found in documents</p></li>
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</ul>
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</dd>
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<dt>such as collective agreements, benefit contracts and government regulations</dt><dd><ul class="simple">
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<li><p>excellent mathematical skills to perform various calculations</p></li>
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<li><p>problem solving, decision-making, time management and organizational skills</p></li>
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</ul>
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</dd>
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</dl>
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</section>
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<section id="behavioural-and-ethical-standards">
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<h2><span class="section-number">4.5. </span>Behavioural and Ethical Standards<a class="headerlink" href="#behavioural-and-ethical-standards" title="Link to this heading">¶</a></h2>
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<p>Behaviour and ethics are two areas that build on the skills that an effective payroll practitioner
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must have. Effective payroll professionals should be:</p>
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<blockquote>
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<div><ul class="simple">
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<li><p>trustworthy, as the potential for fraud is ever present</p></li>
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<li><p>conscientious, with a keen attention to detail</p></li>
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<li><p>discreet, due to the confidential nature of information being handled</p></li>
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<li><p>tactful in dealing with employees who can be very sensitive when discussing their</p></li>
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</ul>
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</div></blockquote>
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<dl class="simple">
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<dt>financial issues</dt><dd><ul class="simple">
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<li><p>perceptive, able to understand all sides of an issue</p></li>
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<li><p>able to work under the pressures of absolute deadlines</p></li>
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<li><p>able to use common sense in order to recognize problems quickly and apply sound</p></li>
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</ul>
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</dd>
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<dt>solutions</dt><dd><ul class="simple">
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<li><p>able to remain objective and maintain a factual perspective when dealing with</p></li>
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</ul>
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</dd>
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</dl>
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<p>questions and inquiries</p>
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<section id="summary">
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<h3><span class="section-number">4.5.1. </span>Summary<a class="headerlink" href="#summary" title="Link to this heading">¶</a></h3>
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<p>The primary objective of the payroll function in every organization is to ensure that employees are paid accurately
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and on time, in full compliance with legislative requirements, throughout the entire annual payroll cycle. This function is
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critical to maintaining employee satisfaction, legal integrity, and operational efficiency.</p>
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<p>Payroll itself is the process of compensating employees for the services they perform. It encompasses calculating wages,
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deducting taxes and benefits, and distributing payments. Ensuring accuracy in this process is essential to avoid financial
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discrepancies and maintain trust within the organization.</p>
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<p>Legislation refers to the laws enacted by a legislative body that govern payroll practices. These laws may include tax
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regulations, labor standards, and employment rights, all of which must be adhered to by the payroll department. Compliance,
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in this context, means observing and fulfilling these official requirements to avoid legal penalties and ensure ethical
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operations.</p>
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<p>A payroll practitioner’s knowledge base includes a thorough understanding of payroll compliance legislation, payroll
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processes, and payroll reporting. In addition to technical expertise, practitioners must also possess strong personal and
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professional skills to manage responsibilities effectively and adapt to evolving regulatory environments.</p>
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</section>
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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="#">4. PAYROLL COMPLIANCE AND REGULATIONS</a><ul>
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<li><a class="reference internal" href="#learning-objectives">4.1. Learning Objectives</a><ul>
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<li><a class="reference internal" href="#introduction">4.1.1. Introduction</a></li>
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<li><a class="reference internal" href="#what-are-the-payroll-s-objectives">4.1.2. What are the Payroll’s Objectives?</a></li>
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<li><a class="reference internal" href="#what-are-the-responsibilities-of-payroll-function">4.1.3. What are the Responsibilities of Payroll Function?</a></li>
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</ul>
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</li>
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<li><a class="reference internal" href="#content-knowledge">4.2. Content Knowledge</a></li>
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<li><a class="reference internal" href="#technical-skills">4.3. Technical Skills</a></li>
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<li><a class="reference internal" href="#personal-and-professional-skills">4.4. Personal and Professional Skills</a></li>
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<li><a class="reference internal" href="#behavioural-and-ethical-standards">4.5. Behavioural and Ethical Standards</a><ul>
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<li><a class="reference internal" href="#summary">4.5.1. Summary</a></li>
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</ul>
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</li>
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</ul>
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</li>
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<h4>Previous topic</h4>
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<p class="topless"><a href="terminology.html"
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title="previous chapter"><span class="section-number">3. </span>TERMINOLOGY</a></p>
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<h4>Next topic</h4>
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<p class="topless"><a href="compensation.html"
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title="next chapter"><span class="section-number">5. </span>DETERMINING ANNUAL AND PAY PERIOD EARNINGS</a></p>
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